2024 (1) TMI 674 - AT - Service Tax

Recovery of service tax alongwith interest and penalty - Operation Maintenance of Telecom/Mobile towers - Services provided included Diesel Filling services - HELD THAT - The issue involved in the matter is covered on all fours with decision rendered by CESTAT in case of M/S GANPATI ASSOCIATES, M/S MUNSHI LAL DURGA PRASAD VERSUS COMMISSIONER OF CENTRAL EXCISE CENTRAL GOODS AND SERVICE TAX, JAIPUR 2019 (5) TMI 1233 - CESTAT NEW DELHI . Tribunal in this case was considering a similar issue with supply of similar services under a similar contract. Though this order is for the period prior to the amendments made in Section 67 in 2015 as consequence of the decision of the Hon ble Delhi High Court in case of Intercontinental Consultants 2012 (12) TMI 150 - DELHI HIGH COURT , enunciated in the said order are applicable to facts of the present case, where it was held that Even if diesel is considered to be free of cost supplied by the service recipient to the service provider, no service tax can be levied on it in view of the decision of the Supreme Court in Bhayana Builders 2018 (2) TMI 1325 - SUPREME COURT . Appeal allowed.

Issues Involved:
1. Demand of Service Tax on Diesel Supply
2. Extended Period of Limitation
3. Liability for Interest
4. Penalty under Section 78
5. Penalty under Section 76

Summary:

1. Demand of Service Tax on Diesel Supply:
The Principal Commissioner confirmed a demand of Service Tax amounting to Rs.5,13,91,838/- against the appellant for the period 2015-16 and 2016-17, including interest and penalties, on the grounds that the appellant was not paying Service Tax on receipts by way of reimbursement for the cost of diesel supplied for DG sets at telecom tower sites. The appellant argued that the supply of diesel was an independent transaction and not part of the taxable service of operation and maintenance. However, the Tribunal found that the diesel filling activity was integral and essential for rendering the services of operation and maintenance of telecom towers and thus, the value of diesel should be included in the taxable value as per Section 67 of the Finance Act, 1994 and Rule 5 of Service Tax (Determination of Value) Rules, 2006. The Tribunal referred to the decision in Ganpati Associates and concluded that the reimbursement of diesel cost is not a consideration for the service provided and cannot be included in the taxable value.

2. Extended Period of Limitation:
The appellant contested the invocation of the extended period of limitation, arguing that the issue was interpretational and there was no suppression of facts with intent to evade payment of Service Tax. The Tribunal noted that an earlier show cause notice for the period 2014-15 had already been issued, and invoking the extended period again for 2015-16 and 2016-17 was contrary to the guidelines.

3. Liability for Interest:
The Tribunal held that since the demand itself is not sustainable, the question of liability for interest does not arise.

4. Penalty under Section 78:
The Tribunal found that there was no willful suppression of facts with intent to evade payment of Service Tax, and thus, the penalty under Section 78 was not applicable.

5. Penalty under Section 76:
The Tribunal did not find it necessary to impose penalties under Section 76, as the demand itself was not sustainable on merits.

Conclusion:
The Tribunal allowed the appeal, setting aside the impugned order, and concluded that the demand of Service Tax on the value of diesel supplied cannot be sustained. The Tribunal relied on the decision in Ganpati Associates, which held that the reimbursement of diesel cost is not a consideration for the service provided and cannot be included in the taxable value. The Tribunal did not render findings on the issues of limitation and penalties, as the demand itself was not upheld on merits.

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