TaxTMI 
TaxTMI 
TaxTMI 
2025 (11) TMI 1024
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....lty. 2. Brief facts are that the appellant is registered with the department for providing Clearing and Forwarding Agents services (C & F Agent). During the course of Audit, it was noticed by the Department that the Appellant apart from collecting service charges for the service it provided, also had incurred certain expenditures towards providing the taxable services which stood reimbursed by the respective clients. It was seen that the appellant had excluded the said charges and did not pay service tax on the same claiming that the said charges being reimbursable expenditure, are not leviable to tax. 3. The Department was of the view that as per section 67(1) of the Act, where the provision of service is for a consideration in money, the taxable value of service is the gross amount charged by the service provider for providing service and according to Rule 5(1) of the Service Tax (Determination of Value) Rules, 2006 (Valuation Rules in short), expenditure or cost incurred by the service provider in the course of providing taxable service shall be treated as consideration for the taxable service and is includible in the taxable value. 4. The Department was of the opinion ....
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....oviding these services. It is submitted that while providing C & F services the appellant has excluded certain reimbursable charges, while computing the value of taxable income, as these were not part of consideration received for providing services. These expenses are reimbursed by the client on actuals. The learned counsel submits that only the service charges received as consideration for the services provided or to be provided would form part of the taxable value for the purposes of service tax and reimbursements are not liable to tax. 7. The learned counsel submits that the Honourable Supreme Court has in the case of UOI v Intercontinental Consultants and Technocrats Pvt Ltd, reported in (2018) TIOL 76-SC-ST : 2018 (10) GSTL 401 (SC), affirmed the decision of the Delhi High Court wherein Rule 5(1) of the Service Tax Valuation Rules, 2006 which provided for inclusion of expenditures or costs incurred by the service provider in the course of providing taxable services, in the value of such taxable services, was stuck down as ultra vires Section 66 and Section 67 of the Act and as travelling beyond the scope of the said sections. The Ld. Counsel stated that the issue is settle....
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....hat in connected appeals before it, and has gone on to hold as under: "21. Undoubtedly, Rule 5 of the Rules, 2006 brings within its sweep the expenses which are incurred while rendering the service and are reimbursed, that is, for which the service receiver has made the payments to the assessees. As per these Rules, these reimbursable expenses also form part of 'gross amount charged'. Therefore, the core issue is as to whether Section 67 of the Act permits the subordinate legislation to be enacted in the said manner, as done by Rule 5. As noted above, prior to April 19, 2006, i.e., in the absence of any such Rule, the valuation was to be done as per the provisions of Section 67 of the Act. 22. Section 66 of the Act is the charging Section which reads as under: "there shall be levy of tax (hereinafter referred to as the service tax) @ 12% of the value of taxable services referred to in sub-clauses of Section 65 and collected in such manner as may be prescribed." 23. Obviously, this Section refers to service tax, i.e., in respect of those services which are taxable and specifically referred to in various sub-clauses of Section 65. Further, it also ....
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....mity with the statute in order to give effect to the statutory provision the Rule or bye-law has to be ignored. The statutory provision has precedence and must be complied with." 27. The aforesaid principle is reiterated in Chenniappa Mudaliar holding that a rule which comes in conflict with the main enactment has to give way to the provisions of the Act. 28. It is also well established principle that Rules are framed for achieving the purpose behind the provisions of the Act, as held in Taj Mahal Hotel : "the Rules were meant only for the purpose of carrying out the provisions of the Act and they could not take away what was conferred by the Act or whittle down its effect." 29. In the present case, the aforesaid view gets strengthened from the manner in which the Legislature itself acted. Realising that Section 67, dealing with valuation of taxable services, does not include reimbursable expenses for providing such service, the Legislature amended by Finance Act, 2015 with effect from May 14, 2015, whereby Clause (a) which deals with 'consideration' is suitably amended to include reimbursable expenditure or cost incurred by the service provider ....
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....is principle of law is known as lex prospicit non respicit : law looks forward not backward. As was observed in Phillips v. Eyre [(1870) LR 6 QB 1], a retrospective legislation is contrary to the general principle that legislation by which the conduct of mankind is to be regulated when introduced for the first time to deal with future acts ought not to change the character of past transactions carried on upon the faith of the then existing law. 29. The obvious basis of the principle against retrospectivity is the principle of "fairness", which must be the basis of every legal rule as was observed in L'Office Cherifien des Phosphates v. Yamashita-Shinnihon Steamship Co. Ltd. Thus, legislations which modified accrued rights or which impose obligations or impose new duties or attach a new disability have to be treated as prospective unless the legislative intent is clearly to give the enactment a retrospective effect; unless the legislation is for purpose of supplying an obvious omission in a former legislation or to explain a former legislation. We need not note the cornucopia of case law available on the subject because aforesaid legal position clearly emerges from the ....