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2019 (11) TMI 385

..... n the taxable value for calculation of service tax - Whether service tax confirmed by the Commissioner (Appeals) on the value of free supply of the explosives by J.K. White Cement to the appellant is includable in the assessable value of the taxable service or not? - period from September 2004 to May 2007. HELD THAT:- The issue at hand has already been decided by Supreme Court in COMMISSIONER OF SERVICE TAX ETC. VERSUS M/S. BHAYANA BUILDERS (P) LTD. ETC. [2018 (2) TMI 1325 - SUPREME COURT] wherein it has been held that for levy of the service tax as per the provision of Section 67 of the Act the gross amount charged by the service provider from the service recipient means the amount which is billed by the service provider on the service rec .....

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..... ue for calculation of service tax. 2. The matter was adjudicated by the Additional Commissioner by order-in-original dated 7 June 2011. The Additional Commissioner confirmed the amount of the service tax of ₹ 20,18,622/- and dropped the demand of ₹ 9,66,504/- raised on the issue of the addition of the cost of explosives in the assessable value of the taxable service. The relevant extract of the impugned order-in-original is reproduced below :- (i) In view of findings made above I confirm of demand of ₹ 20,18,622/- on the issue of classification of service under site formation and clearance excavation, earthmoving and demolition service and vacate a demand of ₹ 9,66,504/- on the issue of addition of cost of explosives .....

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..... Adjudicating authority had mentioned that the respondent had received explosives free of cost from M/s J.K. White Cement during the period July 2005 to 2006-07 worth ₹ 9,66,504/- (₹ 4,88,952/- + ₹ 4,77,552/-) which he held to be not includible in value on the ground that the Assistant Commissioner, Central Excise Division, Ajmer had already decided that issue in earlier proceedings. However, rather than dropping the demand of service tax payable on this value calculated at the applicable rate, he dropped demand equivalent to the value itself i.e. ₹ 9,66,504/- obviously it was legally as well as factually incorrect and the departmental objection is well founded. Accordingly, the appeal on the ground is allowed and ser .....

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..... e order passed by the Commissioner (Appeals), this appeal has been filed. 5. The learned Counsel appearing on behalf of the appellant has taken us through the record of the appeal and a chart attached to the show cause notice to substantiate that the amount of ₹ 9,66,504/- is the total value of the explosives supplied free of cost by M/s J.K. White Cement Ltd. for providing the taxable service, during the period spanning between September 2004 to March 2007. The learned Counsel contended that the Commissioner (Appeals) committed an error in holding that the service tax leviable on the difference between ₹ 9,66,504/- and the service tax leviable on this amount is to be recovered from the respondent alongwith the interest. The lea .....

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..... t of the taxable value of service. The relevant extract of the above-mentioned judgment is reproduced below :- 13. A plain meaning of the expression the gross amount charged by the service provider for such service provided or to be provided by him would lead to the obvious conclusion that the value of goods/material that is provided by the service recipient free of charge is not to be included while arriving at the gross amount simply, because of the reason that no price is charged by the assessee/service provider from the service recipient in respect of such goods/materials. This further gets strengthened from the words for such service provided or to be provided by the service provider/assessee. Again, obviously, in respect of the goods/ .....

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..... of account of a person liable to pay service tax, where the transaction of taxable service is with any associated enterprise.] [emphasis supplied] 15. It was argued that payment received in any form and any amount credited or debited, as the case may be... is to be included for the purposes of arriving at gross amount charges and is leviable to pay service tax. On that basis, it was sought to argue that the value of goods/materials supplied free is a form of payment and, therefore, should be added. We fail to understand the logic behind the aforesaid argument. A plain reading of Explanation (c) which makes the gross amount charges inclusive of certain other payments would make it clear that the purpose is to include other modes of payments .....

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..... vice provider to the service recipient for the service rendered. The fact that it is an inclusive definition and may not be exhaustive also does not lead to the conclusion that the contract value can be ignored and the value of free supply goods can be added over and above the contract value to arrive at the value of taxable services. The value of taxable services cannot be dependent on the value of goods supplied free of cost by the service recipient. The service recipient can use any quality of goods and the value of such goods can vary significantly. Such a value, has no bearing on the value of services provided by the service recipient. Thus, on first principle itself, a value which is not part of the contract between the service provid .....

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