2024 (8) TMI 208 - AT - Service Tax

Valuation of service - amount paid to the guards of CISF and expenses incurred towards supply of arms and ammunitions, saftery shoes expenses etc. - includable in the amount of consideration for receiving the Security/Detective Agency Services from CISF in terms of section 67 of Finance Act 1994 read with Rule 5 of Valuation Rules, 2006 - applicability of Rule 5 of Valuation Rules, 2006 - Extended period of limitation. HELD THAT - In the present case the value of freebies supplied by the service recipient to the service provider and the amount of reimbursable expenses has been considered as the part of consideration assessable to tax since the demand in question has solely been confirmed by invoking Rule 5 of Valuation Rules. The decision of M/S BHAYANA BUILDERS (P) LTD. OTHERS VERSUS CST, DELHI OTHERS. 2013 (9) TMI 294 - CESTAT NEW DELHI-LB and that of UNION OF INDIA AND ANR. VERSUS M/S. INTERCONTINENTAL CONSULTANTS AND TECHNOCRATS PVT. LTD. 2018 (3) TMI 357 - SUPREME COURT is sufficient to hold that demand is liable to be set aside the said demand. The above discussion also clarifies that the amount do not classify to be called as consideration. The case is no more res integra. It has been consistently held that value of amenities provide to CISF by the service recipient is not required to be included in the value of services. For the period prior to 30 June 2012, the services provided by CISF were covered under forward carge. With effect from 01 July, 2012, the services are covered under RCM vide Notification No.3/2012-ST dated 20.06.2012. For the services involving same facts, involving CIST, there have been judgements to the effect that value of infrastructure made available to CISF is not includible in the value of services. Extended period of limitation - HELD THAT - The appellant is wrongly made liable for payment of the impugned amount of demand. There can be no reason with the appellant to not to pay the service tax liability with an intent to evade the duty - it was the incumbent duty of the department to prove the positive act of alleged fraud, suppression or wilful misstatement on part of the appellant. But except that the plea of non-payment of tax as has been considered in the impugned order, there are nothing on record which may amount to an act of suppression on part of the appellant - The allegations that appellant did not disclose the extent of taxable services in the form of ST-3 returns which amounts to concealment, also does not support the department as appellants have sufficiently established that they declared everything and every information of what they believe. As per their belief no value is attributable to the infrastructure/arms/ammunitions made available to CISF. Hence, it was inconceivable for the appellant to make any different disclosure than what they have declared. The extended period based on such allegations is held to have wrongly invoked. The demand of service tax has wrongly been confirmed upon the appellant. Rule 5 of Valuation Rules has wrongly been invoked. The show cause notice has wrongly invoked the extended period of limitation. The show cause notice itself gets time barred. The findings of original adjudicating authority are therefore not sustainable - appeal allowed.

Summary

Issues Involved:
1. Inclusion of reimbursable expenses in the assessable value.
2. Applicability of Rule 5 of Service Tax (Determination of Value) Rules, 2006.
3. Invocation of extended period of limitation.
4. Imposition of penalty.

Detailed Analysis:

1. Inclusion of Reimbursable Expenses in the Assessable Value:
The primary issue was whether the amounts paid to CISF guards and expenses incurred towards supply of arms, ammunition, safety shoes, etc., should be included in the consideration for receiving Security/Detective Agency Services under Section 67 of the Finance Act, 1994, read with Rule 5 of the Valuation Rules, 2006. The appellant argued that these expenses were reimbursable and not part of the taxable value. The Tribunal referred to the decision in M/s. Bhayana Builders (P) Ltd., which held that the value of goods and materials supplied free of cost by a service recipient to the provider of taxable service is not includable in the taxable value. The Tribunal concluded that anything provided as a free supply does not constitute monetary consideration and thus should not be included in the assessable value.

2. Applicability of Rule 5 of Service Tax (Determination of Value) Rules, 2006:
The appellant challenged the applicability of Rule 5, which includes reimbursement of expenses in the value of taxable services. The Tribunal referred to the Delhi High Court's decision in Union of India Vs. Intercontinental Consultants & Technocrats Pvt. Ltd., which held that Rule 5 is ultra vires to Sections 66 and 67 of the Finance Act as it seeks to include additional costs in the value of taxable service, contrary to the statutory provisions. The Tribunal held that the demand based on Rule 5 was not sustainable.

3. Invocation of Extended Period of Limitation:
The Tribunal examined whether the extended period of limitation was rightly invoked. The appellant contended that the demand was based on publicly available balance sheet information, which does not justify invoking the extended period. The Tribunal found no evidence of fraud, suppression, or willful misstatement by the appellant. The Tribunal cited the Hon'ble Supreme Court's decision in Uniworth Textiles Ltd. Vs. CCE, which held that non-payment of tax does not constitute suppression of facts. Consequently, the Tribunal held that the extended period was wrongly invoked.

4. Imposition of Penalty:
Given the Tribunal's findings that the demand was wrongly confirmed and the extended period was wrongly invoked, it also concluded that no penalty should be imposed on the appellant. The Tribunal emphasized that the appellant had disclosed all relevant information and acted based on their understanding of the law, which was supported by several judicial decisions.

Conclusion:
The Tribunal set aside the order under challenge, holding that the demand of service tax was wrongly confirmed, Rule 5 of the Valuation Rules was wrongly invoked, and the extended period of limitation was wrongly applied. Consequently, the appeal was allowed, and no penalties were imposed on the appellant.