2012 (11) TMI 42 - Commissioner - Service Tax

Commissioner rules in favor of appellant on service tax issue, finding no evasion or suppression. TDS and Income Tax not taxable.

IN RE: MAINETTI (INDIA) PVT. LTD.

IN RE: MAINETTI (INDIA) PVT. LTD. - 2012 (27) S.T.R. 534 (Commr. Appl.) Issues:1. Whether the suppression of facts justifies the invocation of the extended period of time and if the TDS amount should be included in the taxable service value.2. Whether the appellant correctly paid the service tax on the gross amount paid to the foreign service provider and if the Income Tax amount should be considered in the calculation.Analysis:1. The appellant appealed against the lower adjudicating authority's order-in-original for short payment of service tax due to non-inclusion of TDS amount in the taxable service value. The appellant argued that the TDS amount was not required to be included as they paid service tax correctly on the total amount paid to the foreign service provider. The Commissioner found that there was no suppression of facts to evade tax, as the appellant paid service tax on royalty payments and Income tax directly to the Government. The Commissioner held that the extended period of time could not be invoked, limiting the demand to one year prior to the show cause notice issuance.2. Regarding the inclusion of TDS amount in the taxable service value, the appellant contended that they correctly paid service tax on the gross amount paid to the foreign company under the reverse charge mechanism. The Commissioner noted that previous judicial decisions supported that TDS on Income Tax should not be included in the service tax calculation. The Commissioner agreed that the Income Tax amount paid directly to the Government should not form part of the gross value for service tax calculation. The appellant provided a clear example to illustrate that service tax should only be paid on the amount billed and paid to the service provider abroad, excluding the TDS amount. The Commissioner concluded that the appellant had already paid the correct amount of service tax and no further payment was required.In conclusion, the Commissioner set aside the lower authority's order and allowed the appeal, ruling in favor of the appellant based on the correct payment of service tax and the non-inclusion of TDS amount in the taxable service value.