TaxTMI 
TaxTMI 
2024 (1) TMI 674
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....T Act"); (2) I also demand and confirm interest due thereon at the applicable rate from the Noticee under Section 75 of the Act read with Section 173, 174 & 142 of CGST Act on the amount of Service Tax being confirmed at (1) above; (3) I impose a penalty of Rs.5,13,91,838/- (Rupees Five Crore Thirteen Lakh Ninety-One Thousand Eight Hundred and Thirty-Eight only) upon M/s Adept, 2/148, Vishal Khand, Gomti Nagar, Lucknow under Section 78 of the Act for non-payment of due Service Tax by suppressing the value of taxable services with intent to evade the payment c of Service Tax from the department read with Section 173, 174 & 142 of CGST Act. The penalty imposed herein shall be further reduced to 25% of the demand of Service Tax confirmed herein subject to the condition that the benefit of reduced penalty shall be applicable only if the amount of such reduced penalty is also paid along with the Service Tax confirmed and the interest payable thereon within a period of 30 days of receipt of this order." 2.1 Appellant is a partnership firm, registered with registration number AAQFA8925JSD001. During the audit of the records of the Party for the F.Y. 2015-16 & 2016-17,....
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....ght Hundred and Thirty Eight only) should not be demanded and recovered from them under proviso to Section 73(1) of the Finance Act, 1994, read with Section 6 of The Taxation And Other Laws (Relaxation And Amendment Of Certain Provisions) Act, 2020 and Notification dated 30.09.2020 issued by CBIC under F. No.450/61/2020-Cus.IV(Part-1), for the reasons detailed here-in-above; b) Interest at the applicable rates, on the demand of Service Tax mentioned at Para 12(i) above, should not be demanded and recovered from them under Section 75 of the Finance Act, 1994, for the reasons detailed here-in-above; c) Penalty under Section 78(1) of the Finance Act, 1994 should not be imposed upon them, for the reasons discussed here-in-above; d) Penalty under Section 76(1) of the Finance Act, 1994 should not be imposed upon them for the reasons discussed here-in-above; 2.6 This show cause notice has been adjudicated as per the impugned order referred in para 1 above. Aggrieved Appellants have filed this appeal. 3.1 We have heard Shri Bharat B. Raichandani Advocate for the Appellant and Shri Sandeep Pandey, Authorized Representative for the Revenue. 3.2 Arguing for....
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....be levied on the value of goods. Service Tax law provides for levy of Service Tax only on provision of services. Supply of goods, whether deemed sale or not, it out of the purview of Service Tax. As per Section 2(v) of the UPVAT Act, 2008, Diesel is provided as Non-VAT goods as per Schedule IV. Schedule IV says that the tax should be collected at the first point of sale. Thus, the dealer (manufacturer) has to pay VAT on such supply of diesel at the first point of sale. Irrespective of the fact whether VAT is payable or not, admittedly, these are goods. This was the clear stipulation, at the time of introduction of Notification No.12/2003-ST dated 20.06.2003, which stands deleted with the introduction of the negative list regime. The Appellant submits that the diesel was purchased by the Appellant in his own name, it was not purchased on behalf of the service receiver. There is an independent sale and purchase transaction. The Appellant had purchased the diesel and supplied the diesel to the service recipient Admittedly, no TDS has been deducted by the service recipient on these diesel charges. Therefore, no Service Tax can be demanded from the Appellants. Section ....
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....e same. However, no TDS has been deducted on the cost of diesel paid/reimbursed which proves that cost of diesel is not the part of service agreement. This is an indicator of the fact that both parties to the contract understand and acknowledge that there is a difference in service vis-à-vis supply of goods. The Ld. Principal Commissioner has failed to consider. telecommunication service provider has included the cost of diesel in the value of their output service. Once this is the case, no demand of service tax can lie at the hands of the appellant. This, in as much as, the same would amount to double taxation. It is well settled law that the as held in the case of BSNL vs. Union of India - 2006 (2) S.T.R. 161, that the same value cannot be brought to tax, both as the value of goods as well as the value of services. supply of diesel is a sale of goods and hence cannot be brought under the ambit of service tax. The Appellant submits that there is no service element involved. there are two limbs of the contract viz. supply of services and supply of diesel which needs to be vivisected for levy of service tax. In support of this submission, the Appell....
