TaxTMI 
TaxTMI 
2024 (8) TMI 14
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....acts culminating into these appeals are as follows:- The appellant is registered for discharging service tax liability for rendering 'Consulting Engineer Services'. During the course of audit of appellant's record by Internal Audit Branch of Central Excise Commissionerate, Bhopal, the department observed that the appellant is providing the said services to National Highway Authority of India (herein after referred as NHAI), but had not filed the ST-3 Returns for the year 2013-14. The invoices issued during the said year were therefore checked and it was observed that the appellant has charged amount in Indian Rupees as well as in US dollars from their clients in lieu of rendering 'Consulting Engineer Services'. The invoices were showing basic amount, grossing up amount and certain other elements. However, the appellant had discharged service tax only on the partial amount received by them. The correct 'Invoice Value' for the services provided was not shown in their ST-3 returns nor in their balance sheets despite that, w.e.f. 01.04.2011, service tax is payable on accrual basis. Since the service tax was not paid on grossed up amount, the appellant was alleged to have short paid se....
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....13 and 2013-14 2.4 Show cause No. 95/2015-16 dated 17.03.2016 has proposed DEMAND as follows:- (i) Service Tax of Rs. 45,35,673/- for the period 2014-15 (ii) Service tax amounting to Rs. 34,964/- (iii) the interest at applicable rate on the amount of service tax so confirmed (iv) the penalty under section 76, 77 and 78 of the Finance Act 1994 (v) the amount of 1,44,638/- as was already deposited by the appellant on 24.08.2015 was proposed to be appropriated. (vi) service tax amounting to Rs. 33,946/- on rent a cab service received by the appellant during the financial year, 2014-15 2.5 On the same set of facts and circumstances, In Appeal No. ST/52279/2018, SCN dated 28.03.2017 following demand was proposed. (i) Service Tax short paid on gross amount to the tune of Rs. 16,40,150/- (ii) Late fee of Rs. 21,300/- for delay in filing returns (iii) For Rent-a-Cab Service an amount of Rs. 12,708/- under Reverse Charge Mechanism. 2.6. Both the show cause notices have been adjudicated vide order-in-original No. 36-37 dated 28.03.2017 and the said proposal has been confirmed. Appeal against the said order has been dismissed vide the order under challenge (as mentioned i....
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....ant has regularly discharged its liability. The Department has wrongly considered the amount mentioned in the invoice as the taxable amount or gross amount. In terms of the impugned agreement between the parties, the invoice raised by appellant is nothing but a performa invoice. The appellant has impressed upon the sample itemized statement for the period in dispute and also upon 'Point of Taxation' Rules. It is submitted that the consideration for rendering the Consultant Engineers Services to NHAI is an amount paid by NHAI to the appellant. The amount proposed by the appellant to be recovered from NHAI since was subject to approval of NHAI it has wrongly been assumed as transaction value hence cannot be called as 'consideration' for the impugned service. The decision of Hon'ble Supreme Court in the case of Commissioner of Service Tax vs. Bhayana Builders Private Limited 2018 (10) GSTL 118 (S.C.) is relied upon. 6. While rebutting the submissions, on this issue, learned DR has mentioned that there cannot be an agreement contrary to law. In terms of Rule 5 (1) of Service Tax (Determination of Value) Rules, 2006, any expenditure or cost incurred by the service provider while provid....
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.... (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, except in such circumstances, and subject to such conditions, as may be prescribed; (iii) any amount retained by the lottery distributor or selling agent from gross sale amount of lottery ticket in addition to the fee or commission, if any, or, as the case may be, the discount received, that is to say, the difference in the face value of lottery ticket and the price at which the distributor or selling agent gets such ticket. (c) "gross amount charged" 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. On a reading of the above definition, it is clear that both prior and after ....
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..... 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. Thus, on first principle itself, a value which is not part of the contract 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." 10. Hon'ble Apex Court in the case Bhayana Builders (supra) has put at rest the interpretation of word 'consideration' and 'gross value' and as to what constitutes the taxable value. The observation relevant for present purpose is below:- "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 ....
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....'consideration' for a service. Any amount proposed to be charged by one person but is not agreed to be paid by the other person in lieu of services, will not be part of 'consideration'. A.10 It is pertinent to note that provision of 'service' is a contract in terms of Contract Act, 1872. Thus, the basic essential features of a valid contract have to be satisfied under a 'service' contract also. Consideration is the agreed amount which flows from the recipient to the provider of service. This principle applies to 'sale' contracts. The Hon'ble Supreme Court in the matter of Neywell Lignite Corporation Ltd. v. CTO 2001 (124) STC 586a (SC). 11. We also observe that Section 67 explanation (C) of Finance Act uses word 'gross amount charged' and dictionary meaning of word 'charge' is to be ask payment of (a person) i.e. to ask somebody to pay a particular amount of money. As per Mariam Webster dictionary 'to charge' is 'to set price'. Charge is a debit to an account. As per Cambridge dictionary 'Charge' is an amount of money for something especially a service or activity. The meaning of word charge clarifies that it is not an amount to be paid....
