Decision by CESTAT, Ahmedabad on Considering the Gross Value of Invoice as cum Value U/s 67(2) - by a unregistered Service provider at the time of providing service, Decision dated 11.02.2013.

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

V/s

Respondent (s) :               Commissioner of Service Tax, Ahmedabad

1. The facts of the case,

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. 

 The appellant 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.  Further  the appellant  paid service tax of Rs. 2,75,417/-, willingly without any protest, as per their own calculation.

 However 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.

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.

2. Analysis:

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. (That is the Invoice amount is inclusive of service Tax as per Sec 67(2)). The further demand of Rs 33,929 is only on account of this treatment.

This case is similar to Advantage Media Consultant V’s  CBEC, Supreme Court 2009 (14) STR J49 (SC).

“the issue now stands settled by the Division Bench in the case of Advantage Media Consultant (supra) wherein the Bench has recorded as under:-

”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.”

3. Decision:

Impugned orders to the extent they confirm the differential service tax liability of Rs. 33,929/- along with interest are set-aside.and 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.