TaxTMI 
TaxTMI 
2026 (9) TMI 1119
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....to be appropriated against the total liability of Rs.76,77,212/-. The remaining demand of Rs.48,12,568/- (Rs.1,24,89,780 Rs.76,77,212) raised in the SCN stands dropped. (ii) I order to recover interest from the noticee on the aforementioned service tax amount of Rs.76.77,212/- in terms of Section 75 of the Finance Act, 1994. The amount of Rs.13,809/- already paid is to be appropriated against the total interest liability. (iii) I impose a penalty of Rs.5,000/- on the noticee under Section 77(2) of the Finance Act, 1994. I, however, do not impose any penalty under Section 77(1)(b), 77(1)(c)(i) and 77(1)(c)(ii) of the Finance Act, 1994. (iv) I impose a penalty of Rs.76,77,212/- on the noticee under section 78 of the Finance Act, 1994. In the event of the noticee opting to pay the amount of service tax along with all other dues as confirmed and ordered to be recovered, within thirty days from the date of communication of this order, the amount of penalty under Section 78 of the Finance Act, 1994 shall be 25% of the said amount and the benefit of reduced penalty shall be available only if the amount of penalty is also paid within the period of thirty days fro....
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....ellant and summons were issued to Shri Janak Rajendra Kumar Dave, Chief Accountant of appellant. Shri Dave in his statement dated 26.12.2011 deposed as follows:- • M/s AMC received only Rs. 12 Lakhs for the first year of the agreement i.e. w.e.f. 01.09.2008 to 31.08.2009. • Ahmedabad Municipal Corporation is registered with service Tax under the category of "Renting of Immovable Property" having Service Tax Registration No.AAALA0024CST005; • they are paying Service Tax & filing the ST-3 returns regularly; • as far as receipt of Rs.12 lakhs rent received from M/s ESPL, the service tax had already been paid vide challan dated 20.11.2010 to the tune of Rs. 1,12,059/- along with interest amount of Rs. 16,054/- vide challan dated 20-11-2010 and 04-05-2011; • after the aforesaid receipts of rent of Rs. 12.00 lakhs in total for the period from 01.09.2008 to 31.08.2009 i.e first year of the agreement, no further rent was received as M/s ESPL did not use their stadium and no rent was received by M/s AMC; • the matter was taken up by M/s AMC with Business Head of M/s ICL/ESPL namely Mr. Himanshu Modi for payment of....
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....hat to be decided by the standing Committee of the AMC: • M/s AMC is also aware of service tax law that any taxable income received on rendering taxable service in cash or kind or both is taxable. 2.6 Inquiries were also made with M/s ESPL and they were asked to provide copies of the balance sheet/profit and loss account for the period 2008-09 to 2009-10 and also to appear in person for their statement. M/s ESPL vide their letter dated 08.08.2012 intimated that they had incurred Rs.5,66,99,452/- for upgradation/renovation of the stadium and again the amount of Rs.10 crore as mentioned in the agreement. 2.7 On the basis of information provided, the expenditure incurred by M/s ESPL on the said stadium till 31.03.2010 was prepared and reproduced below:- Sr. No Expenditure by M/s ESPL towards installation etc. Party Name Bill No. Date Bill Amount Date of capitalisation Amount Remarks 1 Cost of flood lighting system Dev Musco Lighting P. Ltd DMPL/20 08-09/-3 16.04.08 32254000 20.10.08 32254000 2 Reimbursement of transport charges for high masts, panel and cables, labour, warehousing etc. Dev Musco L....
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....idered as taxable service under the category of "Renting of Immovable Property Service" as defined under Section 65 of the Finance Act 1994, as amended, and the amount of Rs.10,12,00,000/-should not be considered as taxable value. (ii) Service tax amounting to Rs.1,24,89,780/- (including Education Cess and SHEC) for the period upto 10-12-2009 should not be demanded from them under Section 73(1) of the Finance Act, 1994, invoking the larger period of five years. Further, as service tax of Rs.1,12,059/- has already been paid by them, why the same should not be appropriated. (iii) Interest as applicable on the amount of service tax liability of Rs.1,24,89,780/-should not be recovered from them for the delay in making the payment, under Section 75 of the Finance Act, 1994 as amended; Interest amounting to Rs.13,809/- already paid by them should not be appropriated. (iv) Penalty under Section 77 (1) (b) of the Finance Act 1994 should not be imposed upon them for failure to keep, maintain books of accounts and other documents as required under the provisions of the Finance Act, 1994 or rules made there under. (v) Penalty under Section 77 (1) (c) (i) sh....