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....shpam Pharmaceuticals Company vs. CCE 1995 (78) E.L.T. 401 (SC). Similar was the view of the Honorable Supreme Court in the case in CCE vs. Chemphar Drugs and Liniments 1989 (40) E.L.T. 276 (SC), (Supra). Thus extended period of limitation could not have been invoked. Since the demand cannot be sustained on merits or limitation there is no case for demand of interest or penalty. 3.3 Arguing for the Revenue, leaned authorized representative reiterated the findings recorded in the impugned order. 4.1 We have considered the impugned order along with the submissions made in the appeal and during the course of arguments. 4.2 For confirming the demand of service tax with interest and penalties, impugned order records the findings as follows: "6.2 The period in dispute in the instant case in Financial Year 2015-16 and 2016-17. The issue in brief is that the Noticee, M/s Adept, Gomti Nagar, Lucknow, a partnership firm, registered with the department under the provisions of service tax entered into an agreement with their service recipient, M/s VION Networks Limited for providing "Diesel Filling Services" for generators installed at telecom towers. During....
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....ice recipient. Further, the O&M services, Diesel Filing Services as well as supply of diesel were all limbs of same taxable service i.e. Operation and maintenance of Telecom Tower Sites and by excluding the value of Reimbursement for supply of diesel, the Noticee undervalued the output services provided by them and accordingly applicable service tax is liable to be recovered from the Noticee 6.3. The Noticee has contested the demand of service tax during the material period. The main contention is that cost of diesel is not the part of service and the same is paid on the actual basis. The Noticee's contention is that the responsibility of supply of diesel is separate from the Diesel Filling Services and cost of diesel does not form part of the service provided. Supply of Diesel has no relation with output service of operation and maintenance provided by the Noticee and it is a distinct supply. The Noticee also contended that TDS under the provisions of Income Tax Act, 1961 has been deducted by the service recipient on the services of contractual nature like O&M and diesel filling but no TDS under Income Tax Act, 1961 has been deducted on cost of diesel paid / reimburse....
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....sis of discussion above, I find that the following issues are pending before me for consideration and decision in the present case: Whether the Service Tax amounting to Rs.5,13,91,838/- as demanded in the impugned Show cause Notice is liable to be confirmed in the instant case? (i) Whether, the extended period provisions as provided under Section 73(1) of the Act, are invokable for demand of the Service Tax, alleged to have been short paid? (ii) Whether, the Noticee are liable for payment of interest, in terms of Section 75 of the Act, on the Service Tax, alleged not to have been paid? (iv) Whether the Noticee are liable for penal action under section 78(1) of the Finance Act, 1994 for willful suppression of facts with intent to evade payment of Service Tax? (v) Whether the Noticee are liable for penal action under section 76(1) of the Finance Act, 1994 and whether penalties under Section 76 & Section 78 of the Finance Act, 1994 are imposable simultaneously? I take up these issues one by one as under:- 6.5. first set out to consider the issue listed at paragraph 6.4 () above relating to the demand of Service Tax of Rs.5,13,91,838/- I note that basically, the Party is under....
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.... in the DG sets and rental charges for mobile DG sets arranged by the Party in case of malfunctioning of DG Sets installed at the sites. On the basis of these facts, it has been alleged in the Show cause Notice that the Party was required to pay the Service Tax on entire consideration received by them, including diesel charges which has been termed as reimbursement of diesel. 6.9. On the contrary the Party has contested that the firm is registered with the Service Tax department having Service Tax Registration No. AAQFA8925SD001. They are providing services of operation and maintenance of telecom towers. They received and paid Service Tax on service charges for operation and maintenance of tower. They have also stated that they have also supplied diesel to be filled in the DG Sets at different telecom tower sites which is an independent activity of service of operation and maintenance. They neither received nor paid Service Tax on supply of diesel as it has no relation to the output service provided by them. The supply of diesel is a distinct activity, as diesel is not used for providing operation and maintenance service. 6.10. They have also contended that as per....
