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TMI Blog2024 (10) TMI 328X X X X Extracts X X X X X X X X Extracts X X X X ..... f expenses incurred by it which were reimbursed by the clients - the service tax is on the value of taxable services and, therefore, it is the value of the services which are actually rendered which has to be ascertained for the purpose of calculating the service tax. It is for this reason that the Supreme Court observed that the expression such occurring in section 67 of the Finance Act assumes importance. It is in this context that the Supreme Court in paragraph 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 of the Finance Act either prior to its amendment on 01.05.2006 or after this amendment and if this be so, then rule 5 went much beyond the mandate of section 67 of the Finance Act. The Supreme Court, therefore, held that the reimbursement amount cannot be treated as gross amount charged as that is not a consideration for rendering the service. It n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deration. 3. According to the appellant, for better efficiency of the work it has to send its personnel to the clients place for performance of work. These personnel perform their work under the supervision and direction of the appellant and not as per the supervision and direction of the service recipient. For providing such services to the clients, the appellant charges the clients and discharges payment of service tax. Apart from services charges, the appellant is reimbursed for the expenses incurred by the appellant towards the salary paid to the personnel deployed. 4. An audit was conducted by the department and it was observed that the appellant had entered into agreements with clients to supply manpower as per the requirement of the clients and under the terms and conditions of the agreements, the staff was not employed by the recipients of services, but serve under their directions. The audit team also noted that the appellant was not discharging service tax on the full consideration, but it paid service tax only on the service charges and not on the reimbursements claimed. The audit believed that reimbursements would also be taxable under rule 5 of the Service Tax (Determi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... misstatement, or suppression of facts by the appellant with an intention to evade payment of service tax. 9. Shri Anand Narayan, learned authorized representative appearing for the department, however, supported the impugned order and submitted that it does not call for any interference. 10. The submissions advanced by the learned chartered accountant for the appellant and the learned authorized representative appearing for the department have been considered. 11. The appellant has paid service tax under manpower recruitment or supply agency services on the value charged for providing such services i.e. the commission received by it. The department is seeking to impose service tax on reimbursement amount based on rule 5(1) of the 2006 Rules. The issue that would arise for consideration is whether the reimbursement amount can be subjected to levy of service tax for a period prior to May, 2015. 12. It needs to be noted that section 67 of the Finance Act deals with valuation of taxable services for charging service tax. Sub-section (1) and Explanation (a) are reproduced below: 67(1) Subject to the provisions of this Chapter, where service tax is chargeable on any taxable service with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7 authorised the determination of value of taxable services for the purpose of charging service tax under section 66 of the Finance Act 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 Delhi High Court placed emphasis on the words for such service and took the view that the charge of service tax under section 66 of the Finance Act has to be on the value of taxable service i.e. the value of service rendered by the assessee and the quantification of the value of service can, therefore, never exceed the gross amount charged by the service provider for the service provided by him. On that analogy, the Delhi High Court opined that the scope of rule 5 goes beyond the scope of section 67 of the Finance Act which was impermissible as rules could be framed only for carrying out the provisions of Chapter 5 of the Finance Act. In taking this view, the Delhi High Court observed that the expenditure or cost incurred by the service provider for providing the taxable service can never be considered as the gross amount charged by the service provider for such service provided by him. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xpenditure or cost would form part of valuation of taxable service. However, in the present case, the transaction were made before 14.05.2015. Thus, inclusion of the reimbursable cost in the value of taxable service cannot be justified. 17. Learned chartered accountant for the appellant also contended that the extended period of limitation could not have been invoked in the facts and circumstances of the case. In this connection learned chartered accountant for the appellant placed a chart to show that an amount of Rs. 8,21,87,032/- was purposed for the extended period of limitation and an amount of Rs. 5,82,82,158/- was proposed for the normal period of the limitation. The said chart is reproduced is below: S. No. Period ST-3 filing date Due date to serve the show cause notice Remarks Demand 1. 