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....stice if it is concluded that the gross amount charged by the Appellant for a Stadium per annum was only Rs.12 lakhs. The Appellant would have certainly demanded a much higher rent for the Stadium, if the clause of onetime cost of Rs.10 crore was not inserted in the Agreement as a payment obligation. Therefore, the Adjudicating Authority in his findings at Para 15.2 onwards relied on Rule 3(b) of the Service Tax (Determination of Value) Rules, 2006, where it is stated that when the value of such taxable service is not ascertainable by getting the equivalent value of such taxable service provided to any other person in the ordinary course of trade, then the Service Provider shall determine the equivalent money value of such consideration which shall, in no case be less than the cost of provision of such taxable service. The said service provided by the Appellant being unique in its own way, the equivalent value of such service in the ordinary course of trade was also not ascertainable. Therefore, resorting to Rule 3(b), the equivalent money value of such consideration would be the amount of Rs. 10 crores, envisaged in the agreement between the Appellant and ESPL as part of the payme....
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....under the category of renting of immovable property service under sub-clause (zzzz) of Section 65(105) of the Finance Act, 1994 and the amount of Rs.10 crore spent by M/s ESPL towards development, up-gradation, etc. of the stadium was liable to be taxed as a consideration against provision of service by the noticee, along-with licence fee of Rs.12 lakh per annum. 14.1 From the details available in the SCN and defence reply filed by the noticee, I observe that the noticee received Rs. 12 lakh for the first year of the agreement, ie, from 1.9.2008 to 31.8.2009. M/s ESPL did not pay any rent thereafter and the licence agreement was terminated by the noticee on 10.12.2009. As no further rent was received by the noticee other than that in the first year of agreement, service tax liability on the amount of Rs. 10 crore allegedly spent by M/s ESPL for up-gradation, renovations, etc. of the stadium is now the moot point to be decided in the case. 15. The SCN seeks to recover service tax on the amount of Rs.10 crore under the category of 'renting of immovable property service on the ground that the consideration received by the noticee in respect of usage of stadium by....
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....ore of the view that the amount to be spent by M/s ESPL towards development, upgradation and renovation of the stadium was a significant additional consideration for leasing out the stadium and should form a part of total value of services provided by the noticee, in terms of Rule 3(b) of the Service Tax (Determination of Value) Rules, 2006, which reads as follows- 3. Manner of determination of value- Subject to the provisions of section 67, the value of taxable service, where such value is not ascertainable, shall be determined by the service provider in the following manner- (a) the value of such taxable service shall be equivalent to the gross amount charged by the service provider to provide similar service to any other person in the ordinary course of trade and the gross amount charged is the sole consideration; (b) where the value cannot be determined in accordance with clause (a), the service provider shall determine the equivalent money value of such consideration which shall, in no case be less than the cost of provision of such taxable service. 15.3 Here, since cost involved in development, upgradation and renovation of the stadium had ....
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....ho undertook the said jobs for renovation. These payments were not rooted through the appellant. Further, these expenses have been capitalized in the books of account of M/s ESPL. The case of revenue is that this amount should have been included in the value of the taxable services provided by the appellant. Taking note of the fact that the total amount to be expended by M/s ESPL for the development, renovation was not Rs.10 crores, (as per the agreement) the actual expenditure was only Rs.6,10,13,364/- the total gross value of services provided under category of renting of immovable property was reduced to Rs.6,22,13,364/- by the impugned order. Impugned order reduced the demand made in the show cause notice to Rs.76,77,212/-. 4.4 The basic question that needs to be answered in the present case is whether the amount expended by the service recipient i.e. M/s ESPL towards renovation of stadium can be considered as part of value of taxable services rendered by the appellant. We find that Hon'ble Delhi High Court in the case of Intercontinental Consultants & Technocrats Pvt. Ltd. [2013 (29) S.T.R. 9 (Del.)] has held as follows:- "10. The contention of the petitioner that ....
