TMI Blog2018 (11) TMI 1468X X X X Extracts X X X X X X X X Extracts X X X X ..... to be a service and subjected to service tax. In fact, the process amounting to “manufacture” is kept specifically out of the scope of Section 65 (19) of Finance Act, 1994 which prescribes service tax liability on processing of goods not amounting to manufacture. It has been consistently laid down by the Tribunal, in a plethora of decisions, that consideration which is subject to payment of excise duty is not liable for payment of service tax liability. No suppression of facts - Held that:- There does not appear to be any dispute or allegation that the respondents were not filing the prescribed statutory returns with the department - in the process of auditing, all the transactions were duly and properly audited by the Department; that such neither any attempt was made to conceal the facts nor to hide any information and the respondent had acted diligently in accordance with the provisions of law - there is no suppression of any information or facts. The Commissioner has correctly applied the law after appreciating the facts of the case - appeal dismissed. - Application No.ST/MISC/40793/2017 Appeal No.ST/330/2012 - FINAL ORDER No. 42883/2018 - Dated:- 29-10-2018 - Ms. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rity dropped the proceedings holding that 1% discount is not consideration received for rendering services and hence not taxable. Aggrieved, the department is now before the Tribunal. 3. The Ld.AR, Sh.S.Govindarajan reiterated the grounds of appeal. He submitted that the findings of the adjudicating authority that respondents are not rendering any taxable services is erroneous in law. As per the agreement viz. HP Purchase Agreement : AG401 dated 01.12.2003, respondent was appointed as an Authorised Reseller / Volume Distributor for purchasing / selling HP products and services at applicable discounts. As per Clause 7 of Volume Distributor Programme Terms of the said agreement, out of the total discount offered, 1% discount is for providing HP or HP s designate with Reseller sell-through and inventory reports in a format specified by HP on a weekly basis. The vital strategic market information to enable HP to maximize the sales of their products and ensure availability of the products wherever required, is not a mere transaction of sale and purchase of products as claimed by the respondent or as observed erroneously by the Adjudicating Authority but is in the nature of service fa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ween the respondent and M/s.HP is that of manufacture and buyer and merely because an inventory report is furnished to the manufacturer in regard to the sale of goods, it cannot be said that the appellant has rendered any services to M/s.HP. The decision of the Tribunal, Bangalore rendered in 2003 (162) E.L.T.399 (Tri.-Bang) relied in the grounds of appeal by the department, has held that the 1% discount does not fall in category of permissible discount to be excluded from the assessable value of goods manufactured by HP in terms of Section 4 of Central Excise Act, 1944. For this very same reason, the said discount, if any, has to be included in the assessable value by the manufacturer namely M/s.HP Ltd. Thus the discount is subject to payment of Central Excise duty. The same cannot be subject to service tax in the hands of respondent as this respondent has not rendered any service in regard to this 1% discount. The 1% value addition (discount) is a value addition on goods and is liable to excise duty and not for service tax. The adjudicating authority has considered all these in detail and has correctly dropped the demand. 5. Heard both sides. 6.1 The allegation in the S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e for charging service tax was arrived at as under : (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 shall, - (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) in a case where the provision of service is for a consideration which is not ascertainable, be the amount as may be determined in the prescribed manner. (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) The gross amount charged for the taxable service shall include any amount received towards the taxable service before, during or after provis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er is liable to pay to, or on behalf of, the assessee, by reason of, or in connection with the sale, whether payable at the time of the sale or at any other time, including, but not limited to, any amount charged for, or to make provision for, advertising or publicity, marketing and selling organization expenses, storage, outward handling, servicing, warranty, commission or any other matter; but does not include the amount of duty of excise, sales tax and other taxes, if any, actually paid or actually payable on such goods. 6.7 Further clarity in respect of valuation for the purposes of levy of Central Excise duty is brought about in Central Excise Valuation Rules, 2000. So also, Service Tax (Determination of Value) Rules, 2006 have been introduced vide Notification No.12/2006-ST dt. 19.4.2006. 6.8 The important takeaway from these discussions on the differing nature of assessable value, one for the purpose of levy of Central Excise duty and the other for levy of service tax, is that they are two different and distinct entities. This indeed has to be so, since the purpose of levy of central excise duty is to levy tax on production or manufacture of excisable goods in India w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nal. However, from the point of view of his client, the chartered accountant/broker is his service provider. The value addition comes in on account of the activity undertaken by the professional like tax planning, advising, consultation etc. It gives value addition to the goods manufactured or produced or sold. Thus, service tax is imposed every time service is rendered to the customer/client. This is clear from the provisions of Section 65(105)(zm) of the Finance Act, 1994 (as amended). Thus, the taxable event is each exercise/activity undertaken by the service provider and each time service tax gets attracted...... 6.10 Viewed in this light, a value or consideration undisputedly forming part of assessable value for purposes of levy of central excise duty cannot then be also considered as part of the value of taxable service for levy of service tax. This is in keeping with the fundamental principle that the same activity cannot be considered as manufacture and subjected to excise levy and at the same time considered to be a service and subjected to service tax. In fact, the process amounting to manufacture is kept specifically out of the scope of Section 65 (19) of Finance A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that matter, the ratio laid down had been overturned by the Hon ble Apex Court itself, which is certainly not the case here, there is no justification for the department to have initiated the impugned proceedings. In our view, seeking to tax a particular commission amount under excise duty on the one hand, and in respect of the identical transaction, demanding service tax liability on the very same amount, is nothing but an exercise in incredulity. 6.14 In any case, we do not find that there is any quid pro quo for this amount between the respondent and M/s.HP Ltd. so as to become an activity exigible to service tax under Business Auxiliary Service. We therefore do not find any infirmity with the following conclusions of the adjudicating authority : 13.8 To be taxable under the above categories the activities specified above should have been rendered on behalf of another person and the service provider should have been instrumental for causing sale or purchase of goods or services. In other words the activities should have been carried out as between a principal and an agent. Whereas in the instant case involving a transaction of sale or purchase, the relationship between No ..... X X X X Extracts X X X X X X X X Extracts X X X X
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