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TMI Blog2025 (2) TMI 264X X X X Extracts X X X X X X X X Extracts X X X X ..... om the MasterCard and have not been paying service tax in respect of VISA. Hon'ble Supreme Court in the case of Bhayana Builders [2018 (2) TMI 1325 - SUPREME COURT] held that 'Explanation 3 to sub-section (1) of Section 67 removes any doubt by clarifying that the gross amount charged for the taxable service shall include the amount received towards the taxable service before, during or after provision of such service, implying thereby that where no amount is charged that has not to be included in respect of such materials/goods which are supplied by the service recipient, naturally, no amount is received by the service provider/assessee. Though, sub-section (4) of Section 67 states that the value shall be determined in such manner as may be prescribed, however, it is subject to the provisions of sub-sections (1), (2) and (3). Moreover, no such manner is prescribed which includes the value of free goods/material supplied by the service recipient for determination of the gross value.' Section 67A of the Finance Act, 1994, gives an understanding that the consideration received must be for the service provided. In case, a part of the consideration is identifiable not to be fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... S. GARG , MEMBER ( JUDICIAL ) And HON'BLE MR. P. ANJANI KUMAR , MEMBER ( TECHNICAL ) Shri B. L. Narasimhan , Ms. Krati Singh and Ms. Shreya Khunteta , Advocates for the Appellant Shri Siddharth Jaiswal , Shri Anurag Kumar and Shri Yashpal Singh , Authorized Representatives for the Respondent ORDER P. ANJANI KUMAR : The present appeal is directed against the impugned order dated 20.04.2020 passed by the Commissioner of CGST, Rohtak. 2.1 Briefly stated facts of the case are that the appellant M/s SBI Cards & Payment Services Private Limited are engaged in the business of providing credit card services; the appellant availed credit card settlement services from networks like VISA Worldwide International PTE Ltd (in short "VISA") and MasterCard Asia Pacific PTE Ltd (in short "MasterCard"); the appellant entered into the agreements with overseas service providers; as per the agreements, the overseas service providers charged an amount on a pre-defined timeline by auto debiting the bank account of the appellant; the appellant used to deposit withholding tax (in short "WHT") on the amount paid during a particular month for the charges. 2.2 In respect of agreement with MasterCa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rt of the consideration paid for receiving services from VISA; as per Section 67 of the Finance Act, 1994, taxable value in case of provision of service for a consideration in money, shall be the gross amount charged by the service provider; "Gross Amount Charged" has been defined as any payment made by a person, including by debit or credit entries; the understanding is made clear by the definition of "Consideration"; in the impugned case, amount charged is exclusive of withholding tax, which is evidenced by the invoices issued by MasterCard/ VISA; as the WHT is not charged by them, it cannot be treated as a "Consideration" for the purpose of providing the service. He relies on the following cases: Magarpatta Township Development and Construction Co. Ltd. vs. CCE, Pune-III -2016 (43) S.T.R. 132 (Tri. - Mumbai) Hindustan Oil Exploration Co. Ltd. vs. Commissioner of GST & CE - 2019 (25) G.S.T.L. 252 (Tri. - Chennai) T.V.S. Motor Company Ltd. Versus Commr. Of C. Ex. & S.T., Chennai-III Commissionerate 2021 (55) G.S.T.L. 459 (Tri. - Chennai) FCI Oen Connectors Ltd Versus Commissioner of Central Tax, Cochin 2023 (10) TMI 1217-CESTAT Bangalore Centre For High Technology Ve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... regularly filing the Returns, penalty under Section 77 cannot be imposed; the appellants are entitled to waiver of penalty under Section 80. He relies on the following cases: NCR Corporation India Pvt. Ltd. Versus Commr. Of C.T., Bangalore North 2021 (55) G.S.T.L. 6 (Tri. - Bang.) - M/S. Goldman Sachs Services Versus Commissioner of Central Tax, Bengaluru East [2022] 97 G S.T.R. 315 (CESTAT - Bang) Schneider Electric India Pvt. Ltd. Versus Commissioner of Service Tax, Delhi and Commissioner of Service Tax, Delhi Versus Schneider Electric India Pvt. Ltd. 2023 (6) TMI 1198 - CESTAT Chandigarh. 6. Learned Authorized Representative for the Department takes us through various clauses of the Agreement, relevant provision of Section 67 and submits that as per the invoice issued by VISA, they have charged for the services rendered by them and the appellant has borne the TDS (WHT amount) on behalf of VISA @ 10% of the gross value; the amount is claimed as reimbursement from the overseas service provider. He submits that as per invoice issued by MasterCard; the appellant had borne and paid the TDS on behalf of MasterCard. He submits that on going through the License Agreement with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ver and above the value of the services build; the case law of M/s Degremont Ltd. and International Consultancy Services Ltd. is not applicable as the service tax is demanded only on gross amount charged by the service provider; WHT charges are not reimbursable expenses. The arguments of the appellants are self-contradictory as for some period, they have paid service tax on the grossed-up value and for some period on the invoice value. In respect of MasterCard, the appellants claim that the amounts are reimbursed and hence paid service tax on grossed up value from April 2013 and only during July 2012 to March 2013, they have not discharged the liability; as there is no clarity on the exigibility of WHT to service tax, extended period cannot be invoked. The arguments are incorrect; any payment made after investigation initiated could be treated as payment on account of suppression only. Rule 6(3) is not applicable as it pertains to non-provision of service or deficiency of service; the argument on revenue neutrality negates the very scheme of service tax which requires to be paid at every stage as applicable. The appellants have paid service tax for some period and have not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s Chapter, service tax chargeable on any taxable service with reference to its value shall,- (i) in a case where the provision of service is for a consideration in money, be the gross amount charged by the service provider for such service provided or to be provided by