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.... up sites/ locations owned/ acquired by VNL across India where telecom towers have been installed. Passive Telecom Infrastructure shall mean and include (but not limited to) towers shelter, DG sets, Air Conditioners, Electrical and civil work placed on the cell sites, owned, leased or otherwise acquired by VNL, which enables the operators to install their active telecom infrastructure at the cell sites. Service shall mean the operation and maintenance services to be performed by service provider including but not limited to supervision, telecom assistance and technical guidance related to the Passive Telecom Infrastructure under this agreement in accordance with SOW. Scope of work The scope of services going to be followed is a non-comprehensive. In this model, service provider has to undertake all the general maintenance activity as specified in responsibility matrix and service schedules including supervision/liasioning with the OEM'S for breakdown maintenance, corrective maintenance, preventive maintenance, routine checks of all Passive Infrastructure equipments at site, ensure uninterrupted power either from utility provider (EB) or from ....
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....go into the fuel tank. All diesel filling activity to be carried out during the day time as per the beat plan finalized between the Circle O&M team & Service Provider. Service Provider's representative will be responsible for maintenance of diesel log book with dual verification of Viom representative. The Service Provider has to make his own arrangement for filling diesel in sites & provide dedicated diesel filler. No subleting of Diesel Filling and Maintenance activity will be done by service provider. Further it is required hat diesel filling team will be rotated periodically and no diesel filling team will be in one cluster for more than 06 months. VNL has right to test the quality of diesel at any point in time. If required any external agency can be engaged by VNL to carry out the test on behalf of VNL. Quality of Diesel will be as per the specifications of Bureau of Indian Standards ("BIS"). Service provider has to provide daily diesel filling report site-wise in the mutually agreed format signed SPR of previous month should also be submitted with the current cycle invoices. Fortnightly diesel filling-debit notes w.r.t. fund provided for diesel....
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....conclusion that activity of filing of diesel and maintenance of DG sets is integral and essential for rendering the services of operation and maintenance of telecom towers and that the activity of diesel filling is in relation to operation and maintenance of telecom towers, I have to now examine if the value of diesel will form part of taxable value of service rendered by the party or not. 6.17. Provisions of Valuation of taxable services for charging Service Tax are contained in Section 67 of the Finance Act, 1994. It provides that in case the provision of service is for consideration of money, it be the gross amount charged by the service provider for such service provided or to be provided by him. The gross amount charged for the taxable service shall include any amount received towards the taxable service before, during or after provision of such service. It further provides that- 'consideration" includes. (i) any amount that is payable for the taxable services provided or to be provided; (ii) any reimbursable expenditure or cost incurred by the service provider and charged, in the course of providing or agreeing to provide a taxable service, exce....
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....ends to hold nor holds any title to the goods or services so procured or provided as pure agent of the recipient of service; (c) does not use such goods or services so procured; and (d) receives only the actual amount incurred to procure such goods or services Explanation 2. - For the removal of doubts, it is clarified that the value of the taxable service is the total amount of consideration consisting of all components of the taxable service and it is immaterial that the details of individual components of the total consideration is indicated separately in the invoice. (emphasis supplied) 6.19. I observe from the provisions of Section 67 of the Finance Act, 1994 read with Rule 5 Service Tax (Determination of Value) Rules, 2006 reproduced above, that the consideration includes any amount of expenditure or cost incurred by the service provider (may be reimbursable) charged, in the course of providing a taxable service. The conditions prescribed for exclusion of certain expenditure or cost has to satisfy the conditions prescribed in Rule 5 ibid. I observe from the facts involved in the present case that the Party is not acting as a pure agent of t....
