2013 (12) TMI 909 - AT - Service Tax

Waiver of pre deposit - Waiver of pre deposit - Penalty u/s 77 and 78 - Valuation of taxable service - Whether the value of wall rent is required to be included in the taxable value for the purpose of discharging Service Tax and also further the cost of Flex and other material is to be included in the value of taxable service - Held that - amount of wall rent was recovered by the applicant from the service recipients. Under Section 67 of the Finance Act and Rules made thereunder, where any expenditure or cost is incurred by the service provider in the course of providing service, such expenditure or cost is required to be included in the taxable value. Similarly cost of flex and other material is required to be added in the value. Prima facie we are of the view that the expenditure incurred on account of wall rent as well as on account of cost of flex and the other material is required to be included in taxable value - Conditional stay granted.

Summary

Issues:
Stay application seeking waiver of pre-deposit of Service Tax, interest, and penalties under Sections 77 and 78 of the Act for advertising services provided.

Analysis:
The case involved a stay application seeking waiver of pre-deposit of Rs. 43,08,942 for Service Tax, interest, and penalties imposed under Sections 77 and 78 of the Act. The applicant was engaged in providing advertising services by painting advertisements on walls and displaying ads on hoardings. The Revenue contended that the applicant did not pay the tax amount on wall rent and the cost of printed Flex and other materials supplied. A show cause notice was issued, demanding Service Tax and proposing penalties, which was confirmed by the additional Commissioner. The appeal filed by the applicant was rejected by the Commissioner (Appeals).

Upon hearing both sides, it was found that the demand was confirmed concerning whether the value of wall rent and the cost of Flex and other materials should be included in the taxable value for Service Tax purposes. The Tribunal noted that the amount of wall rent was recovered by the applicant from the service recipients. Referring to Section 67 of the Finance Act and related Rules, it was established that any expenditure or cost incurred by the service provider in providing services must be included in the taxable value. Similarly, the cost of Flex and other materials should also be added to the value. Consequently, the Tribunal directed the applicant to deposit Rs. 15,00,000 as pre-deposit within 8 weeks and report compliance by a specified date, with a stay of recovery for the balance dues until the appeal's disposal.

This judgment highlights the importance of including all relevant expenditures and costs incurred in providing services in the taxable value for Service Tax purposes. The decision serves as a reminder for service providers to ensure compliance with tax regulations and to make necessary pre-deposits as required by law to avoid penalties and interest.