2013 (11) TMI 505 - AT - Service Tax

Valuation - Validity of Rule 5(1) of Service Tax Rules - Real Estate Agent s Service Waiver of Pre-deposit Held that - The expenditures were not considered by the Adjudicating Authority on the ground that they were not considered as Pure Agent on behalf of their Principal and sought to include such expenditures in the Gross Taxable Value of the services received by them under Rule 5(1) of the Service Tax Valuation Rules, 2006 - The Hon ble Delhi High Court in the case of Intercontinental Consultants & Technocrats Pvt. Ltd. vs. Union of India 2012 (12) TMI 150 - DELHI HIGH COURT had struck down Rule 5(1) of the Service Tax (Determination of Value) Rules, 2006 holding the same as ultra vires to the provisions of Section 67 of the Finance Act, 1994 - the Applicant could able to make out a prima facie case for total waiver of predeposit of the dues adjudged - the pre-deposit of the dues waived and its recovery stayed during pendency of the Appeal Stay granted.

Summary

Issues:
Application for waiver of predeposit of service tax and penalty under Section 78 of the Finance Act based on the interpretation of Rule 5(1) of the Service Tax Valuation Rules, 2006.

Analysis:
The case involved an Application seeking waiver of predeposit of service tax and penalty amounting to Rs.64,98,738/- under Section 78 of the Finance Act. The Appellant, a service provider under the category of 'Real Estate Agent's Service,' argued that certain expenditures incurred on behalf of their Principal were not considered by the Adjudicating Authority. The Appellant contended that these expenditures should be excluded from the Gross Taxable Value of services received by them under Rule 5(1) of the Service Tax Valuation Rules, 2006. The Appellant relied on the judgment of the Hon'ble Delhi High Court in the case of Intercontinental Consultants & Technocrats Pvt. Ltd. vs. Union of India, where Rule 5(1) was struck down as ultra vires to the provisions of Section 67 of the Finance Act, 1994.

The Revenue, represented by the ld. AR, acknowledged that the issue at hand pertained to the exclusion of reimbursable expenditures in the Gross Taxable Value under Rule 5(1) of the Service Tax Valuation Rules, 2006. It was noted that the Department had filed a Special Leave Petition (SLP) against the judgment of the Hon'ble Delhi High Court in the aforementioned case. However, the Revenue did not contest the Appellant's argument regarding the exclusion of expenditures.

Upon hearing both parties and examining the records, the Tribunal, following the decision of the Hon'ble Delhi High Court in the Intercontinental Consultants & Technocrats case, held that Rule 5(1) of the Service Tax Valuation Rules, 2006 was ultra vires to the provisions of the Finance Act, 1994. Consequently, the Tribunal found that the Appellant had made a prima facie case for the total waiver of predeposit of the dues adjudged. As a result, the predeposit of the dues adjudged was waived, and the recovery of the amount was stayed during the pendency of the Appeal. The Tribunal allowed the Stay Petition in favor of the Appellant.

In conclusion, the Tribunal's decision was based on the interpretation of Rule 5(1) of the Service Tax Valuation Rules, 2006 in light of the judgment of the Hon'ble Delhi High Court, which declared the rule as ultra vires to the Finance Act, 1994. The Appellant successfully argued for the exclusion of certain expenditures from the Gross Taxable Value, leading to the waiver of predeposit and a stay on the recovery of the dues adjudged pending the Appeal.