Taxable value exclusions for reimbursements, separate goods supply and soil unloading defeated the Service Tax demand.

Reimbursed wages separately identified in the work order and confirmed by the service recipient were not includible in the taxable value, because only the gross amount charged for the service could be taxed and reimbursements could not be added. Diesel supplied under a separate contract with independently identified rates and quantities was likewise excluded from Service Tax as a separately identifiable goods component. Supply and unloading of soil did not amount to Site Formation and Clearance services, as the activity lacked site-preparation functions such as excavation or levelling. A demand based only on mismatch between ST-3 returns and the balance sheet failed, and the extended period of limitation was unavailable for want of suppression or intent to evade.

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Issues: (i) whether reimbursed wages paid by the service recipient formed part of the taxable value; (ii) whether diesel supplied under separate work orders was includible in the value of security services; (iii) whether supply and unloading of soil fell within Site Formation and Clearance services; (iv) whether a demand could be sustained only on mismatch between ST-3 returns and the balance sheet; and (v) whether the extended period of limitation was invocable.

Issue (i): whether reimbursed wages paid by the service recipient formed part of the taxable value.

Analysis: The records showed a fixed service charge on which tax had already been paid, while the wage component for field consultants was separately identified in the work order and confirmed by the service recipient as a reimbursable amount. The valuation principle applied was that, for the relevant period, only the gross amount charged for the taxable service could be included, and reimbursements were not to be added to the assessable value.

Conclusion: The reimbursed wage component was not includible, and the demand on this count was unsustainable in favour of the assessee.

Issue (ii): whether diesel supplied under separate work orders was includible in the value of security services.

Analysis: The supply of diesel was found to be under a separate and distinct contract with separately identified rates and quantities, supported by invoices and work orders. The applicable exemption for the value of goods sold by a service provider was relied upon, and the goods component was held to be independently identifiable from the security service component.

Conclusion: The diesel value was not liable to Service Tax, and the demand on this count was set aside in favour of the assessee.

Issue (iii): whether supply and unloading of soil fell within Site Formation and Clearance services.

Analysis: The activity was limited to procurement and unloading of specified quantities of soil, without levelling, stabilisation, excavation, or other site-preparation functions. The statutory definition and the departmental clarification on site formation services were applied, both of which pointed to pre-construction site preparation activities and not to mere supply of soil as a commodity.

Conclusion: The activity did not fall within the taxable category of Site Formation and Clearance services, and the demand on this count was not sustainable in favour of the assessee.

Issue (iv): whether a demand could be sustained only on mismatch between ST-3 returns and the balance sheet.

Analysis: The discrepancy was held to be inherently unreliable because tax was payable on receipt basis while the balance sheet followed accrual accounting, and the balance sheet also included reimbursable expenses. The demand could not rest merely on a comparison of two sets of figures without proof that the difference represented taxable consideration for services actually rendered.

Conclusion: The mismatch-based demand was unsustainable in favour of the assessee.

Issue (v): whether the extended period of limitation was invocable.

Analysis: No suppression, wilful misstatement, or corroborative evidence of intent to evade was established. The returns had disclosed the taxable value, and the Revenue did not produce material showing concealment sufficient to justify the extended limitation period.

Conclusion: The extended period was not invocable, in favour of the assessee.

Final Conclusion: The entire confirmed Service Tax demand, together with interest and penalties, failed on merits and on limitation, and the appeal succeeded with consequential relief as per law.

Ratio Decidendi: For the relevant period, reimbursements and separately identifiable goods-supply values are not includible in taxable value unless they form part of the gross amount charged for the taxable service, and a demand cannot be sustained merely on accounting mismatch or without proof of taxable consideration and suppression.

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