2013 (11) TMI 920 - AT - Service Tax

Stay application - whether the amount received by the assessee from banks and financial institution towards reimbursement of some of the services offered by the assessee to the banks/ financial institutions must be excluded from the gross value of the taxable service in terms of Rule 5(2) of the Service Tax (Determination of Value) Rules, 2006 - Held that - Whether the value received by the assessee in respect of services such as security, videography, photo rolls, iron boards, locking and sealing material etc. should be excluded from the gross taxable value, in view of provisions of Rule 5(2) of the Service Tax Rules is not wholly free from doubt at this stage. However, the entirety of the assessee s claim for exclusion does not appear to be based on any sound legislative of statutory basis - Prima facie case not in favour of assessee - Stay granted partly.

Summary

Issues:
Waiver of pre-deposit and stay of further proceedings for recovery of the amount adjudicated.

Analysis:
The case involves the appellant seeking waiver of pre-deposit and stay of all further proceedings for the recovery of the amount adjudicated by the order dated 02.03.2012, confirmed by the Appellate Commissioner on 27.08.2012. The adjudicating authority had confirmed a demand of service tax of Rs.21,64,594/- along with interest and penalty, including a penalty equal to the service tax liability assessed under Section 78 of the Finance Act, 1994. The key issue in this appeal revolves around whether the amounts received by the assessee from banks and financial institutions for services offered should be excluded from the gross value of the taxable service as per Rule 5(2) of the Service Tax (Determination of Value) Rules, 2006. The contention of the assessee is that amounts received for all reimbursable services should be excluded. However, it was found by the adjudicating authority and affirmed by the appellate authority that some services provided by the assessee and reimbursed by banks and financial institutions are integrally connected to the taxable service specified in Section 65(105)(zzzl) of the Finance Act, 1994.

The question arises whether the value received by the assessee for services like security, videography, photo rolls, iron boards, locking, and sealing material should be excluded from the gross taxable value in accordance with Rule 5(2) of the Service Tax Rules. The judgment indicates that the assessee's claim for exclusion does not seem to have a solid legislative or statutory basis. However, the issue regarding the exclusion of these specific services from the taxable value remains uncertain at this stage.

In light of the circumstances, the judges find it appropriate in the interest of justice and the revenue to grant the waiver of pre-deposit and stay of further proceedings subject to a condition. The condition imposed is that the assessee must remit 50% of the basic tax demand (excluding interest and penalty) as adjudicated within four weeks and report compliance by a specified date. Failure to comply with this condition would result in the rescission of the waiver and dismissal of the appeal for failure of pre-deposit. The counsel for the appellant present in court acknowledges the order and undertakes to communicate the obligations of the assessee as per the order.