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TMI Blog2019 (5) TMI 1814X X X X Extracts X X X X X X X X Extracts X X X X ..... nd any other amount which is not a consideration for provision of service cannot be subjected to service tax. 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. Reliance placed in the impugned order on Rule 5(1) of the 2006 Rules for including the cost of cranes/mobilization of labour in the value of taxable services under Rule 5(1) of the 2006 Rules is not justified. Extended period of limitation - HELD THAT:- As it is not possible to sustain the demand under the impugned order, it will not be necessary to examine the contention raised by Learned Counsel for the appellant that the extend ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ices as per the contract made with different service receivers; (ii) As per the terms conditions of the contracts, the appellant was required to provide services by making its own arrangement of machinery, tools, equipments, cranes and labour etc.; (iii) The appellant had raised separate bills for collecting the charges in respect of crane hire charges, labour transportation charges, labour mobilization charges, tools/equipments mobilization charges which were used for completion of the contract; (iv) The assessee had used the machinery, tools, equipments, cranes and labour for completion of the work to be performed under the contracts and collected ₹ 5,50,83,066/- on this account from the service recipient in the year 2007-08. The assessee raised separate bills for ₹ 5,50,83,066/- but had not included this amount in the value of services provided under the work orders/contracts and thereby not paid/short paid Service Tax amounting to ₹ 68,04,792/- (including of Edu. Cess+ HSE Cess) on this amount; and (v) The value of taxable service in such cases is required to be determined in the light of provisions of Section 67 of the Act and the Ser ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs were issued for which no Service tax was liable to be paid. 7. The Commissioner, however, did not accept the contention of the appellant. The findings are as follows :- (i) As per Rule 5(1) of the 2006 Rules, 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 considered 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. (ii) The assessee is registered with the Service Tax Department since 2004 and should be well conversant with the provisions of the Act and the Rules made thereunder. The entire amount charged for providing services as per work order has been splitted in different parts by raising separate bills. In view of above, it is clear that the assessee had used the machinery, tools, equipments, cranes and labour etc. for completion of each work allotted to them under contract for which it realized a value of ₹ 83,09,388/- during the period 2004-05 for 2006-07 and ₹ 5,50,83,066/- during the period 2007-08. This value was not included in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ection 76 of the Finance Act, 1944. (4) I impose a penalty of ₹ 75,04,288/- upon M/s. Hazi A.P. Bava Co. Plot No. 8, Road No. 3, Jain Colony, New Bhupalpura, Udaipur under Section 78 of the Finance Act, 1994. However, benefit of reduced penalty of 25% as per proviso to Section 78 ibid, is available to the assessee subject to the condition that service tax demand of ₹ 75,04,288/- and the interest payable thereon under Section 75, is paid within 30 days from the date of communication of this order and further subject to the condition that the benefit of reduced penalty (25% on ₹ 75,04,288/-) shall be available if the amount of penalty so determined has also been paid within the period of 30 days from the communication of this order. 9. The Learned Counsel for the appellant submitted that :- (i) The whole demand against the appellant is based on an assumption that the income from supply of cranes and mobilization/transport of labourers arises out of a common work order for erection of plants, even though the income from supply of cranes and mobilization/transport of labour is from a different activity under a separate work order and has no relati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pellant and the Learned Authorized Representative of the Department have been considered. 12. The show cause notice dated 20 April, 2010 included an amount of ₹ 83,09,388 for the period 2004-05 to 2006-07 and ₹ 5,50,83,066 for the period 2007-08. The impugned order holds that the Service Tax demanded for the period 2004-05 would be barred by limitation and thus Service Tax of ₹ 1,16,127/- raised for an amount of ₹ 14,51,584/- pertaining to the period 2004-05 has not been confirmed. 13. The issue that arises for consideration in this appeal is whether the appellant was liable to pay Service Tax on the income derived from supply of cranes and mobilization/transport of labour. The contention of the appellant is that it is primarily engaged in the erection of plants, though it occasionally also supplies cranes and mobilizes/transports labour. The case of the appellant is that for erection of plants, specific work orders are issued, but when a client requires cranes or labour, different work orders are issued and, therefore, the income derived from these separate work orders cannot be clubbed with the income derived from the erection of plants for the purpo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... paper book is a Bill for manpower mobilization. 18. The work orders/bills for supply of cranes/manpower mobilization have been perused. It is seen these work orders/bills for supply of cranes/mobilization of manpower are independent and have no connection at all with the work order issued to the appellant for erection of plants. The ST-3 Return for the Financial Year 2007-08, which is at page 200 of the paper book, also specifically mentions the amount received for supply of cranes/mobilization of labour and states that it is an exempted service. 19. It is not in dispute that the appellant has been discharging the Service Tax liability on the work orders issued for erection of plants. It is only the amount received by the appellant for hiring of cranes/supply of manpower that has been disputed by the Department. In spite of a specific statement made by the appellant that the amount received for supply of cranes/mobilization of manpower through separate work orders (other than the work orders issued for erection of plants) could not have been included in the taxable value, there is no discussion of this contention of the appellant in the impugned order and only a bald statemen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ervice 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 Sections 66 and 67 of the Act. The High Court of Delhi accepted the said contention and declared Rule 5 to be ultra vires the provisions of Sections 66 and 67 of the Act. The High Court noted that both the amended and unamended Section 67 authorized the determination of value of taxable services for the purpose of charging Service Tax under Section 66 as the gross amount charged by the service provider for such services provided or to be provided by him in a case where consideration for such service is money. The High Court placed emphasis on the words for such service and took the view that the charge of Service Tax under Section 66 has to be on t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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