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....ailed to acknowledge as to how something can be recognized as 'income' in balance sheet, which was never supposed to be treated as receivable from NHAI. It is an admitted fact that the amount paid by NHAI also includes grossed up amount, amount withheld and the amounts of remunerations but only those which were duly supported by the respective document and were approved by NHAI. Hence, department reliance upon Rule 7 of valuation rules and upon the amendment w.e.f. 01.04.2011 is redundant. The department failed to acknowledge as to how something can be recognized as 'income' in balance sheet, which was never supposed to be treated as receivable from NHAI. 14. We also draw our support from the decision of Reliance Infratel Ltd. versus Commissioner of Central Excise, Thane - II reported as 2016 (42) S.T.R. 452 (Tri. - Mumbai), wherein it has been held as follows :- "To qualify as 'gross amount charged' there must first be a payment. It is this payment which must be in the nature of a consideration for the Service. The word 'consideration' has been defined in clause (a) of the explanation to Section 67 to include any amount that is payable for the taxable services provided or to be....
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....AI. Hence, the amount of TDS cannot be considered as appellant's income for the financial year 2014-15 and 2015-16. It is further mentioned that agreement between appellant and NHAI defines considerations as an amount 'exclusive of taxes'. As already discussed above that this is an inbuilt mechanism to ensure that only the taxable service shall be evaluated under the provisions of Section 67, that on construing the provisions of Sections 66 and 67(1) (i) together and harmoniously, it is clear that the value of taxable service shall be the gross amount charged by the service provider; and nothing more and nothing less than the consideration paid as a quid pro quo for the service can be brought to charge. The Court further held that the common thread that runs through Sections 66 and 67 and 94 (the Rule making power), manifests that only the service actually provided by the service provider can be valued and assessed to tαx. Hence TDS when it was not retained with the appellant, the amount of TDS was not liable to service tax. Learned Counsel referred to clause 12 of minutes of meeting between NHAI and appellant which are integral part of the agreement as mentioned in agreement....
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....gn currency as determined in accordance with 6.11 (a) of the General Conditions and Undertakings, and Rupees 11,45,77,300 in local currency (Exclusive of taxes). ... Clause 13. Miscellaneous : (a) ... (b) The General Conditions and Undertakings, and Appendices A to F and other documents attached hereto, which including this Agreement collectively constitute this Contract (as defined hereinabove) are each integral and substantive parts of this Contract and are fully binding on each of the parties hereto as of the effective date of this Contract." 20. It is further observed that as per the terms relating to the tax reimbursements (in the form of TDS) in the Contract, the TDS deposited by the NHAI for the payments made to the Appellant was to be refunded back in case the Appellant did not utilize that TDS for the payment of taxes on the underlying project. Agreement recites minutes of meeting to be the part and parcel of agreement between the parties herein. Clause 12 thereof recites as below:- "12. Taxes The Consultant was informed that as indicated in Para 5.8 and Data Sheet of Section 2 of RFP, the amounts payable by NHAI to the Consultant for the services shall be subje....
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....t may be required as per statutory requirements. The said firm of Chartered Accountants will also assess the relative advantage/disadvantage of making assessments either under withholding tax provisions or a regular assessment made in the normal course under the Indian Tax Laws and decide on the option which entails least cost to NHAI. The Consultant agreed that they will ensure that NHAI is subjected to a liability which will be least cost to NHAI. (v) NHAI will have the right but not the obligation to appoint another firm of Chartered Accountants, for reviewing the audit and assessment done by the auditors as narrated in Para (iv) above, as a concurrent auditor or otherwise. The cost for such an appointment of the Auditors shall be borne by the Consultant. However, any such cost required to be borne by the Consultant will not exceed the cost incurred/to be incurred by the Consultant for the appointment of the firm of Chartered Accountants as specified in Para (iv) above". 21. We also observe, it as apparent from copy of certified computation for the period 2013-2014 and 2014-2015 that with reference to the period under consideration, the Appellant incurred losses in the years ....
