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TMI Blog2025 (1) TMI 1322X X X X Extracts X X X X X X X X Extracts X X X X ..... owable only to the employees of the Appellant and not their relatives and employees of other group companies; CFA limit is on a monthly entitlement basis and any unused portion is not carried forward to the next month; in case an employee exceeds the CFA limit granted to him, the excess amount is collected by the Appellant along with appropriate amount of service tax payable, which is deposited by the Appellant; (Bills raised by Appellant are at pg.157-166 of the Appeal Memo); however, if the employee proves that the excess usage was directly related to work then exemption can be granted subject to approval from Function Heads or CEO/COO as specified under the Scheme; in case of the approval of the said waiver, waived amount is reimbursed as per a laid down process. Revenue conducted an Audit of the appellants circle in Karnataka; appellant was as ked to submit details of the waiver granted by the Appellant to its employees; show cause notices dated 21.08.2008 and 20.04.2009 (for the period April 2006 to March 2007and April 2007 to September 2008) were issued to the Appellant for the Bangalore Circle proposing the demand of service tax under 'telephone services' on the amount of ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ltd Vs CCE&ST2022 (67) GSTL 569. * M/S Max Life Insurance Company Limited Vs CCE&ST, New Delhi Final Order No. 50767/2023 dated 30.05.2023-CESTAT New Delhi * M/S Bharat Sanchar Nigam Limited Vs CST, Delhi Final Order No. 51311/2019 dated 03.10.2019 - CESTAT New Delhi * Minutes of the 2nd Regional Advisory Committee for year 2009-10 held on 17.12.2009. * M/S SI Group India Ltd Vs CCE, Raigad 2015 (38) STR 81 (Tri. - Mumbai) * M/S Leo Coal Movers Private Limited Vs CCCE&ST (Appeals), Raipur 2019-TIOL-3081-CESTAT-DEL 4. Learned Counsel submits further that the learned commissioner wrongly concludes that the Appellant earned goodwill by providing services to the employees under the Scheme and also receiving services of the employees constitute consideration for services rendered by the Appellant; that supply of free telephone services up to certain limits to the employees, does not create goodwill of the Appellant; also, there is no provision under service tax to treat goodwill as additional consideration; TRAI does not charge any license fee on free services; work done by the employees by using the facility provided under the Scheme cannot be treated as non-monetary conside ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4.2010 as the Appellant was busy in filing returns; however, the SCN was issued in complete disregard to the said request of the Appellant by invoking best judgment assessment and without providing sufficient time to the Appellant for producing proper documents and without considering relevant documents; no order was passed under section 72; the appellants were not given opportunity to represent against such invocation; as the conditions specified under Section 72(b) of the Act, were not satisfied, the best judgment assessment could not have been invoked. He places reliance on Ms Blue Star Communication and others Vs CCE&ST-Ludhiana 2019-TIOL-3789-CESTAT-CHD. 6. Learned Counsel submits also that the demand proposed in SCN was based on the figures given by the Appellant for the Bangalore circle for the period from April 2006 to September 2009 vide letter dated 15.04.2010; the same was divided by 7 (seven) to arrive at a half year figure which was multiplied three times to arrive at one and half years' figure; it was further multiplied three times, to make up for the assumed increase in the number of employees and finally by 18 to cover all the circles to arrive at the total all Ind ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... demand is revenue neutral. Further, the issue involves interpretation of complex provisions and as held in the following demand cannot be sustained. * Hyundai Motor India Pvt Ltd Vs CCE&ST, Chennai 2019(29) GSTL 452 (Tri. - Chennai) [affirmed in 2020 (32) GSTL J154 (SC)] * Delhi Airport Metro Express Pvt Ltd Vs CCCE, Final Order No. 50031/2024 dated 11.01.2024, 8. Learned Counsel submits in addition that when the assessee believes that amount is not subject to service tax, there is no requirement for seeking clarifications; the reasoning of the department that the Appellant should have approached the service tax authority for clarification is fallacious. He submits that there is no specific column under the returns for showing the grant of free services to the employees and non-disclosure of the same does not amount to suppression of facts. He submits that self-assessment by the assessee cannot be the ground for invoking extended period of limitation; it is the duty of the central excise officer to scrutinize the returns files by assessee and seek details which he feels necessary to scrutinize them under Section 72; an assessee cannot be faulted for not providing any informati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd 2 mobile numbers as per Section 3.3.3; charges for mobile phone are indicated at Section 3.3.4; fixed telephone/Broadband are indicated at Section 3.3.5; of policy; mobile handset