2025 (4) TMI 447 - AT - Service Tax

Calculation of service tax - inclusion of amount received by CSC Publications and Ramiah Publications who are independent entities for sale of course material kits supplied and payment for which was routed through the appellant in the value of taxable services provided by the appellant - HELD THAT - A similar issue had come up for consideration before the Hon ble High Court of Punjab Haryana in the matter of CCE Chandigarh- I v. Pinnacle 2014 (8) TMI 149 - PUNJAB AND HARYANA HIGH COURT where it was held that the order of the Tribunal to exclude the cost of such material from the quantification of the service tax provided by the assessee have been rightly allowed. The study material supplied by the Bulls Eye is quantifiable separately. The condition in the circular relates to the services of reading material and text books provided by the assessee-institute and not books purchased from another supplier. Such goods can be quantified by the price paid. Therefore the amount of such goods have been rightly excluded in terms of Notification No. 12/2003-S.T. dated 20-6-2003. The Honourable Supreme Court has in the case of UOI v Intercontinental Consultants and Technocrats Pvt Ltd 2018 (3) TMI 357 - SUPREME COURT affirmed the decision of the Delhi High Court in 2012 (12) TMI 150 - DELHI HIGH COURT wherein Rule 5(1) of the Service Tax Valuation Rules 2006 which provided for inclusion of expenditures or costs incurred by the service provider in the course of providing taxable services in the value of such taxable services was stuck down as ultra vires Section 66 and Section 67 of the Act and as travelling beyond the scope of the said sections. Thus the very proposal in the SCN has been rendered meritless. Conclusion - The value of goods sold separately from services should not be included in the taxable value of services. The demand for service tax on the value of course materials is unsustainable and that the invocation of the extended period is unjustified - appeal allowed.

Summary

ISSUES PRESENTED and CONSIDERED

The primary issue considered was whether the demand for service tax on amounts received by CSC Publications and Ramiah Publications for the sale of course material kits, routed through the appellant, could be included in the taxable value of services provided by the appellant. The Tribunal also examined whether the invocation of the extended period for alleging suppression was justified given the circumstances and precedents.

ISSUE-WISE DETAILED ANALYSIS

1. Inclusion of Course Material Value in Taxable Services

Relevant Legal Framework and Precedents: The legal framework involved Section 67 of the Act, Rule 5(1) of the Service Tax (Determination of Value) Rules, 2006, and Notification No. 12/2003-ST dated 20.06.2003. The Tribunal referenced several precedents, including the decision in CCE, Chandigarh-I v. Pinnacle and the appellant's own previous case, M/s. CSC Computer Education Pvt Ltd v The CST Chennai.

Court's Interpretation and Reasoning: The Tribunal interpreted that the value of study materials and kits supplied by independent entities should not be included in the taxable value of services provided by the appellant. The reasoning was based on the precedent set by the High Court of Punjab & Haryana in the Pinnacle case, which allowed the exclusion of such material costs from service tax quantification.

Key Evidence and Findings: The Tribunal found that the study materials were separately quantifiable and were not part of the services provided by the appellant. The materials were supplied by independent entities, and their value was distinct from the appellant's service value.

Application of Law to Facts: Applying the law, the Tribunal concluded that the appellant was entitled to the benefit of Notification No. 12/2003, which exempts the value of goods sold from service tax. The Tribunal found that the materials were goods sold separately and not part of the service provision.

Treatment of Competing Arguments: The Tribunal considered the respondent's argument that the materials were part of the service provision but found it unpersuasive in light of the clear separation of transactions and the precedent decisions.

Conclusions: The Tribunal concluded that the value of the course materials should not be included in the taxable value of the appellant's services, thus setting aside the demand for service tax on these amounts.

2. Invocation of Extended Period for Alleging Suppression

Relevant Legal Framework and Precedents: The Tribunal considered the invocation of the extended period under the proviso to Section 73(1) of the Act, which allows for extended recovery periods in cases of suppression of facts.

Court's Interpretation and Reasoning: The Tribunal noted that the issue of whether the value of course materials should be included in the taxable value was interpretational and had been previously adjudicated in favor of the appellant for an earlier period.

Key Evidence and Findings: The Tribunal found that since the issue had been previously raised and adjudicated, the department was aware of the appellant's position. Therefore, the invocation of the extended period was not justified.

Application of Law to Facts: The Tribunal applied the principle that when an issue is interpretational and within the department's knowledge, the extended period for alleging suppression is not sustainable.

Treatment of Competing Arguments: The Tribunal dismissed the respondent's argument for invoking the extended period, citing the lack of suppression given the department's prior knowledge of the issue.

Conclusions: The Tribunal concluded that the invocation of the extended period was unjustified, further supporting the appellant's case.

SIGNIFICANT HOLDINGS

Preserve Verbatim Quotes of Crucial Legal Reasoning: The Tribunal quoted the Pinnacle case: "The study material supplied by the Bulls Eye is quantifiable separately... Such goods can be quantified by the price paid. Therefore, the amount of such goods have been rightly excluded in terms of Notification No. 12/2003-S.T., dated 20-6-2003."

Core Principles Established: The Tribunal reinforced the principle that the value of goods sold separately from services should not be included in the taxable value of services. It also emphasized that interpretational issues known to the department do not justify the invocation of the extended period for alleging suppression.

Final Determinations on Each Issue: The Tribunal set aside the Order-in-Appeal, concluding that the demand for service tax on the value of course materials was unsustainable and that the invocation of the extended period was unjustified. The appeal was allowed with consequential relief.