2013 (12) TMI 434 - AT - Service Tax

Valuation - Whether the value of diesel supplied by the service recipient JSPL, free of cost, to the assessee service provider ought to be included in the gross value charged for the service provided for valuation of the tax liability under Section 67 - Held that - value of diesel supplied free of cost by the service recipient to the assessee service provider for providing the taxable site formation and clearance, excavation and earthmoving and demolition service would not be a component of the gross value charged for the service provided, for computation of tax under Section 67 of the Act and the failure to so include would not constitute either suppression of material facts nor a wilful contravention of the provisions of the Act with a view to evade tax, justifying invocation of the extended period of limitation under the proviso to Section 73(i) of the Act either - Following decision of Intercontinental Consultants & Technocrats Pvt. Ltd. vs. Union of India 2012 (12) TMI 150 - DELHI HIGH COURT - Decided in favour of assessee.

Summary

Issues:
Under-remittance of service tax for site formation and clearance services provided to a company.
Inclusion of the value of diesel supplied by the service recipient in the gross value for tax liability calculation.
Validity of Rule 5(1) of Service Tax (Determination of Value) Rules, 2006.

Issue 1: Under-remittance of service tax for site formation and clearance services provided to a company:
The appellant filed four appeals against adjudication orders determining the liability for under remittance of service tax for services provided to a company. The contention was that the services provided did not fall under the taxable category, which was not accepted by the adjudicating authority. The core issue was whether the value of diesel supplied by the service recipient should be included in the gross value charged for the service under Section 67 of the Finance Act, 1994.

Issue 2: Inclusion of the value of diesel supplied in the gross value for tax liability calculation:
The adjudicating authority concluded that the value of diesel supplied by the recipient should be included in the gross value charged for the service. The authority calculated the total value of diesel consumed and considered it as the consideration received by the service provider for providing the taxable service. The Tribunal had to determine the sustainability of this conclusion and analysis.

Issue 3: Validity of Rule 5(1) of Service Tax (Determination of Value) Rules, 2006:
The High Court had previously considered the scope of Section 67 of the Act in the context of Rule 5(1) of the 2006 Rules. The Rule stated that all expenditure or costs incurred by the service provider in providing a taxable service should be treated as consideration for the service and included in the value for charging service tax. The High Court invalidated Rule 5(1) on the grounds that it exceeded the scope of Section 67. The Court emphasized that the quantification of the value of a service cannot exceed the gross amount charged by the service provider for the service.

In conclusion, the Tribunal found that the value of diesel supplied free of cost should not be included in the gross value charged for the service provided, as it does not constitute suppression of material facts or a contravention of the Act to evade tax. The adjudication orders were deemed unsustainable based on this analysis, and the appeals were allowed without costs.