2022 (1) TMI 317 - AT - Service Tax

Service Tax Appeal Dismissed: Consideration & Rebates Key Factors

C.C.E. & S.T. -Surat-II Versus Essar Bulk Terminal Limited

The Tribunal upheld the adjudicating authority's decision, confirming that the respondent correctly discharged service tax on the 20% rate charged to ... Valuation of service tax - wharfage charges under Port Service - when GMB charged wharfage charges at the rate of 20% of the notified rate to EBTL and the same was charged on actual by M/s. EBTL to M/s. ESTL, the EBTL on the transaction between EBTL and ESTL required to charge the service tax on 100% of the notified rate including 80% rebate given by GMB to EBTL or on the 20% of the notified rate on which the service tax was discharged is correct or otherwise? - invocation of extended period of limitation. HELD THAT:- In the present case, admittedly the respondent raised invoices for services charge for wharfage charges under Port Service at the rate of 20% of the notified rate as per GMB, however, other than this there is no other amount flowing in the form of money or in any form from ESTL to EBTL therefore, the case of the respondent does not fall under clause (II) of Section 67(1) of the Finance Act, 1994. It is pertinent to note that the entire case of the revenue is that there is a capital expenditure incurred by EBTL and on that account 80% rebate was given by GMB. The transaction which is under question in the present case is not between GMB and EBTL but it is between EBTL and ESTL, in this transaction the capital expenditure incurred by the EBTL is not relevant for the purpose of charging wharfage charges by EBTL to ESTL - the entire foundation of the case that 80% rebate given by GMB to EBTL on account of the capital expenditure incurred by the EBTL is not relevant for the transaction which is between EBTL and ESTL. Rule 3 of the Service Tax (Determination of Value) Rules, 2006 shall be applicable only in case were the value is not ascertainable. In the present case, the value for the service i.e. wharfage charges is clearly ascertained as per the invoice issued by EBTL to ESTL. Therefore, Rule 3 as whole not applicable in the facts of the present case. Without prejudice, even if clause (b) is applied, the cost of service to the respondent was only charged to ESTL therefore, the value of service charged by EBTL to ESTL is not less than the cost for such taxable service. In the present case, there is no dispute that the gross amount charged by EBTL to ESTL is equivalent to 20% of notified rate of wharfage charges and there is no additional consideration therefore, the amount charged by EBTL to ESTL is the sole consideration therefore, the value determined in the present case is strictly in accordance with Section 67 of the Act. In the present case, neither it is a case of any extra consideration flowing from service recipient to the service provider nor there is any proof of such extra consideration therefore, the gross amount charged by EBTL to ESTL being sole consideration will alone be liable to service tax and no any other amount which is otherwise not existing. The appellant has discharged service tax correctly on the 20% of the wharfage charges charged to the M/s. ESTL. Time Limitation - HELD THAT:- The audit report dated 7.9.12 conveyed to the respondent by Jurisdictional Superintendent vide his letter dated 1.2.2013 had in Para 1 specifically referred to clause 22 of the License Agreement dated 25.3.2010 with GMB and had pointed out similar short payment of service tax on part of GMB on wharfage charges on an identical ground that the service tax was paid on concessional rate granted to them by GMB and not on the full rate. These establish that the copy of agreement dated 25.3.10 entered into by the respondent with GMB along with all its enclosures was submitted to the department and clause 22 which is subject matter of the present dispute was very much in the knowledge of the department as similarly short levy in GMB was pointed out earlier - the invocation of the longer period for demand is absolutely incorrect and not sustainable. The impugned order does not suffer from any infirmity and therefore, is sustained - decided against Revenue. Issues Involved:1. Valuation of taxable services and determination of service tax liability.2. Interpretation of Section 67 of the Finance Act, 1994 and Rule 3 of the Service Tax (Determination of Value) Rules, 2006.3. Applicability of rebates and concessions in the context of service tax.4. Allegation of suppression of facts and invocation of the extended period for demand.5. Revenue neutrality and its impact on service tax liability.Issue-Wise Detailed Analysis:1. Valuation of Taxable Services and Determination of Service Tax Liability:The core issue was whether the respondent (EBTL) should charge service tax on the full notified rate of wharfage charges or only on the 20% rate charged to ESTL. The Revenue argued that the 80% rebate given by Gujarat Maritime Board (GMB) should be included in the gross value for service tax purposes. However, the Tribunal found that the transaction between EBTL and ESTL did not involve any additional consideration beyond the 20% rate charged. Thus, the service tax was correctly discharged on the 20% rate.2. Interpretation of Section 67 of the Finance Act, 1994 and Rule 3 of the Service Tax (Determination of Value) Rules, 2006:Section 67(1)(ii) was invoked by the Revenue, suggesting that the rebate constituted additional consideration. The Tribunal disagreed, stating that the provision applies only when consideration includes non-monetary forms, which was not the case here. The value of the service was ascertainable and charged at 20%, making Rule 3 inapplicable.3. Applicability of Rebates and Concessions in the Context of Service Tax:The Tribunal noted that the rebate given by GMB to EBTL was due to capital expenditure incurred by EBTL and was not relevant to the transaction between EBTL and ESTL. The rebate was specific to the agreement between GMB and EBTL and did not affect the service tax liability of EBTL towards ESTL.4. Allegation of Suppression of Facts and Invocation of the Extended Period for Demand:The Revenue alleged suppression of facts, claiming that EBTL did not furnish the agreement with GMB. However, the Tribunal found that EBTL had regularly filed ST-3 returns and had informed the department about the agreement and its terms. Previous audits had also reviewed the agreement, making the invocation of the extended period for demand unsustainable.5. Revenue Neutrality and Its Impact on Service Tax Liability:EBTL argued that the entire exercise was revenue neutral since ESTL, being a group company, could avail of the service tax credit. The Tribunal acknowledged this, referencing several Supreme Court decisions that support the principle that revenue neutrality negates the intent to evade tax, further reinforcing the dismissal of the extended period for demand.Conclusion:The Tribunal upheld the adjudicating authority's decision, confirming that EBTL correctly discharged service tax on the 20% rate charged to ESTL. The appeal by the Revenue was dismissed, and the cross-objection by the respondent was disposed of accordingly. The judgment emphasized the importance of actual consideration in determining service tax liability and rejected the inclusion of rebates as additional consideration in the absence of explicit provisions or evidence.