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TMI Blog2021 (12) TMI 242X X X X Extracts X X X X X X X X Extracts X X X X ..... o form part of valuation of taxable services for charging service tax. It is found that the issue in respect of the reimbursable expenses has been considered and decided by the Hon ble Apex Court for the period prior to amendments made in 2015, and we are concerned with same issue for the period prior to 2015, there are no merits in the impugned order. Appeal allowed - decided in favor of appellant. - Service Tax Miscellaneous Application (EH) No. 85142 of 2021 & Service Tax Appeal No. 87231 of 2017 - A/86933/2021 - Dated:- 24-9-2021 - HON BLE MR. SANJIV SRIVASTAVA, MEMBER (TECHNICAL) AND HON BLE DR. SUVENDU KUMAR PATI, MEMBER (JUDICIAL) Shri Bharat Raichandani, Advocate, for the Appellant Shri Nitin M. Tagade, Joint Commissioner, Authorised Representative for the Respondent ORDER PER: SANJIV SRIVASTAVA This appeal is directed against the order in original 11- 13/ST-VII/CD/2017 dated 28.04.2017 of the Commissioner of Service Tax, Mumbai VII. By the impugned order, the Commissioner has held as follows: 47. In respect of SCN F.No.ST-II/HC/ Audit/ Gr.11759/HCL/11- 12 dated 21.04.2014 for ₹ 13.54,77,297,- for the period from Oct 08 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pay service tax in accordance with the provisions of Section 68 of the Finance Act, 1994 read with Rule 6 of the Service Tax Rules, 1994. However, the penalty payable shall be 25% of the service tax so determined, provided service tax, interest applicable and reduced penalty is paid within a period of thirty days of the date of the receipt of this order issued determining the amount the service tax under Sub- Section (2) of the Section 73 of the Finance At 1994; iv) I also imposed a penalty of ₹ 10,000/- (Rupees Ten Thousand) under the provisions of Section 77 of the Finance Act, 1994. 49. In respect of SCN F.NO. V/ST-II/Dn.VI/Gr. II/ Per.SCN/HCC/153/2014-15 dated 19.02.2016 for ₹ 6,84,41,986/- for the period 2014-15, i) I confirm the demand of Service Tax of ₹ 6,84,41,986/- (Rupees Six Crores Eighty Four Lakhs Forty One Thousand Nine Hundred Eighty Six only), made in the Show Cause Notice, as payable by / recoverable from M/s Hindustan Construction Company Ltd. Mumbai under section 73(2) of the Finance Act, 1994. ii) I order recovery of Interest at the appropriate rates, on the amount confirmed at Para i) above, from the due date(s) under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... raising debit notes 2.2 During the course of EA-2000 audit, it was observed that Appellant had recovered amounts from their related parties for reimbursement expenses and revenue expenses incurred on their behalf by way of raising periodical debit notes but had not discharged the applicable service tax liability thereon. Therefore in terms of audit observations, a SCN dated 21st April 2014 was issued demanding applicable service tax for the period October 2008 to March 2013 under the category of Business Support Service of Section 65(105)(zzzq) of the Finance Act 1994. Followed by, another two Statements of demands were issued under Section 73 (1A) of the Finance Act 1994 for the period April 2013 to March 2014 and for the period 2014-15 respectively. 2.3 Prior to 01.07.2012, the term 'service' was not defined in chapter V of the Finance Act 1994. However, the basic principle or legislative intent was to levy service tax when the service is rendered by a person to another person for a consideration. 2.4. On the basis of the above revenue held the view that these reimbursable expenses were to be included in the gross value of the for determination of the value of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n respect of inclusion of reimbursable expenses in the Gross Value of the services provided. The issue has been settled by the decision of the Hon ble Apex Court in case of the Intercontinental Consultants and Technocrats, holding that prior to amendments made in Section 68 in 2015, Rule 5 of the Service Tax Rules was not in consonance with the section. In view of the above addition of reimbursable expenses to determine the tax able value of the service provided cannot be justified. 3.3 Learned Authorized Representative re-iterates the findings recorded in the impugned order. 4.1 We have considered the impugned order along with the submissions made in appeal and during the course of arguments. 4.2 In the impugned order Commissioner has recorded as follows: 30. From the submissions made by the noticee in the referred Paras, it is clear that noticee, a holding company had sourced and procured the various input services for and on behalf of their 23 group of companies for better management and cost effectiveness and the cost/expenses incurred under various heads are allocated to group of companies by issuing debt notes. In view of the accepted facts and circumstances, it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Therefore, in the instant case cost of services or consideration shall be on value based on actual costs incurred or the amount that is payable for the taxable services provided i.e, nothing but reimbursable expenditure or cost incurred by the service provider and charged, in the course of providing or agreeing to provide a taxable service. The issue has been fortified by substitution of clause (a) of the explanation of the Section 67 of the Act, under the Finance Act, 2015. As per substituted explanation (ii) under clause (a) of the explanation of the Section 67 of the Act under