TaxTMI 
TaxTMI 
2026 (6) TMI 1233
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....ard to the controversy in narrow compass, with the consent of learned advocates appearing for the respective parties, the matter is taken up for final hearing. 4. By way of present petition, the petitioners herein have prayed for the following reliefs: "a) This Hon'ble Court may be pleased to issue a writ of mandamus or a writ in the nature of mandamus or any other appropriate writ, order or direction quashing the Show Cause Notice (F.No. V ST(Adj.)11/Linde/Commr-I/2017-18/II) dated 31.10.2017 issued by the Respondent No. 3 to the Petitioner No. 1; b) Pending the present petition, this Hon'ble Court may be pleased to stay further proceedings against the Petitioner No. 1 pursuant to the Show Cause Notice (F.No.V ST(Adj.)11/Linde/Commr-I/2017-18/II) dated 31.10.2017 issued by the Respondent No. 3 to the Petitioner No. 1; c) Ex-parte ad-interim relief in terms of prayer (C) may kingly be granted d) Such other and further reliefs as may be deemed appropriate by this Hon'ble Court." 5. Brief facts leading to the filing of the present petition read thus: 5.1 The petitioner No. 1 herein is engaged in the business of providing taxable output ser....
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.... Court in case of Union of India Vs. Intercontinental Consultants & Technocrats Pvt. Ltd., reported in 2018 10 GSTL 401(SC). It is submitted that the amendment carried out in Section 67 of the Act to broaden its scope to include Rule 5(1) of the Rules w.e.f. 14.05.2015, is applicable only prospectively and therefore, during the period under question, the reliance placed on Rule 5(1) of the Rules is wholly misconceived, more particularly, when the same has been struck down. Even otherwise, in the facts of the present case, the impugned show cause notice travels beyond the scope of Rule 5(1) of the Rules, 2006. Reliance is placed on the order passed in Special Civil Application No. 19341 of 2018 wherein, the show cause notice is held to be untenable in eye of law and without jurisdiction, in light of the decision rendered by the Hon'ble Apex Court in case of Intercontinental Consultants & Technocrats Pvt. Ltd. (Supra). 7. Mr. Ankit Shah, learned Senior Standing Counsel appearing for the respondent No. 3 is not in a position to dispute the aforesaid factual position. 8. We have heard the learned advocates appearing for the respective parties at length. In the facts of the presen....
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....e said service. (2) Subject to the provisions of sub rule (1), the expenditure or costs incurred by the service provider as a pure agent of the recipient of service, shall be excluded from the value of the taxable service if all the following conditions are satisfied, namely: • the service provider acts as a pure agent of the recipient of service when he makes payment to third party for the goods or services procured; • the recipient of service receives and uses the goods or services so procured by the service provider in his capacity as pure agent of the recipient of service; • the recipient of service is liable to make payment to the third party; • the recipient of service authorities the service provider to make payment on his behalf; • the recipient of service knows that the goods  and services for which payment has been made by the service provider shall be provided by the third party; • the payment made by the service provider on behalf of the recipient of service has been separately indicated in the invoice issued by the service provider to the recipient of service; ....
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....e indicated separately in the invoice issued by the service provider to the recipient of service. Illustration 3: A contracts with B, an architect for building a house. During the course of providing the taxable service, B incurs expenses such as telephone charges, air travel tickets, hotel accommodation, etc., to enable him to effectively perform the provision of services to A. In such a case, in whatever form B recovers such expenditure from A, whether as a separately itemised expense or as part of an inclusive overall fee, service tax is payable on the total amount charged by B. Value of the taxable service for charging service tax is what A pays to B. Illustration 4: Company X provides a taxable service of rent cab by providing chauffeur driven cars for overseas visitors. The chauffeur is given a lump sum amount to cover his food and overnight accommodation and any other incidental expenses such as parking fees by the Company X during the tour. At the end of the tour, the chauffeur returns the balance of the amount with a statement of his expenses and the relevant bills. Company X charges these amounts from the recipients of service. The cost incurred by the c....
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....anufactured by such manufacturer; and (g) the commission or any amount received by the rail travel agent from the Railways or the customer. But does not include - (i) initial deposit made by the subscriber at the time of application for telephone connection or pager or facsimile (FAX) or telephone or telex or for leased circuit; (ii) the cost of unexposed photography film, unrecorded magnetic tape or such other storage devices, if any, sold to the client during the course of providing the service; (iii) the cost of parts or accessories, or consumable such as lubricants and coolants, if any, sold to the customer during the course of service or repair of motor cars, light motor vehicle or two wheeled motor vehicles; (iv) the airfare collected by air travel agent in respect of service provided by him; (v) the rail fare collected by rail travel agent in respect of service provided by him; (vi) the cost of parts or other material, if any, sold to the customer during the course of providing maintenance or repair service; (vii) the cost of parts or other material, if any, sold to the customer during the course of prov....
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....rder, postal remittance and other similar instruments but does not include currency that is held for its numismatic value; (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 accounts of a person liable to pay service tax, where the transaction of taxable service is with any associated enterprise." 10. The High Court, after taking note of the aforesaid provisions, noted that the provisions both amended and unamended Section 67 authorised the determination of value of taxable services for the purpose of charging service tax under Section 66 (which is a charging section) as the gross amount charged by the service provider for such services provided or to be provided by him, in a case where the consideration for the service is money. Emphasising on the words 'for such service', the High Court took the view that the charge of service tax under Section 66 has to be on the value of taxable service i.e. the ....
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....hin 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 subclauses of Section 65. Further, it also specifically mentions that the service tax will be @ 12% of the 'value of taxable services'. Thus, service tax is reference to the value of ser....
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....cedence 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 and charged, in the course of providing or agreeing to provide a taxable service. Thus, only with effect from May 14, 2015, by virtue of provisions of Se....
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....B 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 various decisions and this legal position was conceded by the counsel for the parties. In any case, we shall refer to few judgments containing ....