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If Service tax is not collected separately, the gross amount has to be adopted to quantify the tax liability

CLR Editorial Notes:- As per this system of taxation, tax borne by the consumer of goods/services is collected by the assessee (manufacturer/service provider) and remitted to the Government. When the amount is collected for the provision of services, the total compensation received should be treated as inclusive of service tax due to be paid by the ultimate customer of the services unless service tax is also paid by the customer separately. So considered, when no tax is collected separately, the gross amount has to be adopted to quantify the tax liability treating it as value of taxable service plus service tax payable.

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2013-ITS-133-CESTAT- M/s. Viraj Travel Agency -Vs- Commissioner of Service Tax, Ahmedabad , Decision : 11.02.2013

CUSTOMS EXCISE & SERVICE TAX APPELLATE TRIBUNAL,
West Zonal Bench, Ahmedabad

Appeal No. : ST/405 of 2011

Arising out of : OIA No. 72/2011(STC)/K. Anpazhakan/Commr(A)/Ahd
Dated 04.04.2011.

Passed by : Commr. (Appeals) C. Excise & Customs, Ahmedabad

For approval and signature : Hon ble Mr. M.V. Ravindaran, Member (Judicial)

Appellant (s) : M/s. Viraj Travel Agency

Represented by : Shri Nitesh Jain, Chartered Accountant

Respondent (s) : Commissioner of Service Tax, Ahmedabad

Represented by : Shri J. Nagori, A.R.

CORAM : Hon ble Mr. M.V. Ravindaran, Member (Judicial)

Date of Hearing / Decision : 11.02.2013

ORDER No. _____________ /WZB/AHD/2013

Per : Mr. M.V. Ravindaran;

This appeal is directed against the order in appeal No. 72/2011 (STC)/K. Anpazhakan/Commr(A)/Ahd dated 04.04.2011.

2. The facts of the case, in brief, are that the appellant is engaged in providing taxable services under the category of Rent-a-cab Services as defined under Section 65 of the Finance Act, 1994 since 2006 without having service tax registration up to January 2008 and without paying service tax on the amount received by them for providing taxable service to M/s. Torrent Power Limited. Hence, a summon was issued by the concerned officers of preventive section of Service Tax Commissionerate for getting documents of income received by them for providing the said services and details of payment received by them from M/s. Torrent Power Limited. Inquiry was also extended with M/s. Torrent Power Limited who submitted copies of contract made with the appellant and bill wise amount charged by the appellant for providing vehicles to M/s. Torrent Power Limited. On the basis of the documents received, it was revealed that the appellant provided vehicles such as Maruti Van, Tata Sumo, Ambulance and loading vehicles such as Mini Trucks etc. to M/s. Torrent Power Limited, since April 2006. Statement of Shri Hetal Govindbhai Haribhai Patel, the proprietor of the appellant s firm, was recorded wherein he stated that he owns five vehicles and rest of the vehicles were taken from relatives and was collecting the payment, as per the contract, for them from M/s. Torrent Power Limited. He accepted the fact that this income was taxable under Service Tax and has applied for service tax registration on 24.1.2008 and however, he had neither paid service tax nor filed ST-3 return till that time. He further stated that the reason for on payment of service tax was because the appellant as well as M/s. Torrent Power Limited believed that they were not required to pay service tax and as such they have not collected service tax from their client. The appellant the paid service tax of Rs. 2,75,417/-, willingly without any protest, as per their own calculation. A show cause notice was issued to the appellant on 13.8.2008 and the adjudicating authority confirmed the demand of service tax amounting to Rs. 3,09,346/- under Section 73(1) read with Section 68 of the Act and ordered to appropriate the amount of Rs. 2,75,417/- already paid by them, ordered recovery of the interest thereon under Section 75 of the Act and ordered to appropriate Rs. 28,017/- already paid by them and imposed penalties under Section 76,77 and Section 78 of the Act.

3. Aggrieved by such an order, appellant preferred appeal before the first appellate authority. The first appellate authority, after following the due process of law upheld the order in original.