was provided to employees as per Section 5 of the policy along with ISD/STD/Roaming facilities; Special mobile number provided @50% discount on market rates as per Section 6.2. of policy; policy also provided that E-Bills to be generated for employee's number only in case it exceeds CFA limit and family members bills to be generated in employee's name as per Section 6.4; Excess amount over CFA limit will be deducted directly from the salary account or credit card; No carry forward of balance/ unused CFA amount allowed; Waiver needs to be reimbursed as per normal reimbursement process as per Section 6.4; exemption was permitted beyond CFA limit if employee proves that excess usage was directly related to work, in exceptional casesas per Section 6.4; Payment will be made like a normal customer (through various modes available) etc. 9.1. Learned special Counsel submits that there is no dispute that the appellant did not declare the value of free services as taxable value for providing telecom services i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that Income Tax Act recognizes it as perquisite; appellant is undisputedly engaged in providing telecom services/telephone services including to their employees and others treating them as regular postpaid consumer; hence, the appellant were employer and service receiver were employees; the appellant being a service provider is obliged to collect service tax from service receivers and remit the same to Govt exchequer as per Service Tax laws; the provision of telephone services to employees were not for business purposes; if so, there was no scope of billing to each employee, providing partial exemption from charges, charging of cash beyond permissible CFA limit; no scope for giving allowance to relatives of employees etc; the policy nowhere states that beyond CFA limit only, the employee shall be treated as regular postpaid subscriber; the scheme clearly considers each such employee as a regular postpaid consumer for the purpose; in absence of any exemption provided by the statute, the appellant cannot claim exemption from payment of service tax on telecom charges relating to the telephone/mobile used by the employees or their relatives; case law relied upon like Magnus Constructi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of BSNL relied upon by the appellant has not discussed the issue in detail but arrived at final decision without any reason or justification; cases of Carrier Point and Resonance relate to coaching classes, hence not relevant to the facts of the case; Circular dated 13.10.1997 quoted by the appellant stands withdrawn by circular No. 96/7/2007-ST dated 23.08.2007 and even otherwise, the context was different. 12.1. On the submission of the appellant that no non-monetary consideration not taxable till 18.04.2006, learned special counsel submits that in view of explicit legal provisions contained in Section 67 (i), (ii) & (iii), the argument is not valid; Cases of Assam Gas Company-2008 (11) STR 73 (T) & Shri Pillai & Sons Motor Co-2008 (10) STR 403 (T)as well as Bharti Infotel Ltd-2006 (3) STR 554 (Tri. Del.) are interim orders and therefore not persuasive in nature; in the case of European Court of Justice, as per the Article 11A (1)(a) of Sixth directives, it was held that the taxable amount was the consideration actually received by taxable person hence leviable to VAT on actual price charged to the employees; there is no such provision in Service tax laws; on the contrary, Secti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which stands uncontroverted by any material evidences produced by appellant. The 5 CA certificates submitted did not take into account the number of employees of Bharti Group of companies and relatives; hence the same are not admissible being incorrect. 13.2. Learned special counsel submits that in the case of Kachwala Gems Vs JCIT 2006 (12) TMI 83 (SC) or 288 ITR (10) (SC), it was held that if the assessee did not maintain books of accounts, he himself has to be blamed for Best judgment assessment; in case of NBC Corporation Ltd Vs CST 2014 (1) TMI 151 (Del HC), it was held that best judgment order passed will be akin to ex-parte order when assessee fails to produce records/details and officer passes the order on the basis of other information or data available. He submits that the appellant's reliance on Rajasthan Spinning-2007 (218) ELT 641 (SC), RS Enterprises-2003 (159) ELT 766 (Tri. Del.)and Yogesh Sood-2001 (129) ELT 674 (Tri. Del.), Vardhaman Steel-2006 (197) ELT 401 (Tri. Mumbai) is incorrect as the facts of the cases are different. 