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of <h1>Penal late payment charges excluded from service tax value under CBEC circular; review plea dismissed, KVR Construction issue open</h1> <h3>The Commissioner of Central Tax, (Earlier Commissioner of Service Tax) rep. by the Principal Commissioner, Central Taxes, Bengaluru North Commissionerate Versus M/s. Way2 Wealth Brokers Pvt. Ltd. rep by Sri B.G. Srinath Director</h3> HC held that charges collected by the service provider for delay in payment by the service recipient are in the nature of penal charges and, in view of ... Calculation of service tax - charges on account of delay in making payment by the service recipient to the service provider are in the nature of 'penal charge' for not making payment within stipulated time - includable in the taxable value for charging service tax or not - HELD THAT:- The circular is dated 03.08.2011, which is prior to filing of the application. Once the amount is not includable in the taxable value, the other aspects pale into insignificance. However, as prayed, the argument with regard to the applicability of authority in KVR Construction [2012 (7) TMI 22 - KARNATAKA HIGH COURT] is kept open to be adjudicated in an appropriate case. There are no ground to interfere. Accordingly, this Review Petition is dismissed. Petition challenges impugned judgment for following Commissioner of Central Excise v. KVR Construction and contends subsequent MCI Leasing clarified KVR in favour of Revenue. Respondent invoked Government of India, Ministry of Finance, Central Board of Excise & Customs notification dated 3 August 2011 (para 2.1), which clarifies that charges for delayed payment by the service recipient are in the nature of a 'penal charge' and such amounts are 'not includable in the taxable value' for service tax. Applicant filed refund claim on 30.09.2011 for April 2009-September 2010; Revenue withheld refund for the last quarter as time-barred. Court observed the notification is unambiguous and predates the refund application, hence delayed payment charges are excluded from taxable value, rendering other contentions immaterial. The question of KVR Construction's applicability was left open for appropriate adjudication. Revenue had already refunded the amount on 30.12.2021. Review petition dismissed; no costs.
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