2024 (12) TMI 1193 - AT - Service Tax

Liability of Service tax on the entire amount without deducting TDS - Department has entertained a view that the appellant should have discharged their service tax liability on the entire amount which was decided to be paid to the appellant that is the appellant should not have deducted the amount of TDS while discharging their service tax liability - HELD THAT - It can be seen from the order of the learned Commissioner (Appeals) that the short payment of the service tax has been demanded on TDS amount. It is an established legal proposition that the amount of the TDS has to be deducted from the taxable value for charging service tax as per the provisions of Section 67 Finance Act, 1994 read with relevant service tax rules. While holding the above view reliance placed on this Tribunal decision in case of M/S. MAGARPATTA TOWNSHIP DEVELOPMENT AND CONSTRUCTION CO. LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE, PUNE-III 2016 (3) TMI 811 - CESTAT MUMBAI where it was held that ' There is nothing on record that indicates that the appellant had recovered that amount of Income Tax paid by them on such amount paid to the service provider from the outside India and any other material to hold that this amount is paid is consideration for services received from service provider.' The service tax cannot be demanded on the TDS amount which have been deducted from the taxable value - the impugned order-in-appeal is without any merit and is set aside - appeal allowed.

Summary

Issues:
1. Whether service tax liability should be discharged on the entire amount without deducting TDS.
2. Whether TDS amount should be included in the taxable value for charging service tax.
3. Applicability of relevant legal provisions and precedents in determining service tax liability.

Analysis:

Issue 1:
The appellant contended that service tax liability should not be discharged on the entire amount but should exclude the TDS deducted, citing the case of Sundaram Auto Components. The Commissioner (Appeals) reduced the demand but confirmed service tax and penalty. The Tribunal analyzed the CA certificate submitted by the appellant and relevant decisions, such as Magarpatta Township Development and Indian Additives Ltd. The Tribunal held that TDS should be deducted from the taxable value for charging service tax, as per Section 67 of the Finance Act, 1994.

Issue 2:
The department argued that the appellant should pay service tax on the actual TDS amount paid, not the lower amount declared. The Commissioner (Appeals) upheld the short payment of service tax on TDS amount, leading to a demand of Rs. 45,887. The Tribunal referred to the case of M/s. Magarpatta Township and Construction Co Ltd to support its decision that service tax liability should be discharged based on the amount charged by the service provider, excluding TDS.

Issue 3:
The Tribunal examined Section 67 of the Finance Act, 1994 and Service Tax Valuation Rules, 2006 to determine the correct valuation of taxable services. By analyzing the legal provisions and precedents, the Tribunal concluded that service tax should not be demanded on the TDS amount deducted from the taxable value. The Tribunal set aside the order-in-appeal, stating it lacked merit and allowed the appeal.

In conclusion, the Tribunal ruled in favor of the appellant, holding that service tax liability should not include the TDS amount deducted from the taxable value. The decision was based on legal provisions, precedents, and a thorough analysis of the facts presented in the case.