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TMI Blog2015 (10) TMI 2407X X X X Extracts X X X X X X X X Extracts X X X X ..... n are providing consulting engineers services to their client mainly National Highway Authority of India, MMRDA and MSRDC and are discharging service tax liability on the amounts billed and received as consulting fees, during the process of rendering such consulting engineers services, appellant deputes their employees to various sides and recovers the actual expenses like travelling, accommodation, rent for office at site from the service recipients. It is the claim of the revenue that service tax liability needs to be discharged on these amounts also. Both the adjudicating authority as well as first appellate authority held against the appellant and service tax liability with interest and penalty is also imposed. 4. Learned chartered acc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aragraphs No. 10, 11, 18. 10. The contention of the petitioner that Rule 5(1) of the Rules, in as much as it provides that all expenditure or costs incurred by the service provider in the course of providing the taxable service shall be treated as consideration for the taxable service and shall be included in the value for the purpose of charging service tax goes beyond the mandate of Section 67 merits acceptance. Section 67 as it stood both before 1-5-2006 and after has been set out hereinabove. This section quantifies the charge of service tax provided in Section 66, which is the charging section. Section 67, both before and after 1-5-2006 authorises the determination of the value of the taxable service for the purpose of charging servi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the expenditure or costs incurred by the service provider in the course of providing the taxable service in the value for the purpose of charging service tax is ultra vires Section 66 and 67 and travels much beyond the scope of those sections. To that extent it has to be struck down as bad in law. The expenditure or costs incurred by the service provider in the course of providing the taxable service can never be considered as the gross amount charged by the service provider for such service provided by him. The illustration 3 given below the Rule amplifies what is meant by sub-rule (1). In the illustration given, the architect who renders the service incurs expenses such as telephone charges, air travel tickets, hotel accommodation, et ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r enactment which interdicts such taxation. It is true that section 3 is the general charging section. Even if section 23(5) provides for the machinery for collection and recovery of the tax, once the legislature has, in clear terms, indicated that the income of the firm can be taxed in accordance with the Finance Act of 1956 as also the income in the hands of the partners, the distinction between a charging and a machinery section is of no consequence. Both the sections have to be read together and construed harmoniously. It is significant that similar provisions have also been enacted in the Act of 1961. Sections 182 and 183 correspond substantially to section 23(5) except that the old section did not have a provision similar to sub-secti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble 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 to extract something more from him by including in the val ..... X X X X Extracts X X X X X X X X Extracts X X X X
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