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TMI Blog2011 (3) TMI 183X X X X Extracts X X X X X X X X Extracts X X X X ..... ST 1798/10 27/2010-ST, dated 4.5.2010 Apr 08 to Jun 09 22,71,78,522 Interest u/s 75 Penalty @ 2% per month u/s 76 and penalty of Rs.5,000 u/s 77 The demands are raised towards service tax on value of materials received free of cost and bonus amounts received from the service recipient. The assessee rendered the 'site formation, clearance and excavation service' to M/s Singareni Colleries Company Ltd. (SCCL) under contract. The assessee received diesel and explosives necessary for carrying out the service from SCCL and did not include their value in the value for the purpose of payment of service tax. Hence the demands and penalties. 2.1 In the appeals filed before the Tribunal, it is submitted that value of the materials received (diesel and explosives) is not includible in the taxable value as the value of the goods and material sold by the service provider is exempt from levy of service tax in terms of Notification No. 12/2003-ST, dated 20.6.2003. In the appellant's case, such materials were provided by SCCL. Though there was no sale of goods and materials provided by the service provider, the value of such materials used in providing the taxable service could not be incl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3.2 Section 67 of the Act was substituted with effect from 18.4.2006 and read as follows: "67(1) Subject to the provisions of this Chapter, where service tax is chargeable on any taxable service with reference to its value, then such value; (i) in a case where the provision of service is for a consideration in money, be the gross amount charged by the service provider for such service provided or to be provided by him; (ii) in a case where the provision of service is for a consideration not wholly or partly consisting of money, be such amount in money as, with the addition of service tax charged, is equivalent to the consideration; (iii) ........................." Contrary to the instructions contained in Section 37-B/Order No. 8/92, dated 24.9.1992 issued by the CBEC, the Commissioner held that the decisions of the High Courts were not binding on him as his office was not situate in the territorial jurisdiction of these two High Courts. It is argued that the decision of the High Courts relating to an all India statute was binding on assessing officers even if they were not located in the territorial jurisdiction of the concerned High Courts as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and excavation service. Another decision relied on is a Stay Order in the case of Karamjit Singh & Co. v. Commissioner of Central Excise, Raipur [2009 (15) STR 266 (Tri.-Del.)] where, in a similar case of demand of service tax towards the cost of fuel supplied free of cost in rendering site formation service, full waiver was ordered. The Tribunal waived pre-deposit of the dues finding that waiver had been granted in similar cases earlier. Reliance was also placed on Stay Order No. 538/2010, dated 5.7.2010 in PLR Projects v. Commissioner of Service tax, Hyderabad wherein the Tribunal had ordered complete waiver relying on the Stay Orders in Karamjit Singh & Co. (supra) and Gulf Oil Corporation Ltd. (supra). The learned Counsel relied on the judgment of the High Court of Madras in the case of Larson & Toubro Ltd. v. Union of India [2007 (7) STR 123 (Mad.)] wherein the High Court had expressed its prima facie view that Explanation to Notification No. 1/2006 ST, dated 1.3.2006 did not contemplate inclusion of value of the goods supplied by recipient of service. 5. The learned Jt. CDR has opposed the stay applications. He has relied on the following decisions of the Tribunal: ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... des the value of diesel, explosives, etc. supplied by its client, SCCL for rendering the service under contract. Revenue relies on the statutory provisions contained in section 67 of the Finance Act, 1994 (the Act), the Service Tax (Determination of Value) Rules, 2006, the decision of the Tribunal in the case of Jaihind Projects Ltd. (supra) and Stay Order No. 281/2011, dated 7.1.2005 in case of Mahabala Mannur v. Commissioner of Central Excise, Mangalore, of this Bench to oppose the prayer for waiver of pre-deposit. A decision of the Delhi Bench in the case of Agrawal Colour Advance Photo System (supra) is yet another authority relied on in support of its case by the Revenue. 6.1 The appellant mainly relies on Notification No. 12/2003-ST, dated 20.6.2003 in support of its claim that consumables supplied free of cost by the recipient of the service is not consideration received by it includible in the taxable value. In support of the above claim, it relies on the decision of the Tribunal in Shilpa Colour Lab v. Commissioner of Central Excise, Calicut [2007 (5) STR 423 (Tri.-Bang.)] which was sustained by the Apex Court. In this case, the Tribunal had held that value of materials c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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) The gross amount charged for the taxable service shall include any amount received towards the taxable service before, during or after provision of such service. (4) Subject to the provisions of sub-sections (1), (2) and (3), the value shall be determined in such manner as may be prescribed. Explanation - For the purposes of this section- (a) "consideration" includes any amount that is payable for the taxable services provided or to be provided; (b) "money" includes any currency, cheque, promissory note, letter of credit, draft, pay order, travellers cheque, money order, 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 ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oncern for providing the said taxable service: Provided that this exemption shall not apply in such cases where - (i) the credit of duty paid on inputs or capital goods has been taken under the provisions of the Cenvat Credit Rules, 2004; or (ii) the commercial concern has availed the benefit under the Notification of the Government of India, in the Ministry of Finance, (Department of Revenue) No. 12/2003-Service Tax, dated the 20th June, 2003 [G.S.R. 503(E), dated the 20th June, 2003." (e) Pertinent excerpts of Notification No. 1/2006-ST, dated 1.3.2006: "Effective rate of Service tax for specified services - Percentage of abatements In exercise of the powers conferred by sub-section (1) of section 93 of the Finance Act, 1994 (32 of 1994) (hereinafter referred to as the Finance Act), the Central Government, on being satisfied that it is necessary in the public interest so to do, hereby exempts the taxable service of the description specified in column (3) of the Table below and specified in the relevant sub-clauses of clause (105) of section 65 of the Finance Act, specified in the corresponding entry in column (2) of the said Table, from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Section 67 of the Act contains provisions relating to valuation of taxable service for charging service tax. As per clause (i) of sub-section 1 of section 67, in a case where the provision of service is for a consideration