2017 (9) TMI 229 - AT - Service Tax

Valuation - includibility - Department entertained the view that the amount towards such statutory payments, like amount deposited towards P.F., E.P.F. and E.S.I. contribution into the Central Government account in the capacity of principal employer, should be included in the gross value of the appellant - Held that - in compliance of Employees Provident Fund & Miscellaneous Provisions Act, 1952 and the Employees State Insurance Act, 1948, the service receiver M/s HNGIL had contributed to such funds, the amount towards the workmen deployed by the appellant. The fact is not under dispute that such contributed amount was never given by such service receiver to the appellant - the gross value for the computation of service tax liability in the hands of the appellant will not take into consideration the amount of contribution made by the service receiver M/s HNGIL directly into the respective heads of account - demand set aside. Extended period of limitation - Held that - Since, the issue involved in these cases relates to interpretation of the statutory provisions with regard to addition of the contributed amount into the gross value under Section 67 ibid, it cannot be said that the appellants had indulged into the activities concerning fraud, collusion, suppression, misstatement etc. to defraud the Government Revenue - extended period cannot be invoked. Appeal allowed - decided in favor of appellant.

Summary

Issues:
Interpretation of statutory provisions regarding inclusion of employer's contribution towards P.F., E.P.F., and E.S.I. in the gross value for service tax liability calculation. Invocation of extended period of limitation for confirming adjudged demands. Imposition of penalties in absence of fraud, collusion, suppression, or misstatement.

Interpretation of Statutory Provisions - Employer's Contribution:
The appeals revolved around the issue of whether the employer's contribution towards P.F., E.P.F., and E.S.I. made by the principal employer should be included in the gross value for the computation of service tax liability for the appellant. The appellant contended that since the contributions were directly deposited by the principal employer into the Central Government account, without being received by the appellant, they should not be considered as part of the gross value under Section 67 of the Finance Act, 1994. The tribunal agreed with this argument, emphasizing that the statutory contributions made by the service receiver were never received by the appellant. Consequently, the tribunal ruled that the service tax demand cannot be confirmed on the employer's contributed amount towards these statutory payments.

Invocation of Extended Period of Limitation:
The department had invoked the extended period of limitation to confirm the adjudged demands in some cases. However, the tribunal noted that the issue at hand primarily involved the interpretation of statutory provisions regarding the inclusion of contributed amounts in the gross value for service tax calculation. It was observed that the appellants did not engage in activities such as fraud, collusion, suppression, or misstatement to defraud the government revenue. Therefore, the tribunal held that the show cause proceedings initiated beyond the normal period were time-barred. Citing a judgment of the Hon'ble Allahabad High Court, the tribunal emphasized that penalties cannot be imposed in the absence of specific ingredients mentioned in the Proviso to Section 73 of the Finance Act, 1994.

Conclusion:
After considering the arguments from both sides and examining the case records, the tribunal found no merit in the impugned orders. Consequently, the tribunal set aside the orders and allowed the appeals in favor of the appellants. The judgment was pronounced in the open court on 01.08.2017 by the tribunal members, Mr. S.K. Mohanty and Mr. Ashok K. Arya.