Service tax valuation for foreign consultancy services turns on actual consideration; disputed TDS categories were remanded for fresh examination.

Service tax on foreign consultancy services had to be valued on the actual consideration charged under Section 67 of the Finance Act, 1994 read with Rule 7 of the Service Tax Valuation Rules, 2006. One TDS category, where tax was deducted from the agreed consideration, was not pressed. For the remaining two categories, the record did not conclusively show whether the income tax paid was recovered from abroad or formed part of the service consideration, and the supporting documents were said to have been insufficiently examined. The matter was remanded for de novo adjudication with an opportunity to produce evidence, and the penalty issue was left open in the fresh proceedings.

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Issues: Whether, for services received from abroad, the value for service tax included income tax deducted at source and deposited by the recipient from its own pocket or later refunded, and whether the matter required fresh adjudication on the evidentiary record.

Analysis: The dispute concerned foreign consultancy services received during the relevant period. The valuation provisions under Section 67 of the Finance Act, 1994 and Rule 7 of the Service Tax Valuation Rules, 2006 require service tax to be computed on the actual consideration charged for the service. One category of TDS, where tax was deducted from the agreed consideration, was not pressed. For the remaining two categories, the record before the Tribunal did not satisfactorily establish whether the amounts paid as income tax were recovered from abroad or formed part of the consideration for the service. As the appellant asserted that supporting documents were available and had not been properly examined, the controversy on these categories was not finally resolved on merits and required reconsideration by the adjudicating authority.

Conclusion: The matter relating to the remaining two categories of TDS was remanded for de novo examination, with opportunity to produce evidence, and the issue of penalty was also left open for reconsideration in the fresh proceedings.

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