Service tax valuation turned on actual consideration; separate port rebate did not enlarge the taxable value, and limitation failed.

Service tax valuation for wharfage charges was confined to the actual amount charged in the taxable transaction, where invoices reflected 20% of the notified rate and no further consideration from the recipient was shown. A rebate granted by the port authority under a separate agreement, linked to capital expenditure in that distinct arrangement, did not become additional consideration for the service tax valuation. The alternative valuation method was therefore not triggered, and enhancement to 100% of the notified rate was unwarranted. The extended limitation period also failed because returns disclosed the adopted value and the department was aware of the agreement through intimation and audits, so suppression with intent to evade tax was not established.

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Issues: (i) Whether service tax valuation for wharfage charges was required to be enhanced from 20% of the notified rate to 100% of the notified rate on the footing that the 80% rebate granted by the port authority constituted additional consideration under the valuation provisions; (ii) Whether the demand was barred by limitation.

Issue (i): Whether service tax valuation for wharfage charges was required to be enhanced from 20% of the notified rate to 100% of the notified rate on the footing that the 80% rebate granted by the port authority constituted additional consideration under the valuation provisions.

Analysis: The transaction in dispute was between the service provider and the service recipient, and the amount actually charged under the invoices was 20% of the notified wharfage rate. The record did not show any further amount, money flow, book adjustment, or other ascertainable consideration from the recipient to the service provider. The rebate granted by the port authority under a separate agreement with the service provider, being linked to capital expenditure incurred in that separate arrangement, did not by itself become consideration flowing in the taxable transaction between the service provider and the recipient. Since the gross amount charged was ascertainable and represented the sole consideration, the alternative valuation mechanism was not attracted. The comparison with the standard notified rates charged in other transactions could not justify substitution of a different value in this independent transaction.

Conclusion: The service tax value was correctly taken at 20% of the notified wharfage charges, and enhancement to 100% was not justified.

Issue (ii): Whether the demand was barred by limitation.

Analysis: The assessee had been filing returns reflecting the taxable value adopted by it, and the agreement with the port authority had been within the knowledge of the department through intimation and repeated audits. The record did not support an allegation of suppression with intent to evade tax. In the absence of such foundation, invocation of the extended period was unsustainable.

Conclusion: The demand was time-barred insofar as it relied on the extended period.

Final Conclusion: The demand could not be sustained either on valuation or on limitation, and the revenue challenge failed.

Ratio Decidendi: For service tax valuation, only the actual consideration flowing in the taxable transaction can be adopted unless there is proved additional consideration or an unascertainable value requiring the prescribed method; a rebate arising from a separate arrangement does not automatically become part of the taxable value, and the extended period cannot be invoked without suppression of facts with intent to evade tax.

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