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TMI Blog2019 (2) TMI 955X X X X Extracts X X X X X X X X Extracts X X X X ..... esent case, as discussed above, services of manpower though have been provided by Telenor AS, a Company incorporated under laws of Norway but through its India office registered with India Service Tax Commissionerate. Appellant admittedly being the provider of service, Rule 2(1)(d)(iv) is not applicable to the given circumstances as under this rule, the person liable to pay service tax is recipient of service - SCN has been issued invoking the wrong provisions of the Act and thus is nonest. Even the order under challenge has confirmed demand under these wrongly invoked provisions. Thus, irrespective that the service provider generally is liable to discharge the service tax liability the demand against him cannot be invoked/ confirmed under the provisions making the recipient thereof as liable to pay service tax. Invocation of Rule 5 of Service Tax (Determination Value) Rules, 2006 - Held that:- Rule 5 of Service Tax (Determination Value) Rules, 2006 which talks about the expenses to be included in the cost is therefore absolutely contrary to the intention of legislature as under the charging provisions of Section 66 and 67 of the Finance Act. Hon ble Apex Court in the case of Un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AY KUMAR, MEMBER (TECHNICAL) AND MRS. RACHNA GUPTA, MEMBER (JUDICIAL) Present for the Appellant : Mr. J.K. Mittal Ms. Vandna Mittal, Advocates Present for the Respondent: Mr. G.R. Singh, DR ORDER PER: RACHNA GUPTA Matter was listed for Miscellaneous Application praying for out of turn hearing of the Appeal. Since the appellant was relying upon the decision of Hon ble Apex Court and the Counsel was ready to submit final arguments that the Miscellaneous Application is allowed. Arguments on main Appeal head. The relevant factual matrix for the purpose is: M/s Telenor Consult AS, Unit No. 902, 9th Floor, Le Meridian, Windsor Place, Commercial Tower, New Delhi are registered with Service Tax Commissionerate Delhi, for Manpower Recruitment or Supply Agency Services and Business Support Services (under reverse charge) and have been issued STC No. AADCT2257JSD002. The appellant entered into three Expatriate Agreements with following subsidiaries:- (a) M/s Unitech Wireless (Tamil Nadu) Pvt. Ltd. dated 23.07.2009. (b) Unitech Wireless (Tamil Nadu) Pvt. Ltd. dated 03.02.2010. (c) Telenor India Pvt. Ltd. dated 29.06.2009 (three of the subsi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d Rule 6A of the Service Tax Rules, 1994 was also alleged. The said demand was confirmed vide Order-in-Original No. 71516 dated 30.11.2015. Being aggrieved, the appellant is before this Tribunal. 2. We have heard Mr. J.K. Mittal and Ms. Vandana Mittal, Ld. Advocates for the appellant and Mr. G.R. Singh, Ld. DR for the Department. 3. It is submitted on behalf of appellant that show cause notice is based upon agreements of the appellant with three separate companies. Since three of those agreements were similarly worded, only one has been discussed in the SCN. However, it is still an undisputed fact that the appellant is a foreign company and supply manpower to the Indian company(ies). It is impressed upon that the tax demand vide the impugned SCN and the confirmation thereof under Section 66A of the Finance Act, 1994 (hereinafter referred to as the Act) read with Rule 2(1)(d)(iv) of Service Tax Rules is absolutely not sustainable. Both the provisions speak about the liability of service tax under reverse charge mechanism. Whereas, the appellant is admittedly a service provider. Further, SCN is challenged on following grounds as well: (i) SCN has wrongly alleged about appell ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Department‟s own admission about appellant discharging their liability and in view of the position of law as settled by Hon ble Supreme Court (as submitted above), there is no apparent mensrea on the part of the appellant to evade service tax nor there is any apparent suppression or mis-representation of facts. Hence, the extended period of limitation could not have been invoked by the Department. The period of demand here is 2009-10 to 2013-14 whereas the impugned SCN is dated 24.04.2015. The Order under challenge is prayed to be set aside for the above submitted lacunas. Appeal is prayed to be allowed. 4. While rebutting these arguments it is submitted that the appellant was registered with Service Tax Department during the relevant period for providing manpower recruitment. As such the arguments that appellant is a foreign company is absolutely mis-conceived. The appellant admittedly is providing a taxable service. The payment thereof has been enumerated in Clause 6.1, 6.2 and 6.3 of the Expatriate Secondment Agreements entered into by the appellant with three companies in India. The amount received by virtue of three of these Clauses has to be the gross amount for th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... we are of the opinion as follows: As far as the arguments about appellant being a foreign company is concerned, it is observed that the Agreements whereupon is based the impugned SCN are three Expatriate Secondment Agreement as executed between the appellant i.e. M/s Telenor Consult AS, a Company limited by shares organized and existing under the laws of Norway and (i) Telenor India Pvt. Ltd., a company incorporated in India with its office at Pegus, Level 4, Rectangle I, Saket District, New Delhi (agreement dated 27.06.2009), (ii) Unitech Wireless (Tamil Nadu) Pvt Ltd, a company incorporated in India with its registered office at Basement 6, Community Centre, Saket, New Delhi (agreement dated 03.02.2010) and (iii) Unitech Wireless (Tamil Nadu) Pvt. Ltd., a company incorporated in India with its office at The Masterpiece Plot #10, Golf Course Road, Sector 54, DLF Ph-V, Gurgaon (agreement dated 23.07.2009). 