2024 (6) TMI 769 - AT - Service Tax

Valuation - TDS deposited in the Income Tax Department in relation to the payment made to the service providers - Reverse Charge - services provided by foreign service providers - HELD THAT - As in the appellant s own case M/S. PARADEEP PHOSPHATES LIMITED VERSUS COMMISSIONER OF CGST CX BHUBANESWAR COMMISSIONERATE 2023 (3) TMI 1498 - CESTAT KOLKATA the issue has already been decided that as per the agreement the taxes are to be borne by the appellant therefore TDS deducted by the appellant which is as per the terms of agreement the appellant has to bear. The value of income tax deducted at source is not includible of the value tax service received by the appellant on which the appellant had to pay the service tax under reverse charge mechanism. There are no merits in the impugned order - appeal allowed.

Issues Involved:
1. Liability to pay service tax on TDS deposited with the Income Tax Department.
2. Inclusion of TDS amount in the value of taxable services.
3. Applicability of earlier Tribunal decisions to the present case.

Detailed Analysis:

1. Liability to Pay Service Tax on TDS Deposited with the Income Tax Department:
The primary issue in this case is whether the appellant is liable to pay service tax on the TDS amount deposited with the Income Tax Department. The appellant, engaged in the manufacture of aluminum, received scientific and technical consultancy services from overseas parties. They paid service tax on the gross amount of invoices under the reverse charge mechanism as per Section 68(2) of the Finance Act, 1994, for the period April 2008 to August 2010. The appellant deducted TDS and paid it to the Income Tax Department as per the terms of the agreement with the service providers. An audit observed that the appellant did not include the TDS amount in the value of taxable services, resulting in a short payment of service tax. Consequently, a show-cause notice was issued, and the demand for service tax was confirmed along with interest and penalties.

2. Inclusion of TDS Amount in the Value of Taxable Services:
The Tribunal examined whether the TDS amount should be included in the value of taxable services. The appellant argued that the issue had been previously decided in their favor for an earlier period, and thus, the matter was no longer res integra. The Tribunal referred to its earlier decision and several other cases, including TVS Motor Company Ltd., Hindustan Oil Exploration Co. Ltd., Magarpatta Township Development & Construction Co. Ltd., Indian Additives Ltd., and Centre for High Technology. These cases consistently held that TDS, borne by the appellant as a statutory obligation, does not form part of the consideration for services rendered and thus should not be included in the value of taxable services.

3. Applicability of Earlier Tribunal Decisions:
The Tribunal reiterated its stance from previous decisions, emphasizing that the TDS amount, borne by the appellant, cannot be considered as part of the taxable value for service tax purposes. The Tribunal noted that the appellant had paid the service tax on the actual consideration agreed upon with the service providers. The TDS amount, being a statutory obligation, was not part of this consideration. The Tribunal also highlighted that compliance with statutory provisions, such as TDS, does not amount to rendering services and therefore does not constitute consideration under Section 2(d) of the Indian Contract Act, 1872.

Conclusion:
The Tribunal concluded that since the appellant bore the TDS liability and paid the agreed consideration to the service providers, the TDS amount should not be included in the taxable value for determining service tax liability. The impugned order was set aside, and the appeal was allowed with consequential relief, if any. The Tribunal's decision aligns with its earlier rulings, reinforcing the principle that statutory obligations like TDS do not form part of the consideration for services and thus are not subject to service tax.

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