in money, the value shall be the 'gross amount' charged by the service provider for the service provided or to be provided. As per clause (ii)(introduced with effect from 18.4.2006), in a case where the provision of service is for a consideration not wholly or partly consisting of money, the value shall be the money value equivalent to the consideration. In the impugned orders, the Commissioner held that free supply of diesel, explosives and certain accessories were part of the consideration received by the assessee for rendering the service and rejected the claim of the assessee that 'consideration' meant quid pro quo i.e. something in return. It was also argued before us that free supply of materials did not entail any benefit to the assessee and therefore, the same did not constitute consideration includible in the taxable value. We find that the Commissioner rightly relied on the judgment of the Apex Court in the case of Burn Standard Co. Ltd. v. Union of Ind ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he provisions of section 67 of the Act and the STR. The Tribunal observed as follows: "23. The appellants have relied upon section 66 and section 67 of Finance Act, 1994. According to them, section 66 provides for collection of Service tax on the value of taxable services and section 67 defines the value as the gross amount charged by the service provider, Therefore, the value of taxable services is the amount charged by the service provider from the service receiver and if money is not charged, it will not form a part of the value of the taxable service. It was submitted that the notification should be read in harmony with these sections. This also applies to the value of the goods or material provided by the service provider. Where there is no amount charged by the service provider for any material supplied or provided for such services, it cannot form a part of the value for applying abatement of 33%. We find that the interpretation of gross amount charged by the appellant is not in line with the provisions of law. Section 67 clearly provides that for calculating value of a service, consideration in monetary as well as nonmonetary terms are required to be taken into account an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an essential component and is essentially required for providing pipeline laying service, has to be treated as consideration other than in the form of money and therefore the value has to be included. Rule also provides that if such value cannot be determined, service provider has to determine equivalent money value of such consideration. Therefore, we are unable to agree with the contention of the appellant made by the paragraph 12 above." 7.3 In the Notification No. 15/2004-ST, dated 10.9.2004, exemption was provided in excess of tax due of 33% of the gross amount charged from any person by the service provider. In the Explanation appended to the Notification, the gross amount charged was clarified to include value of the goods and materials supplied or provided or used by a provider for providing such service. Though the exemption is in respect of construction service the 'gross amount' referred to in the Notification has to be the same as referred to in section 67 of the Act since a Notification cannot grant exemption from tax on a value higher than the taxable value on which tax is otherwise due. Therefore, this Explanation indicates the scope of 'gross amount' on which serv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecision of the Division Bench of the Delhi High Court in the case of Era Infra Engineering Ltd. v. Union of India reported in 2008 (11) STR 3 (Del.) relied upon by Dr. Pal, the Delhi High Court has followed the abovementioned Madras decision but has not considered the question of balance of convenience and inconvenience. With great respect to the learned Judges in those two cases we are unable to follow those as a valid precedent." 8. As regards the claim for relief under the Notification No. 12/2003-ST, dated 20.6.2003, we note that the exemption from payment of service tax due on the value of the goods and materials extended under the said Notification is subject to the condition that such materials are sold by the service provider to the recipient of the service. We do not find that the assessee has a case that it sold the items involved to the service recipient and qualified for the exemption under the said Notification. We also note that in Agrawal Colour Advance Photo System case (supra), the Tribunal made the following observations: "5.3 ............On the contrary, from the exemption Notification No. 12/03-S.T. which exempts from service tax the value of the goods sold by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ur Lab [2007] (5) STR 423 (Tri.-Bang.), the Apex Court remanded the dispute to the Tribunal with the following observations : "In the case of Adlabs v. C.C.E., Bangalore, reported in 2006 (2) STR (Tri.-Bang.), it has been observed as follows: "3. On a careful consideration, we notice that the Commissioner was not justified in taking the view in contra to the Boards' letter and the Notification. The appellants have maintained the records of the inputs used in the photography, nowhere it is stated in the Circular and Notification that the inputs used in the photography should be mentioned in the invoices/bills issued to the customers. The reasoning given by the Commissioner is not sustainable. In view of the clarification given in the Boards' letter and the Notification itself the denial of benefit by the lower authorities is not justified and not correct in law. The appellants are eligible for the benefit of deduction in terms of the Board's circular and the Notification. The order passed by the impugned authorities is not correct in law as the same is contra to the Boards' letter and the Notification. The impugned order is set aside by allowing the appeal." In terms of the above ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provisions. (1) The applications for stay should not be disposed of in a routine manner unmindful of the consequences flowing from the order requiring the assessee to deposit full or part of the demand; (2) Three aspects to be focused while dealing with the applications for dispensing of pre-deposit are: (a) prima facie case, (b) balance of convenience, and (c) irreparable loss; (3) Interim orders ought not to be granted merely because a prima facie case has been shown; (4) The balance of convenience must be clearly in favour of making of an interim order and there should not be the slightest indication of a likelihood of prejudice to the interest of public revenue; (5) While dealing with the applications twin requirements of consideration i.e., consideration of undue hardship, and imposition of conditions to safeguard the interests of revenue have to be kept in view; (6) When the Tribunal decides to grant full or partial stay, it has to impose such conditions as may be necessary to safeguard the interests of the revenue. This is an imperative requirement; and (7) An appellate Tribunal, bein ..... X X X X Extracts X X X X X X X X Extracts X X X X
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