TaxTMI 
TaxTMI 
2024 (11) TMI 346
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....part and partial of the gross value of the service in terms of Rule 5(1) of Service Tax Determination of Value Rules, 2006. Accordingly, the demand of service tax was confirmed on such expenditure. Being aggrieved by the said demand the appellant filed the present appeal. 2. Shri Vikas Agarwal, Learned Chartered Accountant appearing on behalf of the appellant at the outside submits that there is no dispute that out of the contract value the part of the value was unbilled which was not charged to the service recipient. As per Section 67, only the amount which is charged for the provision of service shall be taxable. Therefore, neither the part of the service was provided nor it was billed. Hence, the same was not charged to the service recipient, therefore, the same is not taxable. 2.1 He further submits that even the provision of expenditure made but the same has been written off subsequently, for this reason also when any amount towards service does not exist, the same cannot be charged service tax. 2.2 He submits that in the various following judgments including the judgment of Hon'ble Gujarat High Court in their own case, the issue has been settled and the same is no lo....
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....Linde Engineering India Pvt. Ltd and others Vs, Union of India and others 2024 (7) TMI 384 Gujarat High Court wherein the Hon'ble High Court has passed the following order:- "[10] Having heard the learned advocates for the respective parties and having considered the facts of the case and the contents of the show cause notice, it is not in dispute that the show cause notice refers to differential value or amount of taxable service of Rs. 165,82,77,786/- pertaining to unbilled revenue of expenses or additional expenses incurred by the petitioner - assessee which was treated as part of consideration as per Rule 5 and Rule 2 (c) of the Rules read with Section 67 of the Finance Act, 1994. [11] The Hon'ble Supreme Court. in the case of Intercontinental Consultants and Technocrates Pvt Ltd (supra), referring to the provisions of Rule 5 of the Rules 2006, Rule 2(c) of the Rules, 2006 and Section 67 of the Finance Act, 1994, has held as under: "6. Rule 5 was brought into existence w.e.f. June 1, 2007. The demand which was made in the show cause notice was covered by the period from October, 2002 to March, 2007. Against this show cause notice, the respondent prefe....
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....of service; • the service provider recovers from the recipient of service only such amount as has been paid by him to the third party; and  the goods or services procured by the service provider from the third party as a pure agent of the recipient of service are in addition to the services he provides on his own account. Explanation 1 : For the purposes of sub rule (2), "pure agent" means a person who - • enters into a contractual agreement with the recipient of service to act as his pure agent to incur expenditure or costs in the course of providing taxable service; • neither intends to hold nor holds any title to the goods or services so procured or provided as pure agent of the recipient of service; • does not use such goods or services so procured; and • 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 co....
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....curred by the chauffeur and billed to the recipient of service constitutes part of gross amount charged for the provision of services by the company X." 8. The case set up by the respondent in the writ petition was that Rule 5 (1) of the Rules, which provides that all expenditure or cost incurred by the service provider in the course of providing the taxable services shall be treated as consideration for the taxable services and shall be included in the value for the purpose of charging service tax, goes beyond the mandate of Section 67. It was argued that Section 67 which deals with valuation of taxable services for charging service tax does not provide for inclusion of the aforesaid expenditure or cost incurred while providing the services as they cannot be treated as element/components of service. Section 67 was amended by Finance Act, 2006 w.e.f. May 1, 2006. Since the cases before us involve period prior to the aforesaid amendment as well as post amendment period, it would apt to take note of both unamended and amended provisions. Unamended Section 67 was in the following form: ""67. Valuation of taxable services for charging service tax. For the pur....
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....e course of providing erection, commissioning or installation service; and (viii) interest on loan. Explanation 2 - Where the gross amount charged by a service provider is inclusive of service tax payable, the value of taxable service shall be such amount as with the addition of tax payable, is equal to the gross amount charged. Explanation 3. For the removal of doubts, it is hereby declared that 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." 9. After its amendment w.e.f. May 1, 2006, a much shorter version was introduced which reads as under: "67. Valuation of taxable services for charging service tax. (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 money, be the gross amount charged by the service provider for such service provided or to be provided by him; (ii) in a case where the provision of service is for a considerat....
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....ervice i.e. the value of service rendered by the assessee to the NHAI, which is that of a consulting engineer, that can be brought to charge and nothing more. The quantification of the value of the service can, therefore, never exceed the gross amount charged by the service provider for the service provided by him. On that analogy, the High Court has opined that scope of Rule 5 goes beyond the Section which was impermissible as the Rules which have been made under Section 94 of the Act can only be made 'for carrying out the provisions of this Chapter' (Chapter V of the Act) which provides for levy quantification and collection of the service tax. In the process, the High Court observed that the expenditure or cost incurred by the service provider in the course of providing the taxable service can never be considered as the gross amount charged by the service provider 'for such service' provided by him, and illustration 3 given below the Rule which included the value of such services was a clear example of breaching the boundaries of Section 67. The High Court even went on to hold further pointed out that it may even result in double taxation inasmuch as expenses on air tra....
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....erence to the value of service. As a necessary corollary, it is the value of the services which are actually rendered, the value whereof is to be ascertained for the purpose of calculating the service tax payable thereupon. 24. In this hue, the expression 'such' occurring in Section 67 of the Act assumes importance. In other words, valuation of taxable services for charging service tax, the authorities are to find what is the gross amount charged for providing 'such' taxable services. As a fortiori, any other amount which is calculated not for providing such taxable service cannot a part of that valuation as that amount is not calculated for providing such 'taxable service'. That according to us is the plain meaning which is to be attached to Section 67 (unamended, i.e., prior to May 1, 2006) or after its amendment, with effect from, May 1, 2006. Once this interpretation is to be given to Section 67, it hardly needs to be emphasised that Rule 5 of the Rules went much beyond the mandate of Section 67. We, therefore, find that High Court was right in interpreting Sections 66 and 67 to say that in the valuation of taxable service, the value of taxable service shall be the gro....
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....2015, by virtue of provisions of Section 67 itself, such reimbursable expenditure or cost would also form part of valuation of taxable services for charging service tax. Though, it was not argued by the learned counsel for the Department that Section 67 is a declaratory provision, nor could it be argued so, as we find that this is a substantive change brought about with the amendment to Section 67 and, therefore, has to be prospective in nature. On this aspect of the matter, we may usefully refer to the Constitution Bench judgment in the case of Commissioner of Income Tax (Central)-I, New Delhi v. Vatika Township Private Limited [(2015) 1 SCC 1] wherein it was observed as under: "27. A legislation, be it a statutory Act or a statutory rule or a statutory notification, may physically consists of words printed on papers. However, conceptually it is a great deal more than an ordinary prose. There is a special peculiarity in the mode of verbal communication by a legislation. A legislation is not just a series of statements, such as one finds in a work of fiction/non-fiction or even in a judgment of a court of law. There is a technique required to draft a legislation as well as....