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TMI Blog2025 (2) TMI 417X X X X Extracts X X X X X X X X Extracts X X X X ..... TD. 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.
Conclusion - The reimbursed expenses are not part of the taxable value for service tax purposes, aligning with the Supreme Court's interpretation of Section 67.
The impugned order in appeal upholding the impugned order in original cannot sustain - Appeal allowed. X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 but for the verification conducted by the audit party such information would not have come to light; a show cause notice was issued demanding the aforementioned service tax payable along with appropriate interest as well as proposals to impose penalties. Consequent to the reply filed by the appellant, a personal hearing was granted, subsequent t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d 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 interpretation of the provisions of the rules to determine the liability of the CHA to pay service tax on reimbursable expenses and moreover they have been filing returns regularly providing all details. Further the alleged short payment was pointed out on the auditing of the records maintained by the appellant and thus there is no basis to invoke the proviso to section 73(1) by alleging suppression of facts or misstatement. He places reliance on the decision of this Tribunal in the case of International Clearing & Shipping Agency, [(2024) 15 Centax 357 ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 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 in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 015, 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 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 pecul ..... X X X X Extracts X X X X X X X X Extracts X X X X
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