2026 (4) TMI 3

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....Services Pvt. Ltd., 203, Hem Plaza, Frazer Road, Patna - 800 001 (hereinafter referred to as the "appellant") is engaged in providing Manpower Recruitment, Security and allied services. The appellant is registered under Service Tax. 2.1. Two Show Cause Notices were issued to the appellant by invoking extended period of limitation. One Show Cause Notice dated 07.10.2010 was issued covering the period from 2005-06 to 2008-09 and another Show Cause Notice dated 11.07.2011 was issued covering the period from 2008-09 to 2009-10. 2.2. Thereafter, the Order-in-Original No. 1819/ST/Aayukt/2100 dated 09.12.2011 (the first adjudication order) confirmed the demand(s) raised in the Notices. On the appellant's earlier appeal, CESTAT, Kolkata vide Order dated 02.05.2024 set aside the said order and remanded the matter for a decision. Accordingly, personal hearing was held on 14.08.2024. 2.3. On de novo adjudication, the ld. adjudicating authority again confirmed the entire demand vide the impugned Order-in-Original dated 12.09.2024. The appellant has filed the appeal before this Tribunal challenging the said Order-in-Original. 3. During the course of hearing, the Ld. Counsel appe....

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....irectorate of Horticulture, the Appellant was paid a fixed service charge (on which Service Tax was duly paid) and a separate, identifiable amount representing wages of field consultants as fixed by the service recipient. The wage component was a reimbursable expenditure and not service charge. * The Directorate of Horticulture, Patna itself confirmed vide letter dated 23.12.2009 that out of total payment of Rs. 75,22,482/- Rs. 72,34,361/- was earmarked toward wages of field consultants and only Rs. 2,88,121/- was the service charge to the Appellant. The Adjudicating Authority ignored this contemporaneous government document entirely. * The Hon'ble Supreme Court in Union of India vs. Intercontinental Consultants & Technocrats Pvt. Ltd. 2018 (10) G.S.T.L. 401 (S.C.) has categorically held that valuation of taxable service under Section 67 of Finance Act, 1994 can only include the gross amount charged for 'such taxable service' and nothing more. Reimbursements cannot be included. * The Ld. adjudicating authority's finding that wages cannot be reimbursement because an employer-employee relationship exists between service provider and manpower....

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....that diesel was actually supplied under a separate contract. 5.1. Thus, the appellant submits that the alue of diesel supplied under independent work orders is exempt from Service Tax and the demand on this count for 2005-06 to 2007-08 is liable to be quashed. 6. The appellant also submits that they have provided earth-filling/soil supply services to M/s Reliance Infocomm Engineering Pvt. Ltd. for preparation of BTS tower sites, which does not fall within the taxable category of 'Site Formation and Clearance, Excavation and Earthmoving and Demolition Services' as defined under Section 65(97a) of the Finance Act, 1994; that thus, the Service Tax demand for Financial Year 200809 on this count is not sustainable. In this regard, the appellant made the following submissions: * The task of the appellant was strictly and solely to procure and unload specified quantities of soil (measured in cubic feet) at designated sites as per the work order. The appellant had no role in levelling, stabilisation, or any further activity. The remaining work was performed by other agencies appointed by the service recipient. * Section 65(97a) of the Finance Act, 1994 defin....

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....allowing the present appeal. 9. On the other hand, the Ld. Authorized Representative of the Revenue has reiterated the findings in the impugned order. 10. Heard both sides and perused the records of the case. Service Tax on Manpower Supply to Directorate of Horticulture (Reimbursable Wages) 11. In respect of the demand raised and confirmed on the reimbursement of wages received by the appellant for supplying Field Consultants to the Directorate of Horticulture, Patna for the FY 2008-09 & 2009-10, it is observed from the records that as per the Work Order with Directorate of Horticulture, the appellant was paid a fixed service charge on which Service Tax was duly paid by the appellant. We find that the Work Order indicates a separate identifiable amount representing wages of field consultants as fixed by the service recipient. It is pertinent to note that wage component is a reimbursable expenditure and not a service charge. We find that the Directorate of Horticulture, Patna itself confirmed vide letter dated 23.12.2009 that out of total payment of Rs. 75,22,482/- Rs. 72,34,361/- was earmarked toward wages of field consultants. Thus, it is evident that only Rs.2,88,121/....

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....f diesel at specified rates. We find that these were entirely separate contracts and hence the same must be treated independently. Supply of diesel is supply of goods and cannot be clubbed with the provision of security services. The two transactions operated under distinct work orders with separately identified rates and quantities (diesel measured in specified units). In support of this, we refer Notification No. 12/2003-ST dated 20.06.2003 which specifically exempts from Service Tax so much of the value of taxable services as is equal to the value of goods and materials sold by the service provider to the recipient, subject to documentary proof. We find that the Appellant has maintained and produced invoices and work orders clearly demarcating the diesel supply component. The Hon'ble Allahabad High Court in the case of Commissioner of Central Excise, Agra vs. Goverdhan Transformer Udyog Pvt. Ltd. [2015 (37) S.T.R. 161 (All.)] has held that where the value of goods and services are separately disclosed in the contract/invoices, Service Tax cannot be levied on the goods component. Thus, by relying on the ratio of the decision cited supra, we hold that the value of diesel suppl....

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....nd Earthmoving and Demolition Services' as defined under Section 65(97a) of the Finance Act, 1994 and hence we set aside the demand confirmed in the impugned order on this count. 14. We also observe that the demand in the present case has been raised on the allegation that the appellant has suppressed the taxable value by showing a lower figure in ST-3 Returns compared to the gross income as per Audited Balance Sheet, resulting in short payment of Service Tax. In this regard, we observe that during the period under dispute, Service Tax was payable on actual receipt of consideration, whereas books of accounts and Balance Sheet are maintained on accrual basis. Thus, it follows therefrom that the two figures cannot match by their very nature and any comparison is inherently flawed. We find that the gross amount in the Balance Sheet also includes 'reimbursable expenses' such as the cost of diesel supplied to clients. Such reimbursements do not form part of taxable value. It is a settled principle of law that Service Tax can be levied only upon clear identification of service provider, service recipient and consideration paid. Demand cannot be raised merely on the basis o....

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2026 (4) TMI 3