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TMI Blog2019 (11) TMI 248X X X X Extracts X X X X X X X X Extracts X X X X ..... service. Regarding the remaining services, the Appellant did not pay Service Tax as the Appellant claimed that the amount was reimbursed. Section 67 of the Act deals with valuation of taxable services for charging Service Tax. Sub-section (1) of section 67 provides that where Service Tax is chargeable on any taxable service with reference to its value, then such value shall, where the provision of service is for a consideration in money, be the gross amount charged by the service provider for such service provided or to be provided by the service provider. It is, therefore, clear that only such amount is subject to Service Tax which represents consideration for provision of service and any other amount which is not a consideration for provision of service cannot be subjected to service tax. No Service Tax could have been levied in regard to the aforesaid services namely, horticulture, housekeeping and cleaning, supply of manpower and pest control. Valuation - expenses incurred in relation to maintenance of immovable property services - Real Estate Consultant Services - HELD THAT:- When the nature of service provided by the Appellant is specifically covered by the amendment made in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es in relation to horticulture, housekeeping and cleaning, pest control, supply of manpower, rent-a-cab, maintenance of immovable property, even though they were part and parcel on the activities relating to Real Estate Agent Service. The show cause notice also mentions that the Appellant had been availing Cenvat Credit but it did not maintain a separate amount for availment and utilisation of Cenvat Credit for taxable and exempted taxable services as required under Rule 6 of the 2004 Rules and hence the Appellant could not have utilised Cenvat Credit more than 20% of Service Tax payable on "Real Estate Agent Services" but it utilised more than 20%. Thus, it paid short paid Service Tax amounting to ₹ 3,09,79,339/-. 6. The second show cause notice mentions that the Appellant was providing security service to clients through security agencies in addition to 'Real Estate Agent Services' on which it had not discharged service tax liability. It further mentions that the Appellant was also providing rent-a-cab service to clients through other travel agencies on which no Service Tax was discharged. The Appellant was, therefore, called upon to show cause as to why Service Tax amount ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... egory "real estate agent services". The Appellant is engaged in facilitation services by appointing a facilitation manager to supervise and manage the management/ maintenance of immovable property. For the actual execution, the Appellant takes the services of various vendors. The services for which expenses are incurred on behalf of clients are in nature of "horticulture, housekeeping and cleaning, maintenance of immovable property, pest control and supply of goods. The above activities are not liable to be classified under the definition of "real estate agent services" or "real estate consultant" as provided for under Section 65(88) and Section 65(89) of Act; (ii) "real estate consultant" services includes activities in relation to advice, consultancy and technical assistance. The actual execution of work cannot fall under the category of consultancy services; (iii) 'management and maintenance of immovable property' became taxable with effect from 16 June 2005 but no amendment was made in the definition of the existing "Real Estate Agent Services". Hence, introduction of a new entry and inclusion of certain services in the existing entry pre-supposes that there was no earlier ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... security and rent-a-cab operator. It also discharged Service Tax liability on management and maintenance of immoveable property services w.e.f. 16 June 2005, when an amendment was made in the definition of management, maintenance or repair services. 14. The Department claimed that the above expenditure incurred by the Appellant was liable to be taxed under Rule 5(1) of the Service Tax (Determination of Value) Rules 2006 2006 Rules read with Section 67 of the Act. Under the first show cause notice dated 30 September 2008, the Department proposed Service Tax of ₹ 5,68,00,738/- for the period 2003-04 to 2005-06 under 'Real Estate Agent Service'. Under the second show cause notice, the Department proposed Service Tax demand of ₹ 1,57,53,488/- under 'security agent services' and 'rent-a-cab operator services'. The total demand under the two show cause notices was, therefore, ₹ 7,25,54,226/- towards the expenses which were claimed by the Appellant as reimbursement. The Commissioner realised that the amount of ₹ 1,57,53,488/- was included in both the show cause notices and, therefore, only an amount of ₹ 4,10,47,250/- under 'Real Estate Agent Services' was c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or provision of service cannot be subjected to service tax. 18. Section 67 of the Act was considered and explained by the Delhi High Court in Intercontinental Consultancy and Technocrafts (P) Ltd. vs. Union of India 2013 (38) STR 375. The Appellant therein was providing consulting engineering services. It received payment not only for the services provided by it but was also reimbursed for the expenses incurred by it on air travel, hotel stay, etc. It paid Service Tax on the amount received by it for services rendered to its clients but did not pay any Service Tax in respect of expenses incurred by it which were reimbursed by the clients. A show cause notice was issued to it to explain why Service Tax should not be charged on the gross value including reimbursable and out of pocket expenses. The provisions of Rule 5(1) of the Rules were resorted to for this purpose. A Writ Petition was filed challenging the vires of Rule 5 as being unconstitutional as well as ultra vires the provisions of section 66 and 67 of the Act. The Delhi High Court accepted the said contention and declared Rule 5 to be ultra vires the provisions of section 66 and 67 of the Act. The High Court noted that bot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... agraph 26 observed that the authority has to find what is the gross amount charged for providing "such" taxable services and so any other amount which is calculated not for providing such taxable service cannot be a part of that valuation as the amount is not calculated for providing "such taxable service." This, according to the Supreme Court, is the plain meaning attached to section 67 either prior to its amendment on 1 May, 2006 or after this amendment and if this be so, then Rule 5 went much beyond the mandate of section 67. The Supreme Court, therefore, held that the value of material which is supplied free by the service recipient cannot be treated as "gross amount charged" as that is not a "consideration" for rendering the service. The Appeal filed by the Department was, therefore, dismissed. 20. Thus, no Service Tax could have been levied in regard to the aforesaid services namely, horticulture, housekeeping and cleaning, supply of manpower and pest control. 21. The next issue is about the expenses incurred in relation to "maintenance of immovable property services". The impugned order has imposed tax under "Real Estate Consultant Services". The Appellant claims that the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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