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2024 (8) TMI 14 - AT - Service TaxValuation - Short payment of service tax - correct Invoice Value for the services provided not shown in ST-3 returns nor in balance sheet - Short payment of service tax due to not including the amount of tax deducted (TDS) - Denial of Cenvat credit availed without documents - Liability of appellant to pay service tax under reverse charge mechanism for receiving legal consultancy and rent a cab services - Extended period of limitation. Service tax has been short paid as has not been paid on gross amount charged despite that it was payable on accrual basis w.e.f. 01.04.2011 - HELD THAT - The definition of gross amount charged given in Explanation (c) to Section 67 only provides for the modes of the payment or book adjustments by which the consideration can be discharged by the service recipient to the service provider. It does not expand the meaning of the term gross amount charged to enable the Department to ignore the contract value or the amount actually charged by the service provider to the service recipient for the service rendered. The fact that it is an inclusive definition and may not be exhaustive also does not lead to the conclusion that the contract value can be ignored and the value of free supply goods can be added over and above the contract value to arrive at the value of taxable services. The value of taxable services cannot be dependent on the value of goods supplied free of cost by the service recipient. Thus, on first principle itself, a value which is not part of the contract between the service provider and the service recipient has no relevance in the determination of the value of taxable services provided by the service provider. An amount recovered or recoverable as per the agreed terms between two persons will only form 'consideration' for a service. Any amount proposed to be charged by one person but is not agreed to be paid by the other person in lieu of services, will not be part of 'consideration'. It is apparent that the value considered by the appellant for computation, on which appellant has discharged his tax liability, is the value paid by NHAI, the recipient of service, after altering the amount demanded by the appellant to the extent it approved the same as per terms of the contract between service provider and service recipient/NHAI. Thus, the amount which has been approved by NHAI out of the proposed amount of the invoices raised by the appellant is actually the amount of contract paid by NHAI to appellant towards consideration for receiving Consultant Engineer Service from the appellant - It is an admitted fact that the amount paid by NHAI also includes grossed up amount, amount withheld and the amounts of remunerations but only those which were duly supported by the respective document and were approved by NHAI. Hence, department reliance upon Rule 7 of valuation rules and upon the amendment w.e.f. 01.04.2011 is redundant. The department failed to acknowledge as to how something can be recognized as income in balance sheet, which was never supposed to be treated as receivable from NHAI. The demand of service tax on the amount which was never received for the period April 2009 to March 2011 is bad in law and is, therefore, liable to be set aside. The findings of the adjudicating authority below that the method adopted by the appellant for calculation of taxable service is not consistent for the provision of Section 67 of Finance Act, 1994 are not at all sustainable - The appellant has rightly treated the amount approved by NHAI as the amount of consideration for computing tax liability. The allegation of short payment of tax on this account is therefore not sustainable. Short payment of service tax due to not including the amount of tax deducted (TDS) - HELD THAT - It stands clear from the documents on record that the appellant has discharged service tax on the taxable value including the TDS when the said amount of TDS was retained by the appellant, however, the taxable value did not include the amount of TDS when the said amount was to be refunded back by the appellant to the NHAI due to the reason of suffering losses in the said financial year. Also as per the agreement between the service provider and the service recipient the amount of consideration was tax exclusive. This issue is otherwise no more res-integra - Decision in the case of ITD Cem Joint Venture versus Commissioner of Central Excise by CESTAT, Chandigarh 2024 (2) TMI 15 - CESTAT CHANDIGARH followed where it was held that ' The appellants have thus grossed up the TDS and complied with the statutory obligation. The situation would be different if the TDS is deducted from the actual consideration and is not borne by the Indian counterpart. When the foreign counterpart does not agree to forego the TDS portion from the consideration agreed, then it becomes legally incumbent upon the appellant to gross up the value as under Section 195A. Thus, the amount of TDS was not supposed to be included in the gross value received by the appellant for providing Consultant Engineer Service to NHAI otherwise also tax on TDS also has been paid except when the amount was refunded to NHAI owing to losses - the allegations and the confirmation thereof that the tax paid by appellant is short for not including the amount of TDS are, therefore, not sustainable. Denial of Cenvat credit alleging it to have been availed without documents - HELD THAT - The adjudicating authority has relied upon Rule 9 (6) and Rule 9 (9) of Cenvat Credit Rules, 2004, while holding that the Cenvat Credit has been availed based on improper invoice, however, the authority has failed to appreciate proviso to Rule 9 (2) of same Cenvat Credit Rules, 2004. According to the said proviso no specific document is required till all the particulars as mentioned in the Rule 9(1) of CCR, 2004 are available in the document submitted