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....pient is liable to be included in the taxable value. 6.21 I have also examined the CBEC Circular No.65/14/2003-ST dated 05.11.2003 relied upon by the Party in their defense. I do not find any reason for relying on the said circular in the facts and circumstances of the case. The said circular is in respect of advance payment of Service Tax and the adjustment thereof under Rule 6 of the Service Tax Rules, 1994, which obviously is not the subject matter in the present case. 6.22 I have also examined the decision of Hon'ble tribunal in the case of E.V. Mathai & Co. 2003 (157) ELT 101 (T) relied upon by the Party in their defense. I find that the case in the said decision was that of a C & F Agent. The dispute was regarding transportation cost for which a separate agreement was there. It was held by Hon'ble Tribunal that the said transportation cost is not in relation to activity of C& F Agent. However, in the instant case the consumption of diesel in DG sets installed as Passive Infrastructure elements at operation sites is essentially in relation to operation and maintenance of telecom towers. Thus, the said case law is not applicable in the said facts and c....
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....o be confirmed and recovered from the party." 4.3 We find that the issue involved in the matter is covered on all fours with decision rendered by CESTAT in case of Ganpati Associates [Final Order No.50686-50688/2019 dated 12.04.2019 in ST/51074 & 55554/2014]. Tribunal in this case was considering a similar issue with supply of similar services under a similar contract. Though this order is for the period prior to the amendments made in Section 67 in 2015 as consequence of the decision of the Hon'ble Delhi High Court in case of Intercontinental Consultants in our view the principles, enunciated in the said order are applicable to facts of the present case. After examination of the issue in terms of the provisions of law and the terms of agreement tribunal held as follow: "16. Section 67 of the Act deals with valuation of taxable services for charging service tax. Sub-section (1) and Explanation (a) are reproduced below: SECTION 67 (1) Subject to the provisions of this Chapter, where service tax is chargeable on any taxable service with reference to its value, then such value shall, (i) in a case where the provision of service is for a consideration in m....
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.... The clause in the normal agreement for the terms of payment is: "Payment Terms Monthly billing will be done and payment will be made within 10 days of submission of invoice, properly approved by technical for diesel filling you will raise bills after 7 days as per diesel consumption chart and the payment will be made within 10 days. For spares you will raise bills once a month which will be paid in consolidated list of spares with prices, which will be paid to vendor on monthly basis. DG rent will be paid extra @ Rs.1,150/- per day which will be claimed on monthly basis." 22. The normal scope of work/ services has also been provided in the agreement and is as follows: SCOPE OF WORK/SERVICES - A This contract will be applicable for six months (01 Aug - 09 to 31 Mar 10). Contract can be terminated with one month"s notice. The contract will be reviewed after three months and can be extended upto one year after mutual discussion and understanding based on performance. 1. The service provider shall provide round the clock (24x7) a) Operation b) Maintenance (Preventive and breakdown) c) Ensuring a more than 99.95% uptime to the equip....
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....quality issue at the time of buying from the Bharti nominated oil companies, they should immediately inform to local Bharti office, Bharti shall not allow any adulteration at any cost from the origin to site. To ensure the quality of diesel, vendor may procure necessary tools, to verify the purity of the diesel and standard ISI approved measuring pot and shall keep the tools on the diesel filling vehicle itself. The DG tank capacity may be measured and highlighted in the MIS- report for the reference. Adulteration and Contamination may be investigated prior to cleaning of tank under intimation to Bharti O&M Manager and CTO. Service provider shall submit record of HR meter/ GCU/ PIU reading for cumulative DG run hours as prescribed format of each month for comparison with OMCR readings and verification of his monthly bill (as per the defined format). No subletting of the contract, in any form, will be done by the "service provider under any circumstances without proper written permission of the customer." 24. Clause 33 of the agreement relates to payment process for diesel and is as follows: 33. Payment process for Diesel: Servic....
