2007 (3) TMI 163 - AT - Service Tax

Valuation (Service tax) - Alleged that appellant had not included the cost of photographic paper film, chemicals etc. in the Photography service and demands were confirmed - Tribunal rejected the allegation and also sustained by the HC

Summary

Issues:
1. Whether the appellants are eligible to deduct the value of material used while providing photography services.
2. Whether the denial of the benefit by the lower authorities is justified.
3. Whether the impugned order is correct in law.

Analysis:
1. The appellants, engaged in photography services, were registered under the Central Excise Department and paying service tax as per Section 69 of the Finance Act. A show cause notice alleged under-valuation due to the exclusion of the cost of photographic paper film and chemicals. The Tribunal considered the issue and held that the appellants are entitled to deduct the value of material used in providing photography services. The order-in-appeal confirmed the duty demand by denying this deduction. However, the Tribunal found the denial unjustified, citing the Board's circular and Notification allowing such deductions. The Commissioner's reasoning was deemed unsustainable, and the appellants were granted the benefit of deduction.

2. The Commissioner had denied the benefit of deduction based on the grounds that the material used was not indicated in the bills/invoices issued by the appellants. The learned Counsel argued that such details were not required in invoices as per general practice and pointed out the Board's circular emphasizing the maintenance of records. The Tribunal agreed with the Counsel, noting that the circular and Notification did not mandate mentioning inputs in customer invoices. The denial of benefit by the lower authorities was deemed incorrect and not in line with the law. The Tribunal set aside the impugned order, allowing the appeal and granting the appellants the benefit of deduction.

3. The Tribunal observed that multiple appeals on the same issue had been decided in favor of the appellants previously. It was noted that the impugned order was contrary to the Board's letter and Notification, rendering it legally incorrect. The Tribunal found no reason to deviate from the established view favoring the appellants and deemed the impugned order improper. Consequently, the order was set aside, and the stay application and appeal were allowed, affirming the appellants' eligibility for the deduction of material costs in providing photography services.