Provisions of section 67(2) of Finance Act, 1994 (Service Tax) make it clear that, "Where the gross amount charged by a service provider, for the service provided or to be provided is inclusive of service tax payable, the value of such taxable service shall be such amount as, with the addition of tax payable, is equal to the gross amount charged.

But, unfortunately department sometimes takes different stand and put the assessee in unnecessary litigation. In the instant matter the department has appealed against the decision of the Commissioner (Appeals) in which commissioner (appeals) allowed the appeal of the assessee and treated the gross amount received as cum-duty receipt.

In this matter of COMMR OF C. EX & CUS., PATNA Versus ADVANTAGE MEDIA CONSULTANT reported in 2008 -TMI - 4195 - CESTAT KOLKATA, honorable tribunal (CESTAT) upheld the decision of commissioner (appeals) and dismissed the departmental appeal  by observing that:

"Service tax is an indirect tax. As per this system of taxation, tax borne by the consumer of goods/services is collected by the assessee (manufacturer/service provider) and remitted to the Government. When the amount is collected for the provision of services, the total compensation received should be treated as inclusive of service tax due to be paid by the ultimate customer of the services unless service tax is also paid by the customer separately. So considered, when no tax is collected separately, the gross amount has to be adopted to quantify the tax liability treating it as value of taxable service plus service tax payable."a

Inclusive service tax: when tax is not collected separately, gross receipts are treated as tax-inclusive for liability. When service tax is not collected separately, the gross amount charged must be treated as inclusive of service tax and the taxable value is the component which, with addition of tax payable, equals that gross receipt; absent separate collection the cum-tax gross receipt is adopted to quantify tax liability.