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TMI Blog2025 (2) TMI 742X X X X Extracts X X X X X X X X Extracts X X X X ..... ontinental Consultants & Technocrats Pvt Ltd v UOI, [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 service tax should be levied only on the actual consideration for the service provided, excluding reimbursable expenses unless legislatively amended.
The impugned order is set aside - appeal allowed. X X X X Extracts X X X X X X X X Extracts X X X X ..... penditure 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 appellant did not disclose such expenses being claimed as reimbursable in the ST 3 returns filed nor communicated these details to the Department in any other manner and 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 to which the adjudicating authority issued the impugned order in original No.53/2012 dated 16.05.2012 rendering a finding that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ember 1999 to December 2003 was decided in the appellant's favour by this Tribunal vide Final Order No.902/2007 dated 24.07.2007, reported as Sangamitra Services agency v CCE, Chennai, 2007 (8) STR 233 (TriMad) which was upheld by the jurisdictional Madras High Court in CMA 985/2008 dated 27.06.2013, reported in 2014(33) STR 137 (Mad), which has since been followed by this Tribunal in Final Order No.4080140804/2018 dated 15.03.2018 for the period April 2009 to March 2011, wherein this Tribunal was pleased to hold that the expenses incurred by the appellant were not includible in the value of taxable services provided by the Appellant and that service tax is leviable only on the remuneration/commission charged towards the taxable service of C & F agent rendered by the appellant. The appellant also placed reliance on the decision of the Honourable Supreme Court in the case of UOI v Intercontinental Consultants and Technocrats Pvt Ltd, 2018 (10) GSTL 401 (SC), which held Rule 5 of the Valuation Rules to be ultra viries. 7. Learned Authorised Representative, Shri. N. Satyanarayana appeared for the Department and reiterated the findings in the impugned order in appeal. 8. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 (un-amended, 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 emphasised that Rule 5 of the Rules went much beyond the mandate of Section 67. We, therefo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ider 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 just a series of statements, such as one finds in a work of fictio ..... X X X X Extracts X X X X X X X X Extracts X X X X
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