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....000/- is towards filling of diesel at 125 sites. For the same month, the appellant also issued a reimbursement document claiming Rs.49,95,668/- towards the value of diesel. The Department seeks to levy service tax on the value of diesel as according to it, diesel is used by the appellants as an input for providing Management, Maintenance and Repair Services. The impugned orders also hold that diesel is an input used for provision of the services and, accordingly, the value of diesel procured by the Appellant has been included in the total taxable value of service. 27. The submission of learned Counsel for the Appellants is that the amount received towards reimbursement of diesel cost cannot be treated as a consideration for provision of service in terms of Section 67 of the Act. This Section deals with valuation of taxable services for charging service tax. Sub-section (1) of Section 67 provides that where service tax is chargeable on any taxable service with reference to its value, then such value shall where the provision of service is for a consideration in money, be the gross amount charged by the service provider for such service provided or to be provided by the serv....
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....nsidered as the gross amount charged by the service provider "for such service" provided by him. The Supreme Court noticed the various reimbursable claims which were included in the gross value and in respect of certain Appeals, the value of diesel supplied free of cost by the service recipient was also considered. The Supreme Court noted that Rule 5 does bring within its sweep the expenses which are incurred while rendering the service and are reimbursed and, therefore, what was required to be decided was whether Section 67 of the Act permits subordinate legislation to be enacted as done by Rule 5. It needs to be noted that prior to 19 April, 2006, in the absence of a Rule, the valuation was required to be done as per the provisions of Section 67 of the Act. The Supreme Court noticed that the charging Section 66 provides that there shall be levied service tax @ 12% of the value of taxable services referred to in the sub-clauses of Section 65 and collected in such manner as may be prescribed. Thus, the service tax is on the "value of taxable services" and, therefore, it is the value of the services which are actually rendered which has to be ascertained for the purpose of calculati....
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.... the value on which service tax is payable has to satisfy the following ingredients: a. Service tax is payable on the gross amount charged:- the words "gross amount" only refers to the entire contract value between the service provider and the service recipient. The word "gross" is only meant to indicate that it is the total amount charged without deduction of any expenses. Merely by use of the word "gross" the Department does not get any jurisdiction to go beyond the contract value to arrive at the value of taxable services. Further, by the use of the word "charged", it is clear that the same refers to the amount billed by the service provider to the service receiver. Therefore, in terms of Section 67, unless an amount is charged by the service provider to the service recipient, it does not enter into the equation for determining the value on which service tax is payable. b. The amount charged should be for "for such service provided": Section 67 clearly indicates that the gross amount charged by the service provider has to be for the service provided. Therefore, it is not any amount charged which can become the basis of value on which service tax becomes payable but the amount ch....
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....s stage that Explanation (c) to subsection (4) was relied upon by the learned counsel for the Revenue to buttress the stand taken by the Revenue and we again reproduce the said Explanation herein below in order to understand the contention: (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." 15. It was argued that payment received in 'any form' and 'any amount credited or debited, as the case may be...' is to be included for the purposes of arriving at gross amount charges and is leviable to pay service tax. On that basis, it was sought to argue that the value of goods/materials supplied free is a form of payment and, therefore, should be added. We fail to understand the logic behind the aforesaid argument. A plain reading of Explanation (c) which makes the 'gr....
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....between the service provider and the service recipient has no relevance in the determination of the value of taxable services provided by the service provider." (emphasis supplied) 30. The finding recorded in the impugned order that the cost of diesel which is reimbursed has to be included in the gross amount charged by the service provider has to be examined in the light of the aforesaid two decisions of the Supreme Court in Intercontinental and Bhayana Builders. As noted above, the appellants were required to perform various services including diesel filing. It needs to be remembered that the scope of this service was limited to the activity of "filling" the diesel in DG sets for which the appellants were paid service fee of Rs.500/- or Rs.750/- per site. The diesel was to be procured from the filling stations authorised by the service recipients and the value of diesel was paid to the appellants only upon appropriate verification. The value of diesel was in the nature of reimbursement. The appellants had paid service tax on the element of service involved in "filling of diesel" and by no stretch of imagination it can be urged that any "service" was rendered by the appel....