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TMI Blog2024 (11) TMI 346X X X X Extracts X X X X X X X X Extracts X X X X ..... TMI 384 - GUJARAT HIGH COURT] which has relied on the land mark judgment of Hon ble Supreme Court in the case of Intercontinental Consultants Technocrats Pvt. Ltd [ 2018 (3) TMI 357 - SUPREME COURT] it was held that the unbilled amount cannot be liable to service tax. Assessee appeal allowed. - MR. RAMESH NAIR, MEMBER (JUDICIAL) AND MR. RAJU, MEMBER (TECHNICAL) Shri Vikas Agarwal, Chartered Accountant for the Appellant Shir P Ganesan, Superintendent (AR) for the Respondent ORDER The brief fact of the case is that the appellant are registered with service tax department for providing taxable services of Consulting Engineer Services, Erection, Commission and Installation Services, Online Information and Data Base Access and/or Retriever Service through Computer Network, Construction Services other than Residential Complex, including Commercial/Industrial Building for Civil Structure and Works Contract Services, etc. 1.1 During the course of provision of services, the appellant have not billed for the service but as per the accounting principle the same was booked as Revenue expenditure. The case of the department is that such expenditure shall be part and partial of the gross value ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dings of the impugned order. 4. We have carefully considered the submission made by both the sides and perused the records. We find that the Revenue has demanded the Service Tax on an amount considering the same as part of the gross value which was neither towards any provision of service nor the same was billed by the appellant and consequently, the same was not paid by the service recipient. The Section 67 is very clear that only gross amount charged from the service recipient shall be considered as the gross value towards the service provided and that alone shall be chargeable to service tax. In the present case, since, the amount on which the service tax was demanded has admittedly not been charged by the appellant to their service recipient, the same is not a part and partial of gross value as enumerated in Section 67. Therefore, the unbilled amount is not liable to service tax. This issue in the appellant s own case has been considered by the Hon ble Gujarat High Court reported as Linde Engineering India Pvt. Ltd and others Vs, Union of India and others 2024 (7) TMI 384 Gujarat High Court wherein the Hon ble High Court has passed the following order:- [10] Having heard the le ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ions are satisfied, namely: the service provider acts as a pure agent of the recipient of service when he makes payment to third party for the goods or services procured; the recipient of service receives and uses the goods or services so procured by the service provider in his capacity as pure agent of the recipient of service; the recipient of service is liable to make payment to the third party; the recipient of service authorities the service provider to make payment on his behalf; 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; 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 to the recipient of service; the service provider recovers from the recipient of service only such amount as has been paid by him to the third party; and the goods or services procured by the service provider from the third party as a pure agent of the recipient of service are in addition to the services he provides on his own account. Explanation 1 : For the purposes of sub rule (2), pure ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xpense or as part of an inclusive overall fee, service tax is payable on the total amount charged by B. Value of the taxable service for charging service tax is what A pays to B. Illustration 4 : Company X provides a taxable service of rent cab by providing chauffeur driven cars for overseas visitors. The chauffeur is given a lump sum amount to cover his food and overnight accommodation and any other incidental expenses such as parking fees by the Company X during the tour. At the end of the tour, the chauffeur returns the balance of the amount with a statement of his expenses and the relevant bills. Company X charges these amounts from the recipients of service. The cost incurred by the chauffeur and billed to the recipient of service constitutes part of gross amount charged for the provision of services by the company X. 8. The case set up by the respondent in the writ petition was that Rule 5 (1) of the Rules, which provides that all expenditure or cost incurred by the service provider in the course of providing the taxable services shall be treated as consideration for the taxable services and shall be included in the value for the purpose of charging service tax, goes beyond t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , sold to the customer during the course of service or repair of motor cars, light motor vehicle or two wheeled motor vehicles; (iv) the airfare collected by air travel agent in respect of service provided by him; (v) the rail fare collected by rail travel agent in respect of service provided by him; (vi) the cost of parts or other material, if any, sold to the customer during the course of providing maintenance or repair service; (vii) the cost of parts or other material, if any, sold to the customer during the course of providing erection, commissioning or installation service; and (viii) interest on loan. Explanation 2 Where the gross amount charged by a service provider is inclusive of service tax payable, the value of taxable service shall be such amount as with the addition of tax payable, is equal to the gross amount charged. Explanation 3 . For the removal of doubts, it is hereby declared that the gross amount charged for the taxable service shall include any amount received towards the taxable service before, during or after provision of such service. 