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....the statutory obligation. The situation would be different if the TDS is deducted from the actual consideration and is not borne by the Indian counterpart. When the foreign counterpart does not agree to forego the TDS portion from the consideration agreed, then it becomes legally incumbent upon the appellant to gross up the value as under Section 195A". CESTAT, Chennai also in the case title as TVS Motor Company Ltd. versus Commissioner of Central Excise, Service Tax, Chennai - III Commissionerate reported as 2021 (55) G.S.T.L. 459 has held as follows :- "14.3.3 The above application establishes that if the appellants fail to deduct the tax at source and remit the same to the Government, they would be subject to provisions of penalty under the Income-tax Act, 1961. Thus, activity of deducting tax at source is an obligation under the statute. When the TDS is grossed up and borne by the assessee and the service provider receives only the actual consideration agreed between parties, in our view, the TDS amount cannot be included in the taxable value. In this case also there was an agreement between service provider and the recipient thereof to the effect that "the payments are to ....
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....g the amount of TDS are, therefore, not sustainable. The findings on both these issues are sufficient to held that the findings of Commissioner (Appeals) specifically in Para 9 thereof are not sustainable and are liable to be set-aside. Third Issue: Denial of Cenvat credit alleging it to have been availed without documents 25. Learned counsel for the appellant has mentioned that the allegations are vague & baseless and that the finding arrived at by original adjudicating authority are grossly arbitrary. Invoices and ledgers of Cenvat credit were duly supplied to the department at the time of audit and later while replying to the show cause notice vide their letter dated 25.01.2017. The credit has been denied also for the reason that the Cenvat register is not maintained in the prescribed format. It is impressed upon that there is no provision which mandates or even prescribed any specific format for the purpose. The Cenvat credit is admissible on the strength of invoices. Otherwise also it is impressed as a revenue neutral situation. The findings are therefore prayed to be set aside. 26. Learned departmental representative on the other hand has submitted that concept of revenue....
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....ppellant held to be liable to be set aside. Even the allegation that the invoices are just performa invoices has no relevance. Rule 9 (6) of CCR, 2004 has also been wrongly involved as it just mandate maintenance of records, that too not of invoices, but for receipt and consumption of input services. Similarly, Rule 9 (9) of CCR, 2004 talks about filing of half yearly return in a format duly specified by a notification. It also do not talk about any specific format for invoices. We further observe that Cenvat credit has been denied also for the reasons that the documents were not provided by the appellant. But it is on record that invoices and ledges of Cenvat credit were supplied to department on 25.01.2017 and were even provided during audit. The show cause notice could not have so mathematical details had the documents would not been provided. Forth Issue: The liability of appellant to pay service tax under reverse charge mechanism for receiving legal consultancy and rent a cab services Learned counsel for the appellant has submitted that the entire demand on this count is for the extended period of limitation. Since there is no suppression of facts on the part of the appella....
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.... appellant's liability under RCM to pay service tax for receiving legal consultancy and Rent-a-cab services. Fifth Issue: Invocation of extended period of limitation : 30. Learned counsel has reiterated the submissions that the appellant were discharging their service tax liability as per the agreement between the appellant and their service recipient. The said arrangement was statutory permissible. There was never any intention to evade any service tax. The generic statement that appellant has willfully suppressed the facts is not sufficient for invoking the extended period. The show cause notice is prayed to be set aside being barred by limitation. Learned counsel has relied upon the decision in the case of International Merchandise Company LLC versus Commissioner of Service Tax as decided by Hon'ble Supreme Court in a civil appeal No. 3532-3536 of 2020 decided on 1st November, 2022. Reliance is placed upon the decision in the case of Punjab Technical University versus Commissioner of C.E. & S.T., Ludhiana reported as 2016 (42) S.T.R. 474 (Tri. - Del.). 31. To rebut these submissions, learned departmental representative has mentioned that appellant has failed to declared the ....
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....ons about suppression of facts are not sufficient to invoke the extended period of limitation. The Hon'ble Supreme Court in the case of Padmini Products versus Commissioner of Central Excise, Bangalore reported as 1989 (4) SCC (275) has held that extended period of limitation will not be attracted when the appellant has not acted with dishonest or fraudulent intent. With respect to invocation of amount of TDS since there is a scope of entertaining a doubt about the view to be taken the extended period of limitation cannot be invoked. We also draw our support from the decision of Hon'ble Supreme Court in the case of Continental Foundation Jt. Venture versus Commissioner of Central Excise, Chandigarh - I reported as 2007 (216) E.L.T. 177 (S.C.). We also draw our support from another decision of Hon'ble Supreme Court in the case of Uniworth Textile Ltd. Versus CCE, Raipur reported as 2013 (288) E.L.T. 161 (S.C.) where the Hon'ble Supreme Court has distinguished between mere default for which normal period of limitation is attracted and the circumstances for invoking the extended period. It has been held that "mere non-payment of duties is not equivalent to collusion or willful suppres....