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TMI Blog2018 (2) TMI 945X X X X Extracts X X X X X X X X Extracts X X X X ..... s Pvt. Ltd. [2012 (12) TMI 150 - DELHI HIGH COURT]. The Hon’ble High Court held that the inclusion of costs and expenditures in the gross taxable value by making provision in the Rules is repugnant to Section 66 and 77 of the Finance Act and to that extent is ultra vires. Demand do not sustain - appeal allowed - decided in favor of appellant. - ST/156/2010 - Final Order No. 40364/2018 - Dated:- 5-2-2018 - Ms. Sulekha Beevi, Member (Judicial) And Shri Madhu Mohan Damodhar, Member (Technical) Shri S. Muthu Venkataraman, for the Appellant Shri K. Veerabhadra Reddy, JC (AR) for the Respondent ORDER Per Bench The brief facts are that the appellants are engaged in the business of prospecting, exploring and production o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble service and is not required to be included. The definition of taxable service under Survey and Exploration of Mineral, Oil or Gas service covered only activities in the nature of prospecting, surveying and map making activities. They have entered into a contract withr M/s. Odfjell Well Services Ltd., UAE, from whom they had taken the equipments on rent and the appellant is alleged to be liable to pay service tax on the freight charges and rent paid under reverse charge mechanism as provided under Section 66 A of the Finance Act, 1994. The equipment rentals paid by the appellant is in the nature of deemed sale and hence not subjected to service tax. The renting of equipments involved transfer of right to use the equipments wherein posses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rendering the main service Survey and Exploration of Mineral, Oil or Gas service, equipments were rented out. These equipments are integral to the service activities and the rental charges paid have to be included in the gross value. The services could not have been provided without the use of the equipments, which makes it clear that the use of these equipments is the essential part of the service. For the same reason, freight charges and other charges also form essential part of the taxable value and have to be included as reimbursable expenses. Further, appellants have not disclosed to the department the exclusion of various components while discharging the service tax liability. The appellant is guilty of suppression of facts. The dema ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the Contract. Except to any extent expressly stated elsewhere in the Contract, the Services are to be furnished on a non-exclusive basis and Company may at any time obtain similar or associated services to the Services from other contractors or suppliers. Company agrees to pay Contractor in consideration of the performance and completion of the Services in conformity in all respects with the provisions of the Contract the Rates (or such other sums as may become payable under the provisions of the Contract) at the times and in the manner prescribed by the Contract. 6. The allegation raised against the appellant is that they failed to include freight charges, equipment rental charges, clearing expenses, mobilization and demobilization ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion in this appeal, for the reason that the SCN as well as the OIO basis the allegation only under sub-rule 1 of Rule 5 of Service Tax (Determination of Value) Rules 2006. The Rule 5 (1) reads as under:- As per sub-rule (1) to Rule 4 of the Service Tax (Determination of Value) Rules 2006, where any expenditure or costs are incurred by the service provider in the course of providing taxable service, all such expenditure or costs shall be treated as consideration for the taxable service provided or to be provided and shall be included in the value for the purpose of charging service tax on the said service. 7. The applicability of Rule 5 (1) was considered by the Hon ble High Court of Delhi in the case of Intercontinental Consultan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 94, which empowers the Central Government to make rules for carrying out the provisions of Chapter V of the Act is manifest, in the sense that only the service actually provided by the service provider can be valued and assessed to service tax. We are, therefore, undoubtedly of the opinion that Rule 5(1) of the Rules runs counter and is repugnant to Sections 66 and 67 of the Act and to that extent it is ultra vires. It purports to tax not what is due from the service provider under the charging Section, but it seeks to extract something more from him by including in the valuation of the taxable service the other expenditure and costs which are incurred by the service provider in the course of providing taxable service . What is brought to ..... X X X X Extracts X X X X X X X X Extracts X X X X
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