2024 (3) TMI 641 - AT - Service Tax

Short levy of service tax - Manpower Supply Services and Works Contact Services under Reverse Charge Mechanism (RCM) in terms of proviso to Section 68(2) of the Finance Act, 1994 read with Notification No. 30/2012-ST dated 20.06.2012 - transmission or distribution of electricity by an electricity transmission or distribution utility and covered under negative list of services under clause (k) of Section 66D of the Finance Act, 1994 - HELD THAT - Section 67(2) of the Finance Act, provides that where the gross amount charged by the service provider, for the service provided or to be provided is inclusive of service tax payable the value of such taxable service shall be such amount as with the addition of tax payable is equal to gross amount charged. It is therefore clear that where service tax is not separately collected by the assessee, than the price of the goods or gross amount charged for such service rendered shall be deemed to include service tax as may be applicable. It is also a settled proposition in law that no tax is leviable on state dues in the nature of tax/duty/cess etc. As no tax can be recovered on the component of labour cess discharged by the appellant, it is incumbent upon the authorities to rework the demand amount after discounting the aforesaid labour cess component from the value of taxable services as arrived at by the Revenue in the light of the aforesaid example. In view of the findings, the order of the lower authority is set aside and the matter remanded to the original authority to work out the demand amount afresh after giving due consideration from the contractual value for the labour cess amount paid for which all documentary evidence as placed on record shall be considered by the original authority. Needless to state that natural justice shall be adhered to and the appellant given reasonable opportunity to present their case. Appeal disposed off by way of remand.

Summary

Issues:
The issues involved in the judgment are the calculation of service tax on Manpower Supply Services and Works Contact Services under Reverse Charge Mechanism, the inclusion of labour cess component in tax calculation, and the proper assessment of tax liability.

Calculation of Service Tax:
The appellant, engaged in electricity transmission, challenged the order upholding the short levy of service tax for the period 2013-14 to June 2017. The appellant contended that the tax calculation method was incorrect as tax was levied on the labour cess component included in the value of taxable service. The appellant argued that the tax calculation method should consider the cum tax benefit of value adopted, as per previous cases. The appellate authority set aside the demand for interest and penalty, remanding the matter for a fresh calculation.

Inclusion of Labour Cess Component:
The appellant highlighted that while statutory dues like service tax and TDS were abated, the labour cess paid by them was not considered in the demand calculation. They provided evidence of payment of labour cess at the applicable rates, emphasizing that government dues were part of the contractual amount paid. The judgment emphasized the need to recalculate the demand, taking into account the payment of statutory levies by the appellant.

Assessment of Tax Liability:
The judgment referred to Section 67(2) of the Finance Act, stating that where service tax is not separately collected, the gross amount charged for the service shall be deemed to include service tax. The judgment provided a hypothetical example to illustrate the calculation of tax liability, emphasizing that no tax can be recovered on the component of labour cess. The order set aside the lower authority's decision and remanded the matter for a fresh assessment, ensuring natural justice and giving the appellant a reasonable opportunity to present their case.