01.10.2005 to 31.03.2006 25.04.2006 24.04.2007 Time barred 8,21,87,032 2. 01.04.2006 to 30.09.2006 25.10.2006 24.10.2007 3. 01.10.2006 to 31.03.2007 25.04.2007 24.04.2008 4. 01.04.2007 to 30.09.2007 24.10.2007 23.10.2008 5. 01.10.2007 to 31.03.2008 23.04.2008 22.04.2009 6. 01.04.2008 to 30.09.2008 25.10.2008 24.10.2009 7. 01.10.2008 to 31.03.2009 25.04.2009 24.04.2010 8. 01.04.2009 to 30.09 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The Assessee had an obligation to comply with statutory provisions and to furnish the information as required thereunder. Section 68 (1) of the Act, as stood during the relevant period, provides that every person providing taxable service to any person shall pay service tax at the rate specified in Section 66 in such manner and within such period as may be prescribed. Section 66 provides the rate of tax as well as levy of the tax on the services specified therein. Sub-clause (a) and (zm) of Clause (105) of Section 65 had been specified under Section 66 for the purpose of levy of tax. Section 69 mandates that every person liable to pay the service tax shall apply to the proper officer for registration. Undoubtedly, the Assessee had taken registration, but had abused the facility of self-assessment provided under Section 70, which directs that every person liable to pay the service tax shall himself assess the tax due on the services provided by him and shall furnish the periodical returns as prescribed. Thus, the afore mentioned statutory provisions of service tax cast an obligation upon the Assessee to get registration; to pay service tax; and to file periodical returns. The Assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Finance Act, came up for interpretation before the Supreme Court in Pushpam Pharmaceuticals Company vs. Collector of Central Excise, Bombay [1995 (78) E.L.T. 401 (S.C.)]. The Supreme Court observed that section 11A(4) empowers the Department to reopen the proceedings if levy has been short levied or not levied within six months from the relevant date but the proviso carves out an exception and permits the authority to exercise this power within five years from the relevant date in the circumstances mentioned in the proviso, one of it being suppression of facts. It is in this context that the Supreme Court observed that the act must be deliberate to escape payment of duty. The relevant observations are: 2. ****** The Department invoked extended period of limitation of five years as according to it the duty was short levied due to suppression of the fact that if the turnover was clubbed then it exceeded Rupees Five lakhs. ***** 4. A perusal of the proviso indicates that it has been used in company of such strong works as fraud, collusion or willful default. In fact it is the mildest expression used in the proviso. Yet the surroundings in which it has been used it has to be constr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pression of facts is, in our opinion, untenable. If that were to be true, we fail to understand which form of nonpayment would amount to ordinary default? Construing mere non-payment as any of the three categories contemplated by the proviso would leave no situation for which, a limitation period of six months may apply. In our opinion, the main body of the Section, in fact, contemplates ordinary default in payment of duties and leaves cases of collusion or wilful misstatement or suppression of facts, a smaller, specific and more serious niche, to the proviso. Therefore, something more must be shown to construe the acts of the appellant as fit for the applicability of the proviso. (emphasis supplied) 25. In Raydean Industries vs. Commissioner CGST, Jaipur [Excise Appeal No. 52480 of 2019 decided on 19.12.2022] the Tribunal in connection with the extended period of limitation, observed that even in the case of self assessment, the department can always call upon an assessee and seek information and it is the duty of the proper officer to scrutinize the correctness of the duty assessed by the assessee. The Division Bench also noted that departmental instructions issued to officers al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issued by the department also specifically require officers at various levels to do so. (emphasis supplied) 26. In Commissioner of C. Ex. Customs vs. Reliance Industries Ltd. [2023 (385) E.L.T. 481 (S.C.)], the Supreme Court held that if an assessee bonafide believes that it was correctly discharging duty, then merely because the belief is ultimately found to be wrong by a judgment would not render such a belief of the assessee to be malafide. If a dispute relates to interpretation of legal provisions, it would be totally unjustified to invoke the extended period of limitation. The Supreme Court further held that in any scheme of self-assessment, it the responsibility of the assessee to determine the liability correctly and this determination is required to be made on the basis of his own judgment and in a bonafide manner. The relevant portion of the judgment is reproduced below: 23. We are in full agreement with the finding of the Tribunal that during the period in dispute it was holding a bona fide belief that it was correctly discharging its duty liability. The mere fact that the belief was ultimately found to be wrong by the judgment of this Court does not render such belief o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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