TMI Blog2015 (10) TMI 859X X X X Extracts X X X X X X X X Extracts X X X X ..... constitutional validity of the levy before the Hon’ble High Court, they also paid their Service Tax alongwith interest as per their determination before issue of the Adjudication order. In such situation, the appellant shown the reasonable cause for waiver of penalty under Section 76 and 78. – Penalty waived. - Appeal No. : ST/10826-10829/2015 - Order No. A/ 11364-11367/2015 - Dated:- 1-9-2015 - Mr. P.K. Das, Member (Judicial) and Mr. P.M. Saleem, Member (Technical) For the Petitioner : Shri S Jaikumar, Advocate, Shri R Subramanya, Advocate For the Respondent : Shri J Nagori, Authorised Representative ORDER Per : Mr.P.K. Das, Common issue is involved in these appeals and, therefore, all are taken up together for disposal. 2. The relevant facts of the case, in brief, are that the appellants were engaged in the manufacture of Alcoholic Beverages (i.e., Beer), which is not covered within the purview of the Schedule to the Central Excise Tariff Act, 1985. They were registered with the Service Tax Authorities for GTA Service. The appellants were manufacturing Beer on their account and also for M/s United Breweries Ltd (in short UBL) in terms of license ag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nufacture of Alcoholic Beverages on job work basis. The relevant portion of the said Circular is reproduced as under : 2. Under section 67 of the Finance Act, 1994, service tax is chargeable on the gross amount charged by the service provider for providing taxable services. As per CIABC the gross value of sales, as per invoices, includes the following elements: i) Bottling/job charges - paid to CBU ii) Distribution costs including freight, transit insurance etc - paid to CBU iii) Other reimbursable - paid to CBU iv) Cost of raw materials - paid to CBU v) Cost of packing materials - paid to CBU vi) State excise duty and VAT - paid to State Government vii) Surplus/profit - retained by BO It was their plea that if the entire amount charged by CBU is subject to service tax, it would amount to charging tax on goods. The CIABC, therefore, requested that the service tax should be charged on the amount representing the charges for service alone. Accepting their plea, Notification No 39/2009-ST dtd 23.9.2009 was issued wherein exemption from service tax has been provided on the value which represents the value of inputs i.e, raw materials and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Representative on behalf of the Revenue drew the attention of the Bench to the relevant portion of the Adjudication order. The Adjudicating authority observed that the quantum of business profit included in the business income of UBL is not provided by the appellant and in absence of which they have claimed for deduction of entire amount remitted to the UBL cannot be accepted. It is noticed that the Adjudicating authority proceeded on the basis that the business income in this case is business profit of the Brand owner. On plain reading of the Board instruction, it is clear that one of the elements of gross value of invoice is surplus/profit retained by BO , which would not be included in taxable value. In other words, the amount returned to BO is in so far as surplus/profit of BO, cannot be included in the taxable value. The amount surplus/profit retained by BO as claimed by the appellant, had been returned to BO and therefore such amount cannot be included in the taxable value. 8. The other contention of the Learned Advocate is that the other reimbursable paid to CBU as mentioned in the Board Circular would cover under Rule 5(i) of Service Tax (Determination of Value) R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 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 counter and is repugnant to Sections 66 and 67 of the Act and to that extent it is ultra vires. It purports to tax not what is due from the service provider under the charging Section, but it seeks ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on ble High court and therefore, it can be said that the appellant entertained the doubt of the levy of the tax. There is no material available of suppression of fact with intent to evade payment of tax and therefore imposition of penalty under Section 78 cannot be sustained. 11. We find that the appellant challenged the constitutional validity of the Show Cause Notice, which is pending before the Hon ble High Court and they have paid the tax of ₹ 17,66,51,082/- alongwith interest of ₹ 3,27,50,955/- out of the confirmed demand of service Tax of ₹ 28,60,30,676/-. We have already observed that demand of tax on some of the issues can not be included in the taxable value. In our considered view, despite the fact that Writ Petition is pending before the High Court, the appellant paid tax with interest and there is reasonable cause to invoke the Section 80 for waiver of the penalty under Section 76 of the Act. 12. The Hon ble Karnataka High Court in the case of CCE, Bangalore vs. Motor World - 2012(27) STR.225 (Kar.) observed that even if ingredients of Section 76 and 78 of Finance Act 1994 exist, imposition of penalty is not automatic and in view of non-obstante ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t in the case of CCE Vs National Security Force reported in 2014(35) STR.303 (Guj) held as under : 2. The short question is with respect to invocation of Section 80 of the Finance Act, 1994 by the Tribunal while deleting the penalty imposed on the respondent-assessee for short payment of service tax. The respondent is engaged in providing security services. For the period under consideration, he had short paid the service tax. The proceedings were initiated for recovery as well as penalty. The Commissioner holding that the respondent had manoeuvring intention in not paying the service tax in full. The respondent approached in appeal. The Tribunal in facts of the case held that the assessee had bona fide belief that as his clients did not pay Service Tax as indicated in the invoice, his liability to pay the same to the Department did not arise. The Tribunal noted that such non-payment was by the service requirement of the assessee, which included Vadodara Municipal Corporation, Surat Municipal Corporation and Gujarat Electricity Corporation/Board. It was also noted that as and when he had received the payments, he had promptly paid the same with the authority. The Tribunal relie ..... X X X X Extracts X X X X X X X X Extracts X X X X
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