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....eyond the scope of those sections. To that extent it has to be struck down as bad in law. The expenditure or costs 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. The illustration 3 given below the Rule amplifies what is meant by sub-rule (1). In the illustration given, the architect who renders the service incurs expenses such as telephone charges, air travel tickets, hotel accommodation, etc. to enable him to effectively perform the services. The illustration, therefore, says that these expenses are to be included in the value of the taxable service. The illustration clearly shows how the boundaries of Section 67 are breached by the Rule. Apart from travelling beyond the scope and mandate of the Section, the Rule may also result in double taxation. If the expenses on air travel tickets are already subject to service tax and is included in the bill, to charge service tax again on the expense would certainly amount to double taxation. It is true that there can be double taxation, but it is equally true that it should be clearly provided for....
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....with Section 66 which levies a tax only on the taxable service and nothing else. There is thus inbuilt mechanism to ensure that only the taxable service shall be evaluated under the provisions of 67. Clause (i) of sub-section (1) of Section 67 provides that the value of the taxable service shall be the gross amount charged by the service provider "for such service". Reading Section 66 and Section 67(1)(i) together and harmoniously, it seems clear to us that in the valuation of the taxable service, nothing more and nothing less than the consideration paid as quid pro quo for the service can be brought to charge. Sub-section (4) of Section 67 which enables the determination of the value of the taxable service "in such manner as may be prescribed" is expressly made subject to the provisions of sub-section (1). The thread which runs through Sections 66, 67 and Section 94, which empowers the Central Government to make rules for carrying out the provisions of Chapter V of the Act is manifest, in the sense that only the service actually provided by the service provider can be valued and assessed to service tax. We are, therefore, undoubtedly of the opinion that Rule 5(1) of the Rules runs....
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.... respect of those services which are taxable and specifically referred to in various sub-clauses 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 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 emphasise....
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....hich 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 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....
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....n. 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 this dicta, a little later."" 4.5 Similarly, Hon'ble Supreme Court in case of M/s Bhayana Builders (P) Ltd. [2018 (10) G.S.T.L. 118 (S.C.)] following has been observed:- "12. On a reading of the above definition, it is clear that both prior and after amendment, the value on which service tax is payable has to satisfy the following ingredients : a. Service tax is payable on the gross amount charged :- the words "gross amount" only refers to the entire contract value between the service provider and the service recipient. The word "gross" is only meant to indicate that it is the total amount charged without deduction of any expenses. Merely by use of the word "gross" the Department does not get any jurisdiction to go beyond the contract value to arrive at the value of taxable services. Further, by the use of the word "charged", it is clear that the same refers to the amount billed by the service....
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.... to be included in respect of such materials/goods which are supplied by the service recipient, naturally, no amount is received by the service provider/assessee. Though, sub-section (4) of Section 67 states that the value shall be determined in such manner as may be prescribed, however, it is subject to the provisions of sub-sections (1), (2) and (3). Moreover, no such manner is prescribed which includes the value of free goods/material supplied by the service recipient for determination of the gross value. 14. We may note at this stage that Explanation (c) to sub-section (4) was relied upon by the learned counsel for the Revenue to buttress the stand taken by the Revenue and we again reproduce the said Explanation hereinbelow in order to understand the contention : (c) "gross amount charges" 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 ser....
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....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. The service recipient can use any quality of goods and the value of such goods can vary significantly. Such a value, has no bearing on the value of services provided 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. 17. Faced with the aforesaid situation, the argument of the Learned Counsel for the Revenue was that in case the assessees did not want to include the value of goods/materials supplied free of cost by the service recipient, they were not entitled to the benefit of notification dated September 10, 2004 read with notification dated March 1, 2005. It was argued that since building construction contract is a composite contract of providing services as well as supply of goods, the said notifications were is....
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....ls supplied or provided or used by the provider of construction service. Thus, though it took care of the value of goods and materials supplied by the service provider/assessee by including value of such goods and materials for the purpose of arriving at gross amount charged, it did not deal with any eventuality whereby value of goods and material supplied or provided by the service recipient were also to be included in arriving at gross amount 'gross amount charged'. 19. Matter can be looked into from another angle as well. In the case of Commissioner, Central Excise and Customs, Kerala v. M/s. Larsen & Toubro Ltd. - (2016) 1 SCC 170 = 2015 (39) S.T.R. 913 (S.C.). This Court was concerned with exemption notifications which were issued in respect of 'taxable services' covered by sub-clause (zzq) of clause (105) read with clause (25b) and sub-clause (zzzh) of clause (105) read with clause (30a) and (91a) of Section 65 of Chapter V of the Act. This Court in the aforesaid judgment in respect of five 'taxable services' [viz. Section 65(105)(g), (zzd), (zzh), (zzq) and (zzzh)] has held as under : "23. A close look at the Finance Act, 1994 would show that the fixed taxa....
