2024 (11) TMI 346 - AT - Service Tax

Service tax of unbilled amount - Service Tax on an amount considering the same as part of the gross value which was neither towards any provision of service nor the same was billed by the appellant and consequently, the same was not paid by the service recipient - HELD THAT - Section 67 is very clear that only gross amount charged from the service recipient shall be considered as the gross value towards the service provided and that alone shall be chargeable to service tax. In the present case, since, the amount on which the service tax was demanded has admittedly not been charged by the appellant to their service recipient, the same is not a part and partial of gross value as enumerated in Section 67. Therefore, the unbilled amount is not liable to service tax. This issue in the appellant s own case has been considered in Linde Engineering India Pvt. Ltd and others Vs, Union of India and others 2024 (7) TMI 384 - GUJARAT HIGH COURT which has relied on the land mark judgment of Hon ble Supreme Court in the case of Intercontinental Consultants Technocrats Pvt. Ltd 2018 (3) TMI 357 - SUPREME COURT it was held that the unbilled amount cannot be liable to service tax. Assessee appeal allowed.

Summary

Issues Involved:

1. Whether the unbilled revenue should be included in the gross value for the purpose of charging service tax under Section 67 of the Finance Act, 1994.
2. Whether the extended period of limitation was rightly invoked in the show cause notice.

Detailed Analysis:

1. Inclusion of Unbilled Revenue in Gross Value for Service Tax:

The central issue in this case was whether unbilled revenue should be included in the gross value for the purpose of charging service tax. The appellant argued that as per Section 67 of the Finance Act, 1994, only the amount charged for the provision of service is taxable. Since the unbilled revenue was neither billed nor charged to the service recipient, it should not be included in the gross value for service tax purposes. The appellant cited several judgments, including the landmark judgment of the Hon'ble Supreme Court in *Intercontinental Consultants and Technocrats Pvt. Ltd.*, which clarified that Rule 5 of the Service Tax (Determination of Value) Rules, 2006, cannot override Section 67. The Tribunal agreed with the appellant, noting that the Revenue's demand was based on an amount that was not charged to the service recipient and thus not part of the gross value as per Section 67. The Tribunal referenced the judgment of the Hon'ble Gujarat High Court in the appellant's own case, which had already settled this issue, stating that unbilled amounts are not liable to service tax. Consequently, the Tribunal found that the demand for service tax on the unbilled revenue was unsustainable.

2. Invocation of Extended Period of Limitation:

The appellant contended that the show cause notice wrongly invoked the extended period of limitation, arguing there was no suppression of facts on their part. However, the Tribunal did not provide a definitive ruling on this issue, as it was left open. The focus of the Tribunal's decision was primarily on the substantive issue of whether unbilled revenue could be taxed, and since the demand itself was found unsustainable, the question of limitation became secondary.

Conclusion:

The Tribunal set aside the impugned order, allowing the appeal on the grounds that the unbilled revenue could not be included in the gross value for service tax purposes. The Tribunal relied on the precedent set by the Hon'ble Supreme Court and the jurisdictional High Court, affirming that Rule 5 of the Service Tax Rules cannot extend the scope of Section 67 of the Finance Act. The issue of limitation was not conclusively addressed, as the primary demand itself was found to be unsustainable. The decision underscores the principle that the value of taxable services must be determined strictly as per the statutory provisions, without unwarranted expansion by subordinate legislation.