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TMI Blog2025 (2) TMI 418X X X X Extracts X X X X X X X X Extracts X X X X ..... n of the Delhi High Court in INTERCONTINENTAL CONSULTANTS AND TECHNOCRATS PVT. LTD. VERSUS UOI. & ANR. [2012 (12) TMI 150 - DELHI HIGH COURT], wherein Rule 5(1) of the Service Tax Valuation Rules, 2006 which provided for inclusion of expenditures or costs incurred by the service provider in the course of providing taxable services, in the value of such taxable services, was stuck down as ultra vires Section 66 and Section 67 of the Act and as travelling beyond the scope of the said sections.
The impugned order in appeal and order in original are set aside - Appeal allowed. X X X X Extracts X X X X X X X X Extracts X X X X ..... om the taxable service, provided the service provider qualifies as a "Pure Agent" by satisfying the conditions specified in explanation 1 to Rule 5(2) of the Valuation Rules. 4. The Department was of the opinion that the appellant has procured the services for himself and payments were made to the third party as a recipient of service and not as a "Pure Agent" and since the appellant has not fulfilled the conditions specified in Rule 5(2) of the Valuation Rules read with explanation 1 of the said rules so as to qualify as a pure agent, the above charges collected from the clients are to be treated as expenditure or costs incurred by the appellant in the course of providing taxable service and are liable to be included in the gross value for the purposes of charging service tax on the taxable service rendered by the appellant as per provisions of Section 67 of the Act read with Rule 5(1) of the Valuation Rules. Therefore, alleging contravention of provisions of Section 68 of the Act read with Rule 6 of Service Tax Rules, 1994 for failing to pay appropriate amount of service tax and invoking extended period of limitation on the grounds that the fact of non-inclusion of such charges ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6. The learned counsel submits that the Honourable Supreme Court has in the case of UOI v Intercontinental Consultants and Technocrats Pvt. Ltd., reported in [(2018) TIOL 76-SC-ST : 2018 (10) GSTL 401 (SC)], affirmed the decision of the Delhi High Court wherein Rule 5(1) of the Service Tax Valuation Rules, 2006 which provided for inclusion of expenditures or costs incurred by the service provider in the course of providing taxable services, in the value of such taxable services, was stuck down as ultra vires Section 66 and Section 67 of the Act and as travelling beyond the scope of the said sections. The learned counsel also submits that the show cause notice was time barred as none of the ingredients required to invoke the extended period of limitation are present in this case. The learned counsel submits that the extended period in terms of proviso to Section 73(1) can be invoked only when there is fraud, collusion, wilful misstatement, suppression of facts or contravention of any of the provisions of the chapter of the Act or the rules made thereunder with intent to evade payment of duty. The learned counsel submits that the question involved in the present matter is on interpre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... permits the subordinate legislation to be enacted in the said manner, as done by Rule 5. As noted above, prior to April 19, 2006, i.e., in the absence of any such Rule, the valuation was to be done as per the provisions of Section 67 of the Act. 22. Section 66 of the Act is the charging Section which reads as under: "there shall be levy of tax (hereinafter referred to as the service tax) @ 12% of the value of taxable services referred to in sub-clauses of Section 65 and collected in such manner as may be prescribed." 23. Obviously, this Section 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... el : "the Rules were meant only for the purpose of carrying out the provisions of the Act and they could not take away what was conferred by the Act or whittle down its effect." 29. In the present case, the aforesaid view gets strengthened from the manner in which the Legislature itself acted. Realising that Section 67, dealing with valuation of taxable services, does not include reimbursable expenses for providing such service, the Legislature amended by Finance Act, 2015 with effect from May 14, 2015, whereby Clause (a) which deals with 'consideration' is suitably amended 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h must be the basis of every legal rule as was observed in L'Office Cherifien des Phosphates v. Yamashita-Shinnihon Steamship Co. Ltd. Thus, legislations which modified accrued rights or which impose obligations or impose new duties or attach a new disability have to be treated as prospective unless the legislative intent is clearly to give the enactment a retrospective effect; unless the legislation is for purpose of supplying an obvious omission in a former legislation or to explain a former legislation. We need not note the cornucopia of case law available on the subject because 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." 10. In light of the Honourable Supreme Court's decision reproduced supra, which has also been followed in the decision of this Tribunal in International Clearing & Shipping agency reported in [(2024) 15 Centax 357 (Tri.-Mad.)] cited by the appellant, we are of the considered view t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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