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TMI Blog2019 (8) TMI 211X X X X Extracts X X X X X X X X Extracts X X X X ..... imposed under Section 76 of the Act. A penalty of Rs. 30,000/- has also been imposed on the appellant under Section 77 of the Act. Being aggrieved with the said impugned order, the appellant is before us. 2. The brief facts of the case is that the appellant is a proprietary firm of Shri Lakhan Lal Soni and is registered with the Central Excise Department for providing of 'security service' and 'manpower supply services'. Acting on the intelligence that the appellant has suppressed the value taxable service from the Department, the Directorate General of Central Excise, Intelligence (DGCEI) Indore, conducted a search on 25.8.2011 at the appellant's office. During the search, various incriminating documents were recovered, which indicated that the appellant was not paying the service tax on the entire value of services rendered by them to their clients. It was also revealed that the appellant's account were being maintained by their Consultant, M/s Munindra Vaidya & Associates and, therefore, they were also summoned to furnish the records by letter dated 25.8.2011. The statement of accounts of the appellant for the relevant period i.e. 2007-2008, 2008-2009, 2009-2010 and 2011 (up t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mission of the learned Advocate that the component of salary, EPF, ESI and uniform allowances etc. are not includible in the gross amount charged, placing reliance on the decision of Intercontinental Consultants & Technocrats Pvt. Ltd. Vs. Union of India - 2013 (29) STR 9 (Del.). The service tax, thus, is required to be computed on the service portion only. It was also submitted that the issue is purely interpretational in nature and there is no deliberate suppression of facts on part of the appellant, as they were filing the ST-3 returns and were under the bonafide belief that the salary wages PF and ESI etc. is not includible in the gross amount charged under the provisions of Section 67 of the Act, and thus a fit case for invocation of Section 80 of the Act for waiver of penalty. It was also, therefore, submitted that the extended period of limitation is not applicable. Learned Advocate placed reliance on the following decision in support of non-invocation of extended period of limitation. (i) Commissioner of Central Excise, Chandigarh Vs. Punjab Laminates Pvt. Ltd. - 2006 (202) ELT 578 (SC); (ii) Commissioner of Central Excise, Ahmedabad-I Vs. M. Square Chemicals - 2008 (23 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with the work of a factory or establishment to which this Act applies and (i) who is directly employed by the principal employer on any work of, or incidental or preliminary to or connected with the work of, the factory or establishment, whether such work is done by the employee in the factory or establishment or elsewhere; or (ii) who is employed by or through an immediate employer on the premises of the factory or establishment or under the supervision of the principal employer or his agent on work which is ordinarily part of the work of the factory or establishment or which is preliminary to the work carried on in or incidental to the purpose of the factory or establishment; or (iii) whose services are temporarily lent or let on hire to the principal employer by the person with whom the person whose services are so lent or let on hire has entered into a contract of service; 17 and includes any person employed for wages on any work connected with the administration of the factory or establishment or any part, department or branch thereof or with the purchase of raw materials for, or the distribution or sale of the products of, the factory or establishment 18 or any person ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s Act. (4) The contributions payable in respect of each 107 wage period shall ordinarily for due on the last day of the 107 wage period and where an employee is employed for part of the 107 wage period or is employed under two or more employers during the same 107 wage period the contribution shall fall due on such days as may be specified in the regulations. 108 (5) (a) If any contribution payable under this Act is not paid by the principal employer on the date on which such contribution has become due, he shall be liable to pay simple interest at the rate of twelve per cent. per annum or at such higher rate as may be specified in the regulation till the date of its actual payment: Provided that higher interest specified in the regulations shall not exceed the lending rate of interest charged by any scheduled bank. (b) Any interest recoverable under clause (a) may be recovered as an arrear of land revenue or under section 45C to section 45-I. Explanation.-In this sub-section, "scheduled bank" means a bank for the time being included in the Second Schedule to the Reserve Bank of India Act, 1934 (2 of 1934); "Section 40 - Principal employer to pay contribution in the first ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ubject to the conditions specified in the proviso to sub-section (2) of section 40. 110 * * * * * "Employees Provident Fund Act, 1952 : Section 2 (e) and (f): [(e)"Employer" means-(i)In relation to an establishment which is a factory, the owner or occupier of the factory, including the agent of such owner or occupier, the legal representative of a deceased owner or occupier and, where a person has been named as a manager of the factory under clause (f) of sub-section (1) of section 7 of the Factories Act, 1948 (63 of 1948), the person so named; and(ii)In relation to any other establishment, the person who, or the authority which, has been ultimate control over the affairs of the establishment, and where the said affairs are entrusted to a manager, managing directing or managing agent, such manager, managing director or managing agent;](f) "employer" means any person who is employed for wages in any kind of work, manual or otherwise, in or in connection with the work of 3[an establishment] and who gets his wages directly or indirectly from the employer, 4[and includes any person,- (i)Employed by or through a contractor in or in connection with the work of the establishment; ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... loyed by or through him or otherwise to recover such contribution or charges from such employee. Explanation. -In this section, the expressions "dearness allowance" and "retaining allowance" shall have the same meanings as in section 6.]" It is evident from the provisions of the Acts that the contributions made towards the two Acts are in the nature of statutory contribution and required to be deducted by the appellant as immediate employer on behalf of Principal Employer. Thus, following the ratio laid down in the case of Intercontinental case (supra) these contributions cannot be treated as value of such service under Section 67 of the Act. Therefore, there is no authority provided in the law for subjecting these contributions to service tax under Section 67 of the Act. 7. The provisions of the PF and ESI Act makes it clear that it will be the primary responsibility of the principal employer to deduct amount towards the PF and deposit the same with the Central Government. The appellant in this case claimed that it has deducted the contributions on behalf of principal employer, that is recipient of the service, for remittance to the competent authority in terms of the provisions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der 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 charge under the relevant Sections is only the consideration for the taxable service. By including the expenditure and costs, Rule 5(1) goes far beyond the charging provisions and cannot be upheld. It is no answer to say that under sub-section (4) of Section 94 of the Act, every rule framed by the Central Government shall be laid before each House of Parliament and that the House has the power to modify the rule. As pointed out by the Supreme Court in Hukam Chand v. Union of India, AIR 1972 SC 2427 :- "The fact that the rules framed under the Act have to be laid before each House of Parliament would not confer validity on a rule if it is made not in conformity with Section 40 of the Act. Thus Section 94(4) does not add any greater force to the Rules than what they ordinarily have as species of subordinate legislation. 9. In view of above, the contributions made towards EPF and ESI are not liable to be included for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hane Dist. Vs. CCE, Thane-II - 2017 (51) STR 51 (Tri.-Mum.), wherein it is held that wages and allowance including salary and administrative charge collected from client is excludible from the gross value of taxable service in terms of Section 67 of the Act. The relevant paragraph of order is reproduced hereinafter: "4.1 Further, under section 6 of the Maharashtra Private Security Guards (Regulation of Employment & Welfare) Act, 1981, following has been provided :- Disbursement of wages and other allowances "31. to registered Security Guards of the Board. - The wage and other allowances payable to the registered Security Guards of the Board every month by the registered principal employer shall be remitted by the registered principal employers by cheque to Secretary, of the Board, within such time after the end of the month, as may be specified by the Board. The Secretary thereupon shall arrange to disburse the wages and other dues, if any to the registered Security Guards of the Board on specified days every month subject to deductions, if any, recoverable from them under the Scheme; Provided that the Board may, if it thinks fit, and subject to such conditions as may be laid d ..... X X X X Extracts X X X X X X X X Extracts X X X X
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