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....ngible goods, the concept of tax on services may not be easily appreciated for the very reason of its intangibility. The form of the transaction not being apparent until its benefit is perceived in the hands of the recipient and signified by readiness to recompense the provider, the tendency to seize upon the tangibility of the flow of compensation to presume the existence of a service becomes irresistible. And that is when the tax determination exceeds legislative intent. 11. Owing to its inherent intangibility, a service transaction becomes recognizable only if a benefit accrues to a recipient and that explains the use of the phrase "provided or agreed to be provided" to determine taxability. It is taxable only if and when any, or a particular, service is rendered to a recipient. Consideration is, undoubtedly, an essential ingredient of all economic transactions and it is certainly consideration that forms the basis for computation of service tax. However, existence of consideration cannot be presumed in every money flow. Without an identified recipient who compensates the identified provider with appropriate consideration, a service cannot be held to have been provided.....
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....ng the service tax on the services so provided. Even for the period of demand they have paid the service tax along with the interest due during the course of investigation. Since appellant has already deposited a some of Rs.1,12,059/- as service tax liability for the period 2008-09 on the rental value along with interest, and the appropriation of this amount has been made by the impugned order, we are not inclined to go into the issue of levy of service tax on the renting of immovable property services provided by the municipalities in view of the decisions rendered by the Hon'ble Madras High Court in case of Cuddalore Municipality [2021 (55) GSTL 397 (Mad)], more so over when the LPA against this decision is pending before the Division Bench of High Court as noted by Chennai Bench in case of Commissioner, Krishnagiri [(2025) 26 Centax 142 (Tri.-Mad)]. Relevant Extract is reproduced below: "6.6 The above decision was rendered by the Hon'ble High Court on 22.03.2021. However, prior to this, the Hon'ble jurisdictional High Court at Madurai Bench in the case of Madurai Corporation had considered the issue of taxability of renting of immovable property and held that Mu....
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....iness or commerce and it includes vacant land given on lense or license and the test is as to whether it is used in the course of of furtherance of business of commerce Admittedly, the petitioner is a licensee of the first respondent Municipality and the property has been used in the course of business or commerce. As noticed above, Section 65(90a) defines renting of immovable property including renting, letting. leasing, licensing or other similar arrangements of immovable property for use in the course or furtherance of business or commerce. 15 Admittedly, the properties in question de not fall within the two exemptions provided under Section 65(90) http://www.judis.nic.in of the Act. Explanation 2 under Section 65(90a) makes it more clear that renting of immovable property includes allowing or permitting the use of space in an immovable property, irrespective of the transfer of possession or control of the said immovable property. The duty performed by the first respondent Municipality would clearly fall within the ambit of the provisions referred above and therefore they have been remitting service tax to the Department. Further, Section 66D(a)(iv) of the Act deals wit....
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....ty [2015 (37) S.T.R. 696 (Mad.)]. The petitioner therein was a licensee of the Tenkashi Municipality and challenged the demand notice of service tax served by the Municipality upon him. In these cases, the taxability in general was considered. The issue as to whether local authority (Panchayat, Municipality, Corporation) would be liable to discharge service tax as these services are provided in discharge of sovereign function was not considered. The Hon'ble High Court in the case of Cuddalore Municipality has considered this specific issue. 9. It is represented before us that the department has filed appeal upon the decision passed by the Ld. Single Judge in the case of Cuddalore Municipality and that the assessee has filed appeal upon the decision passed in the case of Madurai Corporation. These appeals are pending before the Hon'ble High Court. Since the Hon'ble High Court in the case of St. Thomas Mount Cum Pallavaram Cantontment Board has remanded the matter for considering the issue afresh, we are of the considered opinion that in the interest of justice, these matters also require to be remanded to the adjudicating authority to consider afresh the issue a....