5.1 M/s Telenor Consult AS irrespective is a company under laws of Norway, but is registered with service tax Commissionerate, Delhi for manpower recruitment or supply agency services and business support services having STC No. AADCT2257JSD002 as is mentioned i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Thus, we hold that findings under challenge are liable to be set aside on this score itself. 7. Not only this, there is a noticed contradiction in the SCN and the Order of adjudicating authority below. The SCN in Para 12 thereof is alleging that appellant has not been filing ST-3 Returns whereas in the Order-in-Original in para 19 thereof there is an apparent admission about appellant been paying service tax and being regular in filing the ST-3 Returns. Once the allegation in SCN is held otherwise by the adjudicating authority demand cannot be confirmed. Thus, SCN is opined to have not only invoked the wrong provisions but is also held to be based on wrong presumptions of fact. Also, the demand in order under challenge has been confirmed under the provisions of Rule 3 and Rule 5 of Service Tax (Value of Determination) Rules, 2006 which have not been invoked in the SCN. Thus, it is held that Commissioner has gone beyond the scope of SCN. Law has been settled by Hon ble Apex Court in the case Precision Rubber Industries P. Ltd. Vs. C.C.E., Mumbai 2016 334 E.L.T. 577 (S.C.) wherein it was held that SCN is foundation of any proceedings. A new classification at a subsequent stage ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ner. (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 the 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 i.e. payable for the taxable services provided or to be provided; (b) money includes any currency, cheque, promissory note, letter of credit, draft, pay order, travelers cheque, money order, postal remittance and other similar instruments but does not include currency that is held for its numismatic value; (c) gross amount charged includes payment by cheque, credit card, deduction from account and any form of payment by issue of credit notes or debit notes and book adjustment and nay amoun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... needful in the matter. Above all, whenever there is a conflict between the Rules and the Act as such it is the Rules which have to pave the way for the Act as was held by Hon ble High Court Bombay in the case of Standard Drums Manufacturing Co. Ltd . reported as 2006 (199) E.L.T. 590. The reliance of the Commissioner for confirming the impugned demand on a Rule which has already been held ultra vires is not only erroneous but is held to be an act of judicial indiscipline. Hon ble High Court Karnataka, Bengaluru in their decision dated 22.10.2018 in Writ Petition No. 37514/2017 has held that public servants committing such kind of act are actually threat to society. This kind of lack of Judicial discipline will lead to more litigation and chaos. In view thereof, Commissioner(Appeals) is required to be careful about getting acquainted with the latest laws especially the overruled decisions. 10. Though the Parliament again amended Section 67 of the Act by Finance Act, 2015 w.e.f. 14.05.2015 adding an explanation which lays down that consideration includes the reimbursement of expenditure or cost incurred by the service provider but the period in question for the presen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as wrongly included the expenses as incurred by the service recipient in furtherance of Clause 6.3 of the impugned Agreements while confirming the demand thereof from the appellants, the service provider who is admittedly not receiving any other amount than the one as mentioned in Clause 6.2 of the said Agreement. The findings confirming the demand are held liable to be set aside for this reason as well. 12. Ld. Counsel for appellant has also placed reliance upon the decision of Hon ble Apex Court in the case of Commissioner of Service Tax Vs. M/s Bhayana Builders Pvt. Ltd. 2018 (3) S.C.C. 782 . To our opinion the said decision is not squarely applicable to the facts and circumstances of the present case because the question which has fallen for consideration in that case was as to whether the value of goods or materials supplied or provided free of cost by service recipient and used for providing the taxable service is to be included in computation of the gross amount. However, the Hon ble Apex Court in that case has appreciated the scope of words gross and charge and clarified that the value of such goods/ materials used or for providing the taxable service cannot be ad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... invoke proviso to Section 73(3) of the Finance Act. In the given circumstances no question even of imposition of penalty at all arises. Hon ble Apex Court in the case Uniworth Textiles Ltd. Vs. C.C.E., Raipur 2013 (288) E.L.T. 161 (S.C.) has held that burden to prove malafide is on the Department, the alligator. It was clarified that mere non-payment of duties also is not equivalent to conclude willful mis-representation or suppression of facts but extended period of limitation is not invocable. Present is held to not to be a case of non-payment. Drawing our support from the case law Commissioner of Sales Tax UP Vs. Sanjiv Fabrics 2010 (258) E.L.T. 465 (S.C. ) (para 17) and Union of India Vs. Rajasthan Spinning and Weaving Mills 2009 (238) E.L.T. 3 (S.C.) (para 18) that once there is no mensrea nor any ingredient existing as mentioned in Section 78 of the Act question of imposition of penalty does not at all arises. 15. Seeing from the entire discussion as above and that the Commissioner has committed an error as that of double taxation while demanding the tax on the entire value of Clause 6.2 as well as 6.3 of the Agreements despite his own observation that as far as the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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