him; (ii) in a case where the provision of service is for a consideration not wholly or partly consisting of money, be such amount in money, with the addition of service tax charged, is equivalent to the consideration; (iii) in a case where the provision of service is for a consideration which is not ascertainable, be the amount as may be determined in the prescribed manner. (2) Where the gross amount charged by a service provider, for the service provided or to be provided is inclusive of service tax payable, the value of such taxable service shall be such amount as, with the addition of tax payable, is equal to the gross amount charged. (3) 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. (4) Subject to the provisions of sub-sections (1), (2) and (3), the value shall be determined in su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to indicate that it is the total amount charged without deduction of any expenses Merely by use of the word "gross the Department does not get any jurisdiction to go beyond the contract value to arrive at the value of taxable services. Further, by the use of the word "charged", it is clear that the same refers to the amount billed by the service provider to the service receiver. Therefore, in terms of Section 67, unless an amount is charged by the service provider to the service recipient, it does not enter into the equation for determining the value on which service tax is payable. b. The amount charged should be for "for such service provided": Section 67 clearly indicates that the gross amount charged by the service provider has to be for the service provided. Therefore, it is not any amount charged which can become the basis of value on which service tax becomes payable but the amount charged has to be necessarily a consideration for the service provided which is taxable under the Act. By using the words "for such service provided the Act has provided for a nexus between the amount charged and the service provided. Therefore, any amount charged w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he 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 needs to be emphasized that Rule 5 of the Rules went much beyond the mandate of Section 67. We, therefore, find that High Court was right in interpreting Sections 66 and 67 to say that in the valuation of taxable service, the value of taxable service shall be the gross amount charged by the service provider for such service' and the valuation of tax service cannot be anything more or less than the consideration paid as quid pro qua for rendering such a service. 14. We find that in terms of the exposition, as above, of the provisions of Section 67A of the Finance Act, 1994, gives an understanding that the consideration received must be for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is nothing on record that indicates that the appellant had recovered that amount of Income Tax paid by them on such amount paid to the service provider from the outside India and any other material to hold that this amount is paid as consideration for services received from service provider. 9. In our considered view, the plain reading of Section 67 with Rule 7 of Service Tax Valuation Rules, in this case in hand, Service Tax liability needs to be discharged on amounts which have been billed by the service provider. 16. We also find that Chennai Bench of the Tribunal in the case of TVS Motor Co. Ltd. - 2021 (55) GSTL 459 held that the situation would be different if the TDS is deducted from the actual consideration and is not borne by the Indian counterpart. This judgement was followed this decision in the case of ITD ITD Cem Joint Venture vide Final Order No.60027/2024 dated 30.01.2024. Chennai Bench observed in the case of TVS Motor Co. (supra) that: 14.1.1 Section 67 of the Finance Act, as reproduced above, would show that Service tax is payable on the gross amount charged by the service provider. The Department does not dispute that the TDS amount is borne by the appella ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e parties have reached a consensus ad idem can only be the consideration for the services. Further, the amount of tax deducted varies and depends upon the rate in force. There is no agreement by the parties with regard to the amount of TDS that has to be deducted. It wholly depends upon the law prevailing in the direct tax regime. 14.2.1 Section 2(d) of the Indian Contract Act, 1872, defines "consideration". Compliance with statutory provisions cannot be considered as rendering of service. Again, "consideration" is not doing something which a person is bound by law to do. When the amount is paid at the will of a person not party to the agreement, such amount does not bear the character of consideration. It has to be noted that in the present case, there is no consent from the foreign counterpart to reduce his consideration by deducting the income tax liability from the agreed consideration. While doing business with the foreign counterpart and making payment, they are bound to deduct the tax and deposit with the Government. The appellants have thus grossed up the TDS and complied with the statutory obligation. The situation would be different if the TDS is de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .04.2018 covering the period July 2012 to June 2017 has invoked extended period of limitation without substantiating with any evidence. We find that as the issue came to be settled by a series of judgements by the Tribunal at a later date, there are reasons to believe that the appellants could have entertained a bona fide belief. Moreover, Revenue does not highlight with evidence any act of suppression etc. on the part of the appellants with an intent to evade payment of duty. Moreover, the appellants have been filing ST-3 Returns regularly. We find, for these reasons, that Revenue has not made out any case for invocation of extended period. Therefore, no case has been made out for levy of penalties on any count. In view of the decision of the Principal Bench in the case of Shyam Spectra vide Final Order No. 56196/2024 dated 31.07.2024 held, following Hon'ble Kolkata High Court judgment, in the case of Infinity Infotech Parks -2014 (36) S.T.R. 37 (Cal.) decided on 30.04.2014, that if the demand for extended period is set aside, demand for normal period can also not be sustained. 19. In view of the above , the appeal is allowed. ( Order pronounced in the open court on 06 / 02 / 20 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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