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TMI Blog2018 (9) TMI 253X X X X Extracts X X X X X X X X Extracts X X X X ..... ple of taxation in any tax system. Undisputed fact is that demand has been made in respect of the gross amount after taking into account the exchange rate fluctuation less the amounts booked in the book of accounts on the receipt of invoice for the services received. Appellants have paid the service tax on the amounts actually calculated by taking into account the prevalent exchange rate and the gross invoice value, on the date when invoice was received and expenditure booked in the books of account - by insertion of section 67A, intention of legislature for laying down the date for determination of taxable value and tax incidence, on the date of providing the service or when the service has been agreed to be provided has been made crystal clear. In a way the determination of taxable value and tax incidence has been totally delinked from the date of payment of tax. Appeal allowed - decided in favor of appellant. - APPEAL Nos. ST/85005-85006,85951/2015 - A/87131-87133/2018 - Dated:- 16-7-2018 - Dr. D.M. Misra, Member (Judicial) And Mr. Sanjiv Srivastava, Member (Technical) Shri Mehul Jivani, C.A., for appellant Shri Dilip Shinde, Assistant Commissioner (AR), for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d, may be more or less than the amount entered in the book of accounts for the reason of exchange rate fluctuations. In some case actual remittances would be more than that has been booked in the book of accounts and in some case it will be less. Revenue has sought to demand service tax only in respect of those payments which were in excess of the amounts booked in their book of accounts. However department has not given any credit were the amounts paid were actually less than the amounts booked in the book of accounts. ii. Section 67 of the Finance Act, 1994 provides that value shall be gross amount charged for the taxable services rendered. Gross amount shall be determined on the date on which payment of service tax has been made and not subsequently. Commissioner s observation that explanation to Section 67 provides that actual amount of remittances should only be considered as value irrespective of when liability to pay the tax arises is erroneous. iii. In support of their contentions they rely on the following decisions: Sify Technologies Ltd. [2011 (21) STR 252 (T-Chennai)]; General Motors (I) Pvt Ltd. [2015 (40) STR 962 (T-Mum)]. iv. In case of Paul Merchants ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er consideration, the amount actually paid in Indian Rupees for the services received and the amounts booked in the book of accounts differ. The amounts actually paid are higher than the amounts shown in the book of accounts. In terms of Section 67 of the Finance Act, 1994, the service tax should have been paid on the actual amounts remitted for the services received. He thus supported the order of Commissioner (Appeal) upholding the demand of service tax along with the interest. He further submitted adjudicating authority and Commissioner (Appeal) have relied upon the decision of Larger Bench of Tribunal in case of Jay Yushin [2000 (119) ELT 718 (T-LB)] to hold that revenue neutrality in case for non payment/ short payment of tax can be a valid defence. 5.0 Have heard and considered the submissions made in appeal and during the course of argument. 6.0 Undisputed fact is that demand has been made in respect of the gross amount after taking into account the exchange rate fluctuation less the amounts booked in the book of accounts on the receipt of invoice for the services received. Appellants have paid the service tax on the amounts actually calculated by taking into account t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e gross amount charged by the service provider for such service provided or to be provided by him; (ii) in a case where the provision of service is for a consideration not wholly or partly consisting of money, be such amount in money, with the addition of service tax charged, is equivalent to the consideration; (iii) in a case where the provision of service is for a consideration which is not ascertainable, be the amount as may be determined in the prescribed manner. (2) Where the gross amount charged by a service provider, for the service provided or to be provided is inclusive of service tax payable, the value of such taxable service shall be such amount as, with the addition of tax payable, is equal to the gross amount charged. (3) The gross amount charged for the taxable service shall include any amount received towards the taxable service before, during or after provision of such service. (4) Subject to the provisions of sub-sections (1), (2) and (3), the value shall be determined in such manner as may be prescribed. Explanation.-For the purposes of this section,- (a) consideration includes any amount that is payable for the taxable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... all be paid to the credit of the Central Government,- (i) by the 6th day of the month, if the duty is deposited electronically through internet banking; and (ii) by the 5th day of the month, in any other case, immediately following the calendar month in which the service is deemed to be provided as per the rules framed in this regard: Provided that where the assessee is an individual or proprietary firm or partnership firm the service tax shall be paid to the credit of the Central Government by the 6th day of the month if the duty is deposited electronically through internet banking, or, in any other case, the 5th day of the month, as the case may be, immediately following the quarter in which the service is deemed to be provided as per the rules framed in this regard : Provided further that the service tax on the service deemed to be provided in the month of March, or the quarter ending in March, as the case may be, shall be paid to the credit of the Central Government by the 31st day of March of the calendar year. Provided also that in case of such individuals and partnership firms whose aggregate value of taxable services provided from one or more p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ring that period. However, if exchange rates fluctuate significantly, the use of the average rate for a period is unreliable. Recognition of Exchange Differences 13. Exchange differences arising on the settlement of monetary items or on reporting an enterprise s monetary items at rates different from those at which they were initially recorded during the period, or reported in previous financial statements, should be recognised as income or as expenses in the period in which they arise, with the exception of exchange differences dealt with in accordance with paragraph 15. 14. An exchange difference results when there is a change in the exchange rate between the transaction date and the date of settlement of any monetary items arising from a foreign currency transaction. When the transaction is settled within the same accounting period as that in which it occurred, all the exchange difference is recognised in that period. However, when the transaction is settled in a subsequent accounting period, the exchange difference recognised in each intervening period up to the period of settlement is determined by the change in exchange rates during that period. Tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... axable services received. However the tax was to be paid on the value of taxable service received as determined by the service provider at the time of providing the service. Thus the condition of making the payment for service, could not have been the condition for payment of service tax. Recognizing the fact that in case of Associated Companies/ Enterprises, this provision of linking the payment of service tax to the date of payment for services, was being mis-utilized to delay the payment of service tax, law was amended in 2008 by insertion of following explanation in Rule 6 of the Service Tax Rules, 1994, to provide that in such cases service tax needs to be paid on recognition of the receipt of service in book of accounts. Explanation- For the removal of doubts, it is hereby declared that where the transaction of taxable service is with any associated enterprise, any payment received towards the value of taxable service, in such case shall include any amount credited or debited, as the case may be to any account, whether called Suspense Account or by any other name, in the books of account of a person liable to pay service tax 10.2 At the time of making the amendme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r more persons who participate, directly or indirectly, or through one or more intermediaries, in the management or control or capital of the other enterprise. 6.5 Section 92A(2) of the Income Tax Act specifies various situations under which two enterprises shall be deemed to be associated enterprises. Enterprise means a person who is engaged in the provision of any services of any kind. For details, relevant provisions of Income Tax Act may be referred to. 10.3 In order in appeal, Commissioner (Appeal) have brushed aside the clarification, stating that the said clarification has been issued as anti avoidance measure. For this he has taken support of the decision in case of SIFY Technologies [2011 (21) STR 252 (T-Chennai)]. The clarification issued by the Board may be for the purpose as suggested by the Commissioner, but cannot lay down two principles for determination of time of determination of taxable value. The said clarification clearly lays down that in case of the Associated Enterprises, service tax is to be determined and paid immediately when the documents in relation to supply of service, i.e. invoice etc., is entered into the books of account irrespective of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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