Finance Act 2015, 'consideration includes reimbursable expenditure or cost incurred by the service was provider and charged, in the course of providing or agreeing to provide a taxable service. As mentioned above where consideration was not ascertainable, the machinery and method of determining valuation of such services was very much in force and applicable under Section 67 of the Finance Act 1994 read with the Rule 3 of the Service tax (determination of value) Rules 2006. Therefore, the substitution of clause (a) to the explanation under Section 67 of the Finance Act neither substantive nor expand t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the third party; (iv) the recipient of service authorises the service provider to make payment on his behalf; (v) the recipient of service knows that the goods and services for which payment has been made by the service provider shall be provided by the third party; (vi) the payment made by the service provider on behalf of the recipient of service has been separately indicated in the invoice issued by the service provider is the recipient of service; (vii) the service provider recovers from the recipient of service only such amount as has been paid by him to the third party; and (viii) the goods or services procured by the service provider on the third party as a pure agent of the recipient of service are in addition to the services de provides on his own account. Explanation 1 For the purposes of sub. rule (2), pure agent means a person who-(a) enters into a contractual agreement with the recipient of service to act as his pure agent to incur expenditure or costs in the course of providing taxable service; (b) neither intends to hold nor holds any title to the goods or services so procured or provided as pure agent of the recipient of serv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r taking into submissions of the noticee, I conclude that the noticee is required to discharge the service tax liability totaling to ₹ 19,06,70,322/- (₹ 8,65,45,559/- for the period October 2008 to March 2013, ₹ 3,56,82,777/. for the year 2013-14 and ₹ 6,84,41,986/- for the year 2014-15). 4.3 We find that issue involved in the present case in respect of reimbursable expenses, and the period involved is upto March 2015. In the case of Intercontinental Consultants and Technocrats [2018 (10) GSTL 401 (SC)] referred to by the learned Counsel, Supreme Court while upholding the order of Hon ble Delhi High Court quashing Rule 5 of Service Tax Valuation Rules, 2006 has held as follow: 21. Undoubtedly, Rule 5 of the Rules, 2006 brings within its sweep the expenses which are incurred while rendering the service and are reimbursed, that is, for which the service receiver has made the payments to the assessees. As per these Rules, these reimbursable expenses also form part of gross amount charged . Therefore, the core issue is as to whether Section 67 of the Act permits the subordinate legislation to be enacted in the said manner, as done by Rule 5. As noted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , Section 67(4) is expressly made subject to the provisions of sub-section (1). Mandate of sub-section (1) of Section 67 is manifest, as noted above, viz., the service tax is to be paid only on the services actually provided by the service provider. 26. It is trite that rules cannot go beyond the statute. In Babaji Kondaji Garad, this rule was enunciated in the following manner : Now if there is any conflict between a statute and the subordinate legislation, it does not require elaborate reasoning to firmly state that the statute prevails over subordinate legislation and the byelaw, if not in conformity with the statute in order to give effect to the statutory provision the Rule or bye- law has to be ignored. The statutory provision has precedence and must be complied with. 27. The aforesaid principle is reiterated in Chenniappa Mudaliar holding that a rule which comes in conflict with the main enactment has to give way to the provisions of the Act. 28. It is also well established principle that Rules are framed for achieving the purpose behind the provisions of the Act, as held in Taj Mahal Hotel : the Rules were meant only for the purpose of carry ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nless a contrary intention appears, a legislation is presumed not to be intended to have a retrospective operation. The idea behind the rule is that a current law should govern current activities. Law passed today cannot apply to the events of the past. If we do something today, we do it keeping in view the law of today and in force and not tomorrow s backward adjustment of it. Our belief in the nature of the law is founded on the bedrock that every human being is entitled to arrange his affairs by relying on the existing law and should not find that his plans have been retrospectively upset. This principle of law is known as lex prospicit non respicit : law looks forward not backward. As was observed in Phillips v. Eyre [(1870) LR 6 QB 1], a retrospective legislation is contrary to the general principle that legislation by which the conduct of mankind is to be regulated when introduced for the first time to deal with future acts ought not to change the character of past transactions carried on upon the faith of the then existing law. 29. The obvious basis of the principle against retrospectivity is the principle of fairness , which must be the basis of every legal rule as w ..... X X X X Extracts X X X X X X X X Extracts X X X X
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