2017 (5) TMI 1142 - AT - Service Tax

Tribunal excludes TDS from service tax calculation, aligning with actual consideration paid.

Garware Polyester Ltd. Versus Commissioner of Central Excise & Customs, Aurangabad

The Tribunal ruled in favor of the appellant, holding that the TDS amount paid to the Income Tax Department for remittances to service providers abroad ... Liability of Service tax on TDS amount absorbed by the assessee on foreign remittance - reverse charge mechanism - case of appellant is that the service tax liability under Section 66A is already discharged on the amount of consideration paid by them to the service providers situated abroad - Department contended that appellant having discharged the Income Tax liability on the amount so paid, Service Tax liability arises on the Income Tax amount deducted as TDS and paid to Government of India - whether the appellant is required to discharge the service tax on an amount paid by them as TDS for the payment remitted to the service providers situated abroad or otherwise? - Held that: - It is not the case of Revenue that appellant has not paid the said amount and less paid to the service providers situated abroad. On a perusal of the records, we find that this plea of the appellant that the amount paid actually by them is not controverted by the adjudicating authority or by the first appellate authority. Identical issue came up before this Bench in the case of Magarpatta Township Development and Construction Co. Ltd. [2016 (3) TMI 811 - CESTAT MUMBAI], where it was held that the value which is to be considered for the discharge of service tax liability under reversal charge mechanism is equal to the actual consideration charged for the services provided or to be provided - In the case in hand, it is undisputed that appellant herein had only paid the actual consideration as per the agreement and nothing else - demand set aside - appeal allowed - decided in favor of appellant. Issues:Whether the appellant is required to discharge service tax on the amount paid as TDS for remittances to service providers situated abroad.Analysis:The appeal revolved around the appellant's service tax liability on TDS amounts paid during the relevant period. The appellant contended that the TDS amount paid was not part of the gross amount charged by foreign service providers and should not attract service tax liability. The adjudicating authority and the first appellate authority upheld the demand, leading to this appeal.The key question was whether the TDS amount paid by the appellant should be included in the gross value for service tax discharge. The Tribunal noted that the agreement with service providers specified a specific payment amount, which the appellant had paid without any dispute regarding underpayment. The Tribunal referenced a previous case with similar facts, where it was held that the value for service tax liability under reverse charge mechanism should be the actual consideration paid for the services.Drawing from the precedent, the Tribunal found that since the appellant had paid only the actual consideration as per the agreement, the TDS amount should not be included for service tax calculation. Therefore, the impugned order demanding service tax on TDS payments was deemed unsustainable and was set aside, allowing the appeal in favor of the appellant.In conclusion, the Tribunal ruled in favor of the appellant, holding that the TDS amount paid to the Income Tax Department for remittances to service providers abroad should not be considered for service tax liability calculation. The decision was based on the principle that the value for service tax under reverse charge mechanism should align with the actual consideration paid for the services, as established in a previous case with similar circumstances.