13.3. Learned special counsel submits that the plea regarding cum duty value has been rightly addressed by the impugned order; Explanation 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reated all employees including relatives and Group company as regular post-paid consumers; if the contention of the appellant is presumed to be correct, they could have possibly taken credit of tax paid in respect of each consumer; moreover, Moreover, the link of employees of Bharti Group Companies cannot be justified; in fact, the telecom service provided to these employees is an output service to the appellant and not input service within the meaning of sec 2(l) of CCR, 2004; it is not clear if the appellant were availing credit of service tax paid on the amounts recovered from others and employees over above, the credit limit; appellants produced no evidence to establish the nexus between free services/discounted services provided by the appellant and its output services or in relation to activity of business of the appellant; In view of non-admissibility of credit, question of revenue neutrality does not arise; admissibility of credit is subject to various terms and conditions prescribed in the Cenvat Credit Rules, 2004 which include those related to time frame for availing and utilizing credit; Hence, a blanket remark cannot be made and credit claimed. He relies on * Punjab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6 (2) STR 369 (T-Del) * Bharti Cellular Ltd. 2005 (179) ELT 334 (T-Del) * Mysore Rolling Mills P Ltd 1987 (28) ELT 50 (SC) * Idea Cellular Ltd 2019 (26) GSTL 224 (T-Mum) * Bharti Hexcom Ltd 2019 (24) GSTL 588 (T-Del) 17. Learned special counsel submits on the chargeability of interest that it is leviable when demand is sustained on merit; even otherwise it is a Civil liability gets attracted by virtue of law. He relies on Pratibha Processors Vs UOI 1996 (88) ELT 12 (SC) and UOI vs Valecha Egg Ltd 2010 (249) ELT 167 (Bom). 17.1. Learned special counsel submits on the issue of penalties that mala fide intent is vividly clear from their contumacious conduct, evasive reply and deliberate concealing the material facts leading to evasion of service tax to the tune of Rs. 118 crores; once extended period is invokable, equal penalty under Section 78 becomes corollary; the appellant has not been able to justify the reasonable grounds for invocation of Section 80; Explanation providing for retrospective amendment of Section78 proviso was omitted on 08.04.2011; hence, simultaneous penalty not imposable from 10.05.2008 only; however, both the penalties are imposable against the appel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nts. In certain cases, it is provided that allowance over and above the CFA is granted to the employees, of different grades, subject to the approval by their superior authorities. We find that as per the Bharati Airtel Ltd. Employee Phone Policy dated 05.09.2007, it is stated that: 1. ELIGIBILITY The policy is applicable to all employees of Bharti Airtel Limited (The Company). For the purpose of this policy, the following people are deemed to be 'employees': * Those who are on the employment rolls of The Company. * Selected relatives of those who are on the employment rolls of the Company (relatives defined as Parents / Children / Spouse / In Laws (Father and Mother In law) / Siblings)* * Employees of Bharti Group Companies"* *Only rates are applicable, CFA [call free allowance] not possible. *Associate Employee - as per the Associate Phone Policy. 20. From the policy, it is clear that the CFA is permissible to the employees of Bharati Airtel Ltd. only. Learned Special Counsel for the Department tries to argue that the CFA is also extendable to the relatives of the employees where there is no employee-employer relation. It appears that the clarification give ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce tax liability does not arise. Only land line charges will be liable for tax. 23. It is clear from the above that telephone service providers are required to pay service tax on the consideration received by them, the consideration being the gross amount charged; in this case, the gross amount charged by the appellant is the amount they collected from their employees and not the discount given to the employees in the form of CFA. We find that learned Counsel for the appellants relies on a number of cases, including that of M/s Bhayana Builders (supra) wherein the principle of law was settled to state that the value of goods or material supplied free of cost would not be included in the gross amount charged under Section 67. We find that this particular submission is not relevant to the facts of the case as there is no goods or material supplied free of cost by the service receivers to the service provider i.e the appellant. What is to be seen in the present case is whether the discount or free allowance extended by the appellants to their employees is includable in the assessable value. In the scheme of the service tax taxation, includability of any amount in the gross amount cha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ived by the assesses. Hence it is wrong to contend that they are not receiving any consideration from the employees and therefore, there is no justification in not paying service tax on taxable services provided to them. The value of CFA limit, not directly paid by the employees, is also not paid by the assessee to them along with their pay packages, but adjusted. The contention of the assessee that they have not received any payment in terms of Sec. 68 (1) and Rule 6 of the Act & rules and liability to pay tax does not arise is not correct. As per Sec. 68 (1) "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 provided." Rule 6 provides the manner and period for payment of service tax. Section 68 (1) was substituted by the Finance (No. 2) Act, 1998 with effect from 16-10-98. The assessee is the service provider and 'any person' in the section is the recipient of service, which includes the 'employees' as per the General Clauses Act. Thus, being a service provider, the assessee is liable to pay service tax. In Central Excise matters also the free samples suppl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e. As this is the only dispute in the present appeals, we hold that the appellants will succeed on this point. 