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TMI Blog2025 (3) TMI 506X X X X Extracts X X X X X X X X Extracts X X X X ..... the Delhi High Court in Intercontinental 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.
Extended period of limitation - HELD THAT:- There are force in the contentions of the learned consultant for the appellant that the issue involved was of interpretational nature pertaining to the Valuation Rules and no evidence of malafides has been adduced that would attract the extended period of limitation or warrant imposition of penalties.
Conclusion - The reimbursable expenses incurred in providing services should not be included in the taxable value unless explicitly mandated by statutory provisions, which was only applicable post-May 14, 2015.
The impugned orders in appeal are set aside and the appeals are allowed. X X X X Extracts X X X X X X X X Extracts X X X X ..... pplicable interest and proposing imposition of penalties. It is pursuant to the litigious journey through the adjudicatory and appellate hierarchy that the appellant is presently before this Tribunal having preferred the instant appeal against the impugned OIA. 3. Likewise, in the Appeal ST/41594/2016, the appellant therein, a 'Commodities Broker' registered with the National Commodity and Derivatives Exchange of India Limited (NCDEX) and Multi Commodity Exchange of India Limited (MCX) for carrying out the activities of buying, selling or dealing in commodities in an agency capacity on behalf of their clients, has challenged the impugned Order in Appeal No.258/2016 (STA-I) dated 27.04.2016(OIA) whereby the appellate authority has upheld the Order in Original (OIO) of the adjudicating authority confirming the demand of service tax payable for the period from 01-042006 to 16.05.2008. In this appeal, the facts in brief are that during this period the appellant had collected charges levied by NCDEX and MCX, under the name 'Transaction charges' from their clients, in accordance with the agreement that they enter into with the client whereby the client has undertaken to reim ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s 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. Thus, any kind of reimbursement received prior to 14-05-2015 shall not form part of the taxable value and would not be exigible to service tax in the light of the said judgement of the Apex Court and admittedly the period involved in these appeals are prior to 14-05-2015. The learned consultant also submits that the show cause notice pertaining to ST/41594/2016 was time barred as none of the ingredients required to invoke the extended period of limitation are present in this case. The learned consultant submits that the extended period in terms of proviso to Section 73(1) can be invoked only when there is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction 67 of the Act and as travelling beyond the scope of the said sections. The Honourable Supreme Court had also noticed the nature of reimbursable expenses that arose for consideration in the facts of the case as well as that in connected appeals before it, and has gone on to hold as under: "21. Undoubtedly, Rule 5 of the Rules, 2006 brings within its sweep the expenses which are incurred while rendering the service and are reimbursed, that is, for which the service receiver has made the payments to the assessees. As per these Rules, these reimbursable expenses also form part of 'gross amount charged'. Therefore, the core issue is as to whether Section 67 of the Act 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 pres ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd the subordinate legislation, it does not require elaborate reasoning to firmly state that the statute prevails over subordinate legislation and the byelaw, if not in conformity with the statute in order to give effect to the statutory provision the Rule or bye-law has to be ignored. The statutory provision has precedence and must be complied with." 27. The aforesaid principle is reiterated in Chenniappa Mudaliar holding that a rule which comes in conflict with the main enactment has to give way to the provisions of the Act. 28. It is also well established principle that Rules are framed for achieving the purpose behind the provisions of the Act, as held in Taj Mahal Hotel : "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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng is entitled to arrange his affairs by relying on the existing law and should not find that his plans have been retrospectively upset. This principle of law is known as lex prospicit non respicit : law looks forward not backward. As was observed in Phillips v. Eyre [(1870) LR 6 QB 1] , a retrospective legislation is contrary to the general principle that legislation by which the conduct of mankind is to be regulated when introduced for the first time to deal with future acts ought not to change the character of past transactions carried on upon the faith of the then existing law. 29. The obvious basis of the principle against retrospectivity is the principle of "fairness", which 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 legisl ..... X X X X Extracts X X X X X X X X Extracts X X X X
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