9. After its amendment w.e.f. May 1, 2006, a much shorter version was introduced which reads as under: 67. Valuation of tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which is a charging section) as the gross amount charged by the service provider for such services provided or to be provided by him, in a case where the consideration for the service is money. Emphasising on the words for such service , the High Court took the view that the charge of service tax under Section 66 has to be on the value of taxable service i.e. the value of service rendered by the assessee to the NHAI, which is that of a consulting engineer, that can be brought to charge and nothing more. The quantification of the value of the service can, therefore, never exceed the gross amount charged by the service provider for the service provided by him. On that analogy, the High Court has opined that scope of Rule 5 goes beyond the Section which was impermissible as the Rules which have been made under Section 94 of the Act can only be made for carrying out the provisions of this Chapter (Chapter V of the Act) which provides for levy quantification and collection of the service tax. In the process, the High Court observed that the expenditure or cost incurred by the service provider in the course of providing the taxable service can never be considered as the gross amount char ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion refers to service tax, i.e., in respect of those services which are taxable and specifically referred to in various sub-clauses of Section 65. Further, it also specifically mentions that the service tax will be @ 12% of the value of taxable services . Thus, service tax is reference to the value of service. As a necessary corollary, it is the value of the services which are actually rendered, the value whereof is to be ascertained for the purpose of calculating the service tax payable thereupon. 24. In this hue, the expression such occurring in Section 67 of the Act assumes importance. In other words, valuation of taxable services for charging service tax, the authorities are to find what is the gross amount charged for providing such taxable services. As a fortiori, any other amount which is calculated not for providing such taxable service cannot a part of that valuation as that amount is not calculated for providing such taxable service . That according to us is the plain meaning which is to be attached to Section 67 (unamended, i.e., prior to May 1, 2006) or after its amendment, with effect from, May 1, 2006. Once this interpretation is to be given to Section 67, it hardly n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to include reimbursable expenditure or cost incurred by the service provider and charged, in the course of providing or agreeing to provide a taxable service. Thus, only with effect from May 14, 2015, by virtue of provisions of Section 67 itself, such reimbursable expenditure or cost would also form part of valuation of taxable services for charging service tax. Though, it was not argued by the learned counsel for the Department that Section 67 is a declaratory provision, nor could it be argued so, as we find that this is a substantive change brought about with the amendment to Section 67 and, therefore, has to be prospective in nature. On this aspect of the matter, we may usefully refer to the Constitution Bench judgment in the case of Commissioner of Income Tax (Central)-I, New Delhi v. Vatika Township Private Limited [(2015) 1 SCC 1] wherein it was observed as under: 27. A legislation, be it a statutory Act or a statutory rule or a statutory notification, may physically consists of words printed on papers. However, conceptually it is a great deal more than an ordinary prose. There is a special peculiarity in the mode of verbal communication by a legislation. A legislation is not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aforesaid legal position clearly emerges from the various decisions and this legal position was conceded by the counsel for the parties. In any case, we shall refer to few judgments containing this dicta, a little later. 30. As a result, we do not find any merit in any of those appeals which are accordingly dismissed. [13] In view of the above dictum of law, the impugned show cause notice would not be tenable in law as the same is without jurisdiction. Therefore, the contention raised on behalf of the respondent No. 3 relying upon the decision of the Hon ble Supreme Court that the impugned show cause notice issued by the respondent No. 3 is within jurisdiction and therefore, this petition is not maintainable under Article 226 of the Constitution of India, cannot be accepted. In the facts of the case, as the impugned show cause notice is contrary to the law laid down by the Hon ble Supreme Court, as stated hereinabove, by holding Rule 5 of the Rules 2006 as ultra vires to Section 67 of the Finance Act 1994 and admittedly, the period involved in the impugned show cause notice is prior to 13th May 2015 and therefore, the decision of the Hon ble Supreme Court would be squarely applicab ..... X X X X Extracts X X X X X X X X Extracts X X X X
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