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2021 (9) TMI 81 - AT - Service TaxValuation - reverse charge mechanism - inclusion of tax deducted at source (TDS) in assessable value for determining the taxable value - Technical Consultancy Services and Project Consultancy Services - Section 66 of the Finance Act, 1994 read with 2(1)(d)(iv) of the Service Tax Rules, 1994, before the introduction of Section 66A of the Finance Act - extended period of limitation - Eligibility for cum-tax benefit. HELD THAT:- The issue as to whether the appellants are liable to pay Service Tax under reverse charge mechanism before the introduction of Section 66A in the Finance Act, 1994 is settled by the decision of the Hon’ble High Court of Bombay in the case of INDIAN NATIONAL SHIPOWNERS ASSOCIATION VERSUS UNION OF INDIA [2008 (12) TMI 41 - BOMBAY HIGH COURT]. The Hon’ble High Court held that the liability to pay Service Tax under reverse charge mechanism would arise only after the introduction of Section 66A with effect from 18.04.2006 to the Finance Act, 1994. The said decision was upheld by the Hon’ble Supreme Court in UNION OF INDIA VERSUS INDIAN NATIONAL SHIPOWNERS ASSOCIATION [2009 (12) TMI 850 - SC ORDER] - the demand of Service Tax till 18.04.2006 cannot sustain. Levy of service tax - TDS borne by the appellant while grossing up of the consideration payable to the service provider - HELD THAT:- The TDS is paid / deposited to Government by the appellant out of a statutory liability. Such activity of deducting the tax at source is a legal obligation and the amount so deducted cannot be taken as consideration for services rendered. The amount on which the parties have reached a consensus ad idem can only be the consideration for the services. Further, the amount of tax deducted varies and depends upon the rate in force. There is no agreement by the parties with regard to the amount of TDS that has to be deducted. It wholly depends upon the law prevailing in the direct tax regime. The decision in the case of M/S. HINDUSTAN OIL EXPLORATION CO. LTD. VERSUS COMMISSIONER OF GST & CENTRAL EXCISE [2019 (2) TMI 1248 - CESTAT CHENNAI] have categorically held that when the TDS amount has been borne by the assessee and only the consideration for the services as agreed upon by the parties has been paid to the service provider, the same cannot be included in the taxable value for determining the Service Tax liability. The demand for the entire period (3/2004 to 9/2007 and 10/2006 to 9/2007) cannot sustain and requires to be set aside - the issue is also found in favour of the appellant. Extended period of limitation - HELD THAT:- The issue is wholly an interpretational one and there were several litigations pending before different fora. So also, it has to be noted that the appellant has dutifully discharged the Service Tax liability on the entire consideration paid by them. The demand is only on the TDS portion remitted under the Income Tax Act. There is no positive act of wilful suppression with intention to evade payment of Service Tax brought out by the Department for invoking the extended period - the demand is time-barred and cannot sustain. Eligibility for cum-tax benefit - HELD THAT:- Since it is held that there is no liability to pay the differential tax, the issue of cum-tax benefit has no relevance and the demand confirmed cannot sustain and requires to be set aside. Appeal allowed.
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