2024 (2) TMI 15 - AT - Service Tax

Valuation of service tax - inclusion of TDS paid by the appellants to the Income Tax Department, in terms of Section 195A of the Income Tax Act, should in the gross amount for the purpose of calculation of service tax payable by the appellants in terms of Rule 2 (1)(d)(iv) of Service Tax Rules, 1994 read with Section 66A of Finance Act, 1994 - time limitation - HELD THAT - The Tribunal has referred to the judgments of the Tribunal in the case of Indian Additives Ltd. 2018 (6) TMI 523 - CESTAT CHENNAI and Centre for High Technology 2018 (8) TMI 243 - CESTAT NEW DELHI and concludes that the amount of TDS paid is not includable in the gross value for the purpose of payment of service tax - It is further found Commissioner (Appeals) in the Order dated 20.09.2019, for the further period, holds that the agreement provides for payment of TDS by the appellant in addition to the consideration paid to the overseas service providers and they have not deducted the same from the payment made to the overseas service providers. There are no reason to come to a conclusion that the facts of the case are different as submitted by the learned Authorized Representative for the Department. Moreover, we find that the impugned show-cause notice and the Order do not base their arguments on the conditions of the contract; they hold that TDS per se is includable in the gross value for calculation of service tax - the impugned show-cause notice and the Order do not base their arguments on the conditions of the contract; they hold that TDS per se is includable in the gross value for calculation of service tax. In view of the judgments discussed or cited above, principally, the same is not tenable. Extended period of limitation - HELD THAT - There is nothing in the show-cause notice and the impugned order to prove any of the ingredients like suppression, mis-statement etc. with intent to evade payment of service tax; therefore, no case is made for invocation of extended period. The appeal is allowed both on merits and limitation.

Summary

Issues Involved:
The issues involved in the judgment are the applicability of service tax on TDS amount paid to foreign service providers and whether the TDS amount should be included in the gross amount for the calculation of service tax.

Issue 1: Barred by Limitation
The appellant argued that the issue is barred by limitation as there was no suppression of fact and it involved the interpretation of taxation provisions. They contended that the extended period for invoking the issue is not applicable.

Issue 2: Inclusion of TDS in Gross Amount for Service Tax Calculation
The appellant claimed that the TDS amount paid to foreign service providers should not be included in the gross amount for service tax calculation. They argued that the consideration for service should be the gross amount charged by the service provider, excluding other taxes and duties.

Precedents and Legal Interpretation
The appellant cited various cases to support their argument, including TVS Motor Company Ltd. and other relevant judgments. They highlighted that compliance with statutory provisions cannot be considered as rendering of service and that the TDS amount should not be considered as part of the consideration for services rendered.

Decision and Rationale
The Tribunal reviewed the arguments and legal provisions. They referred to the judgment in the TVS Motor Company case and concluded that the TDS amount paid should not be included in the gross value for the purpose of service tax payment. The Tribunal found that the impugned show-cause notice and order did not base their arguments on the conditions of the contract, leading to the decision that the TDS amount is not includable in the gross value for service tax calculation. The Tribunal allowed the appeal on both merits and limitation, emphasizing that there was no intent to evade payment of service tax.

Conclusion
The Tribunal allowed the appeal, ruling in favor of the appellant on both the merits and the limitation issue, regarding the inclusion of TDS amount in the gross value for service tax calculation. The judgment provides clarity on the interpretation of taxation provisions related to TDS payments to foreign service providers.