TaxTMI 
TaxTMI 
2018 (2) TMI 1325
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....2015, CIVIL APPEAL NO. 7243 OF 2015, CIVIL APPEAL NO. 4970 OF 2016, CIVIL APPEAL NO. 5941 OF 2016, CIVIL APPEAL NO. 8484 OF 2016, CIVIL APPEAL NO. 2338 OF 2018, (ARISING OUT OF DIARY NO. 42349 OF 2016), CIVIL APPEAL NOS. 5319-5320 OF 2017, CIVIL APPEAL NO. 15485 OF 2017, CIVIL APPEAL NO. 11085 OF 2017, CIVIL APPEAL NO. 10606 OF 2017, CIVIL APPEAL NO. 15570 OF 2017, CIVIL APPEAL NO. 12451 OF 2017, CIVIL APPEAL NO. 11182 OF 2017, CIVIL APPEAL NO. 1430 OF 2015, CIVIL APPEAL NO. 9423 OF 2017 AND CIVIL APPEAL NO. 10611 OF 2017 For the Parties : Mr. B. Krishna Prasad, AOR, Mr. V. Lakshmikumaran, Adv., Mr. L. Badri Narayanan, Adv., Mr. Aditya Bhattacharya, Adv., Mr. Victor Das, Adv., Ms. Apeksha Mehta, Adv., Mr. M. P. Devanath, AOR, Mr. Anil Kumar Tandale, AOR, Mr. K. V. Mohan, AOR, Ms. Shipra Ghose, AOR, Mr. Ashok K. Mahajan, AOR, Mr. Rupesh Kumar, AOR, Mr. Susmit Pushkar, AOR, Mr. Abhijeet Swaroop, Adv., Mr. Ayush Mehrotra, Adv., Mr. R. Chandrachud, AOR, Ms. Madhumita Bhattacharjee, AOR, Mr. Praveen Swarup, AOR, Mr. M. P. Vinod, AOR, Mr. Shishir Deshpande, AOR, Mr. Tarun Gulati, Adv., Mr. Kishore Kunal, AOR, Mr. Sparsh Bhargava, Adv., Mr. Shashi Mathews, Adv., Ms. Rachana Yadav, Adv., ....
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....y, steel and cement) were supplied or provided by the service recipients. As these materials were to be utilised in the projects meant for service recipients themselves, obviously, no costs thereof was charged from the assessees. The Department wants that value of such goods/materials even when supplied or provided free should be included, while calculating the "gross value" and 33% thereof be treated as value for the purpose of levying service tax. 4) The question, therefore, which has fallen for consideration is as to whether, the value of goods/material supplied or provided free of cost by a service recipient and used for providing the taxable service of construction or industrial complex, is to be included in computation of gross amount (charged by the service provider), for valuation of the taxable service, under Section 67 of the Act and for availing the benefits under Notification No. 15/2004-ST dated September 10, 2004 as amended by Notification No. 4/2005-ST dated March 01, 2005 (whereby an Explanation was added to Notification No. 15/2004-ST). 5) We may mention here that different benches of the Customs, Excise and Service Tax Appellate Tribunal (for short 'CESTAT') had....
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....he case may be, includes,- (a) the aggregate of commission or brokerage charged by a broker on the sale or purchase of securities including the commission or brokerage paid by the stock-broker to any sub-broker; (b) the adjustments made by the telegraph authority from any deposits made by the subscriber at the time of application for telephone connection or pager or facsimile or telegraph or telex or for leased circuit; (c) the amount of premium charged by the insurer from the policy holder; (d) the commission received by the air travel agent from the airline; (e) the commission, fee or any other sum received by an actuary, or intermediary or insurance intermediary or insurance agent from the insurer; (f) the reimbursement received by the authorised service station from manufacturer for carrying out any service of any motor car, light motor vehicle or two wheeled motor vehicle manufactured by such manufacturer; and (g) the commission or any amount received by the rail travel agent from the Railways or the customer, but does not include- (i) initial deposit made by the subscriber at the time of application for telephone connection or pager or facsimile (FAX) or tel....
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....ce. (4) Subject to the provisions of sub-sections (1), (2) and (3), the value shall be determined in such manner as may be prescribed. Explanation.- For the purposes of this section. (a) "consideration" includes any amount that is payable for the taxable services provided or to be provided; (b)"money" includes any currency, cheque, promissory note, letter of credit, draft, pay order, travellers cheque, money order, postal remittance and other similar instruments but does not include currency that is held for its numismatic value; (c) "gross amount charges" includes payment by cheque, credit card, deduction from account and any form of payment by issue of credit notes or debit notes and [book adjustment, and any amount credited or debited, as the case may be, to any account, whether called 'suspense account' or by any other name, in the books of account of a person liable to pay service tax, where the transaction of taxable service is with any associated enterprise.]" 8) After the amendment, Section 67 of the Act is as follows: Section 67. Valuation of taxable services for charging service tax (1) Subject to the provisions of this Chapter, service tax chargeable on an....
