2018 (1) TMI 1477 - AT - Service Tax

Valuation - Technical Inspection and Certification Service - inclusion of value of X-ray films and certain charges (unit charges and transportation charges) in assessable value - N/N. 12/2003-S.T. - second SCN - time limitation - penalty - Held that - The invoices submitted though show the film as well as certain unit charges there is no evidence of sale of the films to the client. The claim of the appellant that charges for film shown separately should satisfy the condition of N/N. 12/2003 is not tenable. In the absence of any evidence to show that there were sale of goods in the provision of service N/N. 12/2003 cannot be applied - Similarly the claim of reimbursable expenses on travel and stay of staff during the course of rendering service cannot be accepted on the face value as the invoices only show unit charges. Time Limitation - Held that - There were two show cause notices invoking extended period. The second notice cannot invoke the extended period as the issue of tax liability and valuation should have been examined comprehensively when the matter was investigated by the officers when recording in the first notice - the extended period of limitation involved in the second notice is not sustainable. Penalty - Held that - Agreeing with the appellant that the issue of valuation is taken from the documents and invoices maintained by the appellant and there is no case for deliberate suppression of material facts in the present case accordingly the penalty also is not liable to be sustained. The tax liability confirmed against the appellant shall be restricted to the normal period with no penalty - appeal allowed in part.

Summary

Issues: Valuation of technical inspection and certification services, applicability of Notification No. 12/2003-S.T., inclusion of X-ray films and charges in taxable value, reimbursement of expenses, limitation period for tax liability, cum-tax benefit under Section 67 (2) of the Finance Act, 1994, waiver of penalty.

In this case, the appellant, engaged in 'Technical Inspection and Certification Service', challenged the order of the Commissioner (Appeals) regarding the valuation of services provided. The dispute centered around whether the value of X-ray films and certain charges should be included in the taxable value. The appellant argued that X-ray films sold to clients were exempted under Notification No. 12/2003-S.T. and that expenses for staff stay and transportation were reimbursable and should not be taxed. The appellant also raised concerns about the limitation period for tax liability and requested cum-tax benefit under Section 67 (2) of the Finance Act, 1994, along with a waiver of penalty.

Upon review, the Tribunal found that there was no evidence of the sale of X-ray films to clients, and therefore, the exemption under Notification No. 12/2003 could not be applied. The Tribunal also noted that the invoices only showed unit charges without evidence of prearranged reimbursable expenses for staff travel and stay. Consequently, the Tribunal upheld the lower authorities' decision to include these charges in the taxable value.

Regarding the limitation period, the Tribunal observed that there were two show cause notices invoking an extended period. However, it was held that the second notice could not invoke the extended period as the tax liability and valuation issues should have been comprehensively examined during the first notice. As there was no deliberate suppression of material facts, the penalty was deemed unsustainable.

Ultimately, the Tribunal restricted the tax liability to the normal period without imposing a penalty, as the issue of valuation was based on the documents and invoices maintained by the appellant. The appeal was disposed of accordingly, with the tax liability confirmed against the appellant limited to the normal period.