2005 (1) TMI 2 - AT - Service Tax

Service Tax Valuation of bill amount charges paid by consumer as service tax for providing services Penalty

Summary

Issues:
1. Whether the 10% service charges collected by the appellants from their customers are to be included in the gross amount liable to pay service tax or not.

Analysis:
The appellants filed an appeal against the Order-in-Appeal passed by the Commissioner of Central Excise (Appeals), who held that the 10% service charges are liable for service tax. The appellants argued that the 10% collected from customers is disbursed among staff and should not be considered part of their income. They cited Section 67 of the Finance Act, 1994, stating that the gross amount charged by the mandap keeper from the client should include charges for services provided. The Revenue contended that customers paid the 10% for services received, and the appeal filed by Revenue against a similar order was dismissed on technical grounds by the Commissioner (Appeals).

The Tribunal analyzed the provisions of the Finance Act, 1994, and found that the 10% service charges collected by the appellants are indeed liable for service tax. They noted that the appellants were charging this amount from customers for services provided, as mandated by the law. The Tribunal rejected the appellants' argument that the amount was distributed among staff, emphasizing that it was part of the gross amount charged for services. Additionally, the Tribunal observed that the appellants failed to inform the authorities about the 10% charges not being included in the assessment of service tax.

Considering the circumstances, the Tribunal reduced the penalty imposed on the appellants but dismissed the appeal. The penalty was reduced to Rs. 1 Lakh from Rs. 2,37,260 to serve the ends of justice.