4. Learned Chartered Accountant appearing on behalf of the appellant submits that the appellant before receipt of show cause notice, on being pointed out, have discharged the entire service tax liability along with interest and informed the lower authorities. The lower authorities have issued the show cause notice on the figures which have been worked out by them but not considered the cum duty benefit that may arise to the appellant in the entire demand. He would draw my attention to the findings recorded by the first appellate authority, wherein the first appellate authority has accepted that the appellant has not shown the service tax in their bills, which according to him, would tantamount to receipt of lump-sum amount inclusive of service tax. It is his submission that the amounts confirmed by the adjudicating authority as service tax liability is Rs. 33,929/- which is the differential amount calculated by them after arriving at the service tax liability, considering the amounts received by M/s. Torrent Power Limited as cum tax amount. He would submit that the value should be considered as cum tax, has been the issue before the judicial fora, and the Division Bench, in the case of Advantage Media Consultant 2008 (10) STR 449 (Tri. Kolkata) have held that cum-tax benefit should be given to the assessee. It is his submission that this judgment of the Tribunal was maintained by the Apex Court in the Civil Appeal filed by the Revenue, reported as 2009 (14) STR J49 (SC).

5. Learned Additional Commissioner (A.R.) appearing on behalf of the Revenue would submit that the first appellate authority has clearly recorded that as there is no mentioning of service tax amount on the invoices raised by the appellant and there itself is not sufficient to construe that the charges are inclusive of service tax. It is also his submission that the work order issued by M/s. Torrent Power Limited as a service recipient does not indicate that the amount is cum-tax or exclusive of tax and hence department was right in considering the said amount as an amount on which the service tax liability arises.

6. I have considered the submissions made by both sides and perused the record. The issue involved in this case is only limited as to whether the appellant herein is eligible to claim the benefit of cum-tax value on the bills which has been raised by him to M/s. Torrent Power Limited, as service provider.

7. It is undisputed that the appellant has not discharged the service tax liability and has done so after being pointed out on the services rendered by him as Rent-a-cab Services . It is also on record that the agreement entered by the appellant with M/s. Torrent Power Limited does not indicate whether the amount which has been paid by the service recipient to the appellant is inclusive or exclusive of service tax liability. I find that the issue now stands settled by the Division Bench in the case of Advantage Media Consultant (supra) wherein the Bench has recorded as under:-
3.?Service tax is an indirect tax. As per this system of taxation, tax borne by the consumer of goods/services is collected by the assessee (manufacturer/service provider) and remitted to the Government. When the amount is collected for the provision of services, the total compensation received should be treated as inclusive of service tax due to be paid by the ultimate customer of the services unless service tax is also paid by the customer separately. So considered, when no tax is collected separately, the gross amount has to be adopted to quantify the tax liability treating it as value of taxable service plus service tax payable. We find that this principle has been legislated in the following terms with effect from 18-4-2006 in Section 67(2) of the Finance Act, 1994 as amended :
67(2). Where the gross amount charged by a service provider, for the service provided or to be provided is inclusive of service tax payable, the value of such taxable service shall be such amount as with the addition of tax payable, is equal to the gross amount charged.
4.?This principle has all along been relevant and had to be applied. In the circumstances, we find no reason to interfere with the impugned order and we reject both the appeals filed by the Revenue. The Cross Objection in respect of S.T. Appeal No. 55/06 is also disposed.

8. It is also to be noted that the Revenue, aggrieved by this decision of the Tribunal, carried it in Civil Appeal No. D-23523 of 2008 to the Apex Court and the Apex Court, after condoning the delay, dismissed the civil appeal. The ratio of the decision would squarely cover the issue in this case before me and accordingly, I hold that the appellant is eligible to cum-tax benefit of the amounts received from the service recipient and the same being differential amount, which has been confirmed by the lower authorities, I hold that the impugned orders are liable to be set-aside and I do so.

9. Impugned orders to the extent they confirm the differential service tax liability of Rs. 33,929/- along with interest are set-aside. As I have already set aside the service tax demand of Rs. 33,929/-, the consequent penalties imposed by the lower authorities also set aside, as when there is no demand of service tax, the question of penalty does not arise. Accordingly, the penalties imposed under Section 76 and 78 are set-aside.

Appeal is allowed and impugned order is set-aside to the extent as indicated hereinabove.

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