26. We find that it is not provided in the Service Tax law to amortize the goodwill to arrive at the gross value of consideration for the purpose of levy of service tax. It is not correct on the part of learned Commissioner to come to a conclusion that the appellants are receiving goodwill for the free telephone services provided to their employees. For the purpose of valuation of service tax, the goodwill cannot be taken into consideration. We find that learned Commissioner did not arrive at the value of the goodwill for the purpose of taxation, even if goodwill is considered to be an additional consideration. It is incorrect to take the entire free allowance given to the employees as monetary value of goodwill. We further find that arguments on the basis of goodwill were not part of the Show Cause Notice and the adjudicating authority sets up a new case in the impugned order. Therefore, we consider that the attempt made by the adjudicating authority has no legal basis. Moreover, the Department relies on the case of M/s BSNL (supra) to support their argument that even if ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... training of personnel, selection of suppliers of machinery, for commissioning and testing of the plant and machinery as well as for testing of samples of products for inspection and examination by SSI. It is Article 7.2 which refers to payment of royalty. It states that "in consideration of SII providing technical services to the Indian company, the Indian company shall pay to SII royalty at the rate of 4% on the Net Sales subject to ......" We do not agree with the argument of the ld. Sr. Advocate that the service provided is Intellectual Property Service and service of Engineer Consultancy is not provided, notwithstanding the fact that the royalty is paid for such services which is determined on basis of Net Sales. It is well established in law that measure of taxation does not determine the nature of taxation. But the pertinent fact of this case is that whereas the show cause notice was issued in September, 2003, the royalty on account of technical services for the years 2000-2001 and 2001-2002 was paid in 2004. This fact has been also certified by the Chartered Accountant and not controverted by Revenue. The Service Tax provisions under the Service Tax Rules, 1994, as applicabl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... imes to cover all the eighteen circles of the appellants. As can be seen the computation is totally based on assumptions as follows: (i) Six months' turnover of each of the Circles was assumed to be 1/7th of the turnover of Karnataka Circle for a period of three and half years. (ii) The number of employees must have grown three times. (iii) Periodical turnover of all the Circles across India is equal. (iv) Free allowance was also extended to relatives of the employees and to the other group companies. 31. We find that such approximation has no place in demanding and confirming service tax. A fundamental principle of taxation is that tax has to be levied and collected not a rupee more and not a rupee less; therefore, there is no scope for approximation. We find that learned Adjudicating Authority has an occasion to look at the Chartered Accountant certificated dated 14.02.2012, which indicated band-wise number of employees of the appellant and the group companies. The adjudicating authority has neither relied upon the Chartered Accountant certificate nor discarded the same with evidence. Such an approach is not acceptable. Understandably, Revenue cannot be expected to estab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d incoherent show cause notice which has resulted in a serious transgression of the due process of law. 32. In view of the above discussion, we find the following: (i) Service tax cannot be levied when there is no consideration received. Free allowance given to the employees by the appellant is in the nature of discount/ concession and as the same has not accrued to the service provider-appellant, the same cannot form part of the consideration for the purpose of levy of service tax. (ii) Under the facts and circumstances of the case, Department has not made out any strong argument in favour of best judgment method. (iii) Computation of service tax cannot be on the basis of assumptions and presumptions. (iv) The Show Cause Notice is vague and does not specify the service which is rendered by the appellant; moreover, the benefit of discounts/ free allowance is accruing to the employees rather than the appellant who is the service provider. Consideration flowing towards the service recipient cannot be included for the purpose of taxing the service provided by the appellant. (v) In view of (i), (ii), (iii)& (iv) above, the impugned Show Cause Notice and the impugned order ca ..... 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