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TMI Blog2010 (12) TMI 410X X X X Extracts X X X X X X X X Extracts X X X X ..... the proposition that all expenses incurred till that point and time become essential consideration of cost of service - Agreement of parties in respect of modality of payment of valuable consideration towards service provided does not matter for Revenue - Legislature accordingly intend that the gross value of the service shall be the measure of value for taxation whether paid as consideration directly or by reimbursement of expenses relating to providing of taxable service - There is no specific deduction allowed under statutory provisions to diminish the value of taxable consideration of taxable service, in absence of such provision in law, learned Commissioner (Appeals) committed error of law to exclude the expenses reimbursed by the se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... als). He specifically points out that the ratio laid down in Naresh Kumar s case in para 6.10 of the order is to the effect that if an expenditure is indispensable and inevitably incurred to provide taxable service, such cost should essentially form part of cost of service and value of taxable service is not realised by provider of service without such expenditure being recovered from recipient of taxable service. Therefore mode of payment of such expenditure by what ever name called by parties is not material for Revenue. So also expenditure incurred either incidental or ancillary to perform an act, shall essentially make value addition to the service. Therefore, the first Appellate order calls for interference to reverse the same. 3. Wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alue of taxable service to the detriment of law. 4. The Apex Court in the case of All India Federation of Tax Practitioners v. Union of India reported in 2007 - TIOL - 149 - SC - ST = 2007 (7) S.T.R. 625 (S.C.) held that service tax is destination based consumption tax and that may be either performance based or property based. Economic services are provided for valuable consideration without being rendered charitably. No service which is uneconomical or commercially unviable are provided in the commercial world. Various elements of cost contribute to the provision of economic services. Expenses which are indispensable and inevitably incurred to make the economic service performable that contribute to the gross value of service. The prov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ice. 6. The philosophy of service tax law has been described by Apex Court in paras 6, 7, 8 of All India Federation of Tax Practitioners v. Union of India reported in 2007 - TIOL -149 - SC - ST = 2007 (7) S.T.R. 625 (S.C.) in following terms :- 6. At this stage, we may refer to the concept of Value Added Tax (VAT), which is a general tax that applies, in principle, to all commercial activities involving production of goods and provision of services. VAT is a consumption tax as it is borne by the consumer. 7. In the light of what is stated above, it is clear that Service Tax is a VAT which in turn is destination based consumption tax in the sense that it is on commercial activities and is not a charge on the business but on the cons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsumption of goods and consumption of service are similar as they both satisfy human needs. Today with the technological advancement there is a very thin line which divides a sale from service . That, applying the principle of equivalence, there is no difference between production or manufacture of saleable goods and production of marketable/saleable services in the form of an activity undertaken by the service provider for consideration, which correspondingly stands consumed by the service receiver. It is this principle of equivalence which is inbuilt into the concept of service tax under the Finance Act, 1994. That service tax is, therefore, a tax on an activity. That, service tax is a value added tax. The value addition is on account ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the gross value of taxable service and there is no specific deduction allowed under statutory provisions to dimish the value of taxable consideration of taxable service, in absence of such provision in law, learned Commissioner (Appeals) committed error of law to exclude the expenses reimbursed by the service recipient to service provider from the purview of taxation. We are fully in agreement with learned DR to follow the decision made by the Division Bench of Tribunal in the case of Naresh Kumar Co. Pvt. Ltd. v. CST, Kolkata (supra). Our view aforesaid is fortified by the ratio laid down in para 6.10 of the said judgment to allow the appeal of revenue. Accordingly, we allow the appeal of revenue setting aside the first Appellate orde ..... X X X X Extracts X X X X X X X X Extracts X X X X
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