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....xemption Notifications: (a) Notification No. 12/2003-ST dated June 26, 2003, issued by the Central Government, exercising powers under Section 93(1) of the Act exempted the value of goods and materials sold by a service provider to a recipient of service from the tax leviable thereon, subject to documentary proof specifically indicating the value of such goods and material. This notification was specified to come into force w.e.f. July 01, 2013. (b) By Notification No. 15/2004-ST dated September 10, 2004, a further exemption was granted in respect of taxable service provided by a commercial concern to any person in relation to construction service. This Notification reads: "In exercise of the powers conferred by sub-section (1) of section 93 of the Finance Act, 1994 (32 of 1994), the Central Government, being satisfied that it is necessary in the public interest so to do, hereby exempts the taxable service provided by a commercial concern to any person, in relation to construction service, from so much of the service tax leviable thereon under Section 66 of the said Act, as is in excess of the service tax calculated on a value which is equivalent to thirty-three per cent of the....
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....inted out in the beginning, all these assessees are covered by Section 65(25b) of the Act as they are rendering 'construction or industrial construction service', which is a taxable service as per the provisions of Section 65(105)(zzq) of the Act. The entire dispute relates to the valuation that has to be arrived at in respect of taxable services rendered by the assessees. More precisely, the issue is as to whether the value of goods/materials supplied or provided free of cost by a service recipient and used for providing the taxable service of construction or industrial complex, is to be included in computation of gross amount charged by the service provider, for valuation of taxable service. For valuation of taxable service, provision is made in Section 67 of the Act which enumerates that it would be 'the gross amount charged by the service provider for such service provided or to be provided by him'. Whether the value of materials/goods supplied free of cost by the service recipient to the service provider/assessee is to be included to arrive at the 'gross amount', or not is the poser. On this aspect, there is no difference in amended Section 67 from unamended Section 67 of th....
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....e included while arriving at the 'gross amount' simply, because of the reason that no price is charged by the assessee/service provider from the service recipient in respect of such goods/materials. This further gets strengthened from the words 'for such service provided or to be provided' by the service provider/assessee. Again, obviously, in respect of the goods/materials supplied by the service recipient, no service is provided by the assessee/service provider. Explanation 3 to subsection (1) of Section 67 removes any doubt by clarifying that the gross amount charged for the taxable service shall include the amount received towards the taxable service before, during or after provision of such service, implying thereby that where no amount is charged that has not to be included in respect of such materials/goods which are supplied by the service recipient, naturally, no amount is received by the service provider/assessee. Though, sub-section (4) of Section 67 states that the value shall be determined in such manner as may be prescribed, however, it is subject to the provisions of sub-sections (1), (2) and (3). Moreover, no such manner is prescribed which includes the value of fre....
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.... takes care of those amounts which are received by the associated enterprise for the services rendered by the service provider. 16) In fact, the definition of "gross amount charged" given in Explanation (c) to Section 67 only provides for the modes of the payment or book adjustments by which the consideration can be discharged by the service recipient to the service provider. It does not expand the meaning of the term "gross amount charged" to enable the Department to ignore the contract value or the amount actually charged by the service provider to the service recipient for the service rendered. The fact that it is an inclusive definition and may not be exhaustive also does not lead to the conclusion that the contract value can be ignored and the value of free supply goods can be added over and above the contract value to arrive at the value of taxable services. The value of taxable services cannot be dependent on the value of goods supplied free of cost by the service recipient. The service recipient can use any quality of goods and the value of such goods can vary significantly. Such a value, has no bearing on the value of services provided by the service recipient. Thus, on f....
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....cial concern for providing the said taxable service'. According to these notifications, service tax is to be calculated on a value which is 33% of the gross amount that is charged from the service recipient. Obviously, no amount is charged (and it could not be) by the service provider in respect of goods or materials which are supplied by the service recipient. It also makes it clear that valuation of gross amount has a causal connection with the amount that is charged by the service provider as that becomes the element of 'taxable service'. Thirdly, even when the explanation was added vide notification dated March 01, 2005, it only explained that the gross amount charged shall include the value of goods and materials supplied or provided or used by the provider of construction service. Thus, though it took care of the value of goods and materials supplied by the service provider/assessee by including value of such goods and materials for the purpose of arriving at gross amount charged, it did not deal with any eventuality whereby value of goods and material supplied or provided by the service recipient were also to be included in arriving at gross amount 'gross amount charged'. ....