by the assessee. The invoices submitted by the appellant contain entire relevant information. Hence, substantial benefit of availment cannot be denied based on procedural lapse. The findings of denying availment of Cenvat credit to the appellant held to be liable to be set aside - Cenvat credit has been denied also for the reasons that the documents were not provided by the appellant. But it is on record that invoices and ledges of Cenvat credit were supplied to department on 25.01.2017 and were even provided during audit. The show cause notice could not have so mathematical details had the documents would not been provided. Liability of appellant to pay service tax under reverse charge mechanism for receiving legal consultancy and rent a cab services - HELD THAT - The appellant has not contested their liability for the said services, however, as per the Notification 30/2012 the liability on the abated value @ 40% of the taxable value stands already discharged. Hence, this amount can be demanded or recovered again, however, has to be appropriated as appellant s liability under RCM to pay service tax for receiving legal consultancy and Rent-a-cab services. Invocation of extended period of limitation - HELD THAT - The mere verbal allegations about suppression of facts are not sufficient to invoke the extended period of limitation. The Hon ble Supreme Court in the case of Padmini Products versus Commissioner of Central Excise, Bangalore 1989 (8) TMI 80 - SUPREME COURT has held that extended period of limitation will not be attracted when the appellant has not acted with dishonest or fraudulent intent. With respect to invocation of amount of TDS since there is a scope of entertaining a doubt about the view to be taken the extended period of limitation cannot be invoked. Appeal disposed off.
Issues Involved:
1. Short payment of service tax on gross amount charged. 2. Short payment of service tax due to non-inclusion of TDS. 3. Denial of Cenvat credit due to lack of documents. 4. Liability to pay service tax under reverse charge mechanism for legal consultancy and rent-a-cab services. 5. Invocation of extended period of limitation. Issue-wise Detailed Analysis: First Issue: Short payment of service tax on gross amount charged The appellant argued that service tax was correctly paid on the amount approved by NHAI, as per the agreement. The department contended that service tax should be paid on the gross amount mentioned in the invoice, including grossing up, withheld amounts, and remunerations. The Tribunal examined Section 67 of the Finance Act and relevant case law, concluding that the amount approved and paid by NHAI constitutes the "consideration" for the service. Therefore, the service tax should be based on this approved amount, not the invoice amount. The Tribunal held that the department's demand for service tax on the invoice amount was incorrect and set it aside. Second Issue: Short payment of service tax due to non-inclusion of TDS The appellant claimed that TDS should not be included in the taxable value when it was refunded to NHAI due to project losses in certain years. The department argued that TDS should be part of the gross value as per Rule 5(1) of the Service Tax (Determination of Value) Rules, 2006. The Tribunal referred to the agreement between the appellant and NHAI, which specified that the consideration was exclusive of taxes. It also noted that TDS was refunded to NHAI in loss years, so it was not retained by the appellant. The Tribunal held that TDS should not be included in the taxable value when refunded and set aside the department's demand. Third Issue: Denial of Cenvat credit due to lack of documents The appellant argued that Cenvat credit was denied based on procedural lapses, not on substantive grounds, and that the invoices and ledgers were provided to the department. The department contended that credit was availed without proper documents and that the appellant failed to maintain records as required by Rule 9 of the Cenvat Credit Rules, 2004. The Tribunal found that the appellant had provided the necessary documents and that the denial of credit based on procedural lapses was unjustified. It held that the appellant was entitled to Cenvat credit and set aside the department's denial. Fourth Issue: Liability to pay service tax under reverse charge mechanism for legal consultancy and rent-a-cab services The appellant did not contest the liability for these services but argued that the demand was for the extended period of limitation. The department confirmed the liability based on Notification No. 30/2012-Service Tax. The Tribunal noted that the appellant had already paid service tax on the abated value for rent-a-cab services and that the excess amount paid should be appropriated. It held that the demand for these services was justified but limited to the appropriated amount. Fifth Issue: Invocation of extended period of limitation The appellant argued that there was no suppression of facts or intent to evade tax, and that the demand was based on an interpretational issue. The department contended that the appellant failed to disclose income in statutory returns, amounting to suppression of facts. The Tribunal found that the appellant had correctly assessed and paid service tax based on the amounts approved and paid by NHAI. It held that the extended period of limitation was wrongly invoked as there was no evidence of willful suppression or intent to evade tax. The entire demand for the extended period was set aside. Conclusion: The Tribunal set aside the order under challenge in both appeals, except for the findings on the fourth issue regarding the liability for legal consultancy and rent-a-cab services under the reverse charge mechanism. The appeals were allowed, and the demands were set aside as barred by limitation or incorrect based on the substantive issues discussed.
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