TMI Blog2020 (4) TMI 182X X X X Extracts X X X X X X X X Extracts X X X X ..... for doubt that the goods supplied by the recipient of the service without any charge and which, in consequence, does not find inclusion in the recompense for the taxable service is not includable for the purposes of assessment of tax on services. Hon ble Supreme Court in Union of India v. Intercontinental Consultants Technocrats (P) Ltd [2018 (3) TMI 357 - SUPREME COURT] held that the amendment in section 67 of Finance Act, 1994 effected on 14th May 2015 validates rule 5 of Service Tax (Determination of Valuation) Rules, 2006 only prospectively - Adverting to the contours of the plea of Union of India in their writ appeal challenging the nullifying of rule 5(1) of Service Tax Rules, 1994, incorporated for the specific purpose of including reimbursable expenses in gross amount charged except in circumstances enumerated in rule 5(2), and the statutory provisions, the Hon ble Supreme Court, finding that legislations which modified accrued rights or which impose obligations or impose new duties or attach a new disability have to be treated as prospective unless the legislative intent is clearly to give the enactment a retrospective effect; unless the legislation is for purpo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing been excluded from the assessable value, be subject to tax amounting to ₹ 3,21,78,484. Aggrieved by the confirmation of this demand under section 73(1) of Finance Act, 1994, along with interest as prescribed in section 75 of Finance Act, 1994, besides imposition of penalty of like amount under section 78 of Finance Act, 1994, in order in-original no. MUM-SVTAX-006-COM-51-16-17 dated 15th December 2016 of Commissioner of Service Tax-VI, Mumbai, M/s Heligo Charters Pvt Ltd is now before us. 3. Urging us to disregard rule 5 of Service Tax (Determination of Valuation) Rules, 2006 as an acceptable recourse, in the light of the decision of the Hon ble Supreme Court in Union of India v. Intercontinental Consultants Technocrats (P) Ltd [(2018) 4 SCC 669] that the amendment in section 67 of Finance Act, 1994 effected on 14th May 2015 validates rule 5 of Service Tax (Determination of Valuation) Rules, 2006 only prospectively, Learned Counsel further contended that, in employing the expression gross amount charged in section 67 of Finance Act, 1994, the legislature did not intend to include supply effected by a recipient to a provider of service as consideration as held b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the helicopters belonging to the appellant from Mumbai and from its offshore locations. At other places, the cost of fuel procured for operations was to be reimbursed by M/s ONGC Ltd. The impugned order has relied upon two different statutory provisions to confirm the differential tax arising from these two modes of fuel cost borne by the recipient of service. The supply of fuel was held to be a non-monetary form of consideration warranting the determination of its money equivalent as per section 67 of Finance Act, 1994. The reimbursement of cost incurred by the appellant for procuring fuel was held to be includable as prescribed in rule 5(1) of Service Tax Rules, 1994. Furthermore, the adjudicating authority drew attention to the absence of such provisioning, either free or by reimbursement, in the other charter agreements to conclude that the service could not have been rendered without such fuel and that the deviation from the norm of operations was intended to evade the liability. 7. It appears, to us, that the determination by the adjudicating authority is premised on a conceptualization of service as a product and existence of a standard for evaluation-the distinguishi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n services for providing such service. It is made optional for the assessees to take advantage of the aforesaid notification and get the value calculated as per the aforesaid formula provided therein. The assessees have availed the benefit and paid the service tax @ 33% of the gross amount which they have charged from the persons for whom construction was carried out, i.e., the service recipients. It so happened that in all these cases where the construction projects were undertaken by the assessees, some of the goods/materials (particularly, steel and cement) were supplied or provided by the service recipients. As these materials were to be utilised in the projects meant for service recipients themselves, obviously, no costs thereof was charged from the assessees. The Department wants that value of such goods/materials even when supplied or provided free should be included, while calculating the gross value and 33% thereof be treated as value for the purpose of levying service tax. and places the finding thereof in the context of the decision of the Larger Bench of the Tribunal which was impugned in the appeal. Taking note of section 67 of Finance Act, before and after the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 provider and the service recipient has no relevance in the determination of the value of taxable services provided by the service provider. 10. Proceeding further to examine the constitutionally demarcated tax jurisdiction of the legislative organ of the Union which is limited to provision of services without being extendable to transfer of goods, and thereby to exemptions under section 93 of Finance Act, 1994, it was held that 20. It is to be borne in mind that the notifications in questions are exemption notifications which have been issued under Section 93 of the Act. As per Section 93, the Central Government is empowered to grant exemption from the levy of service tax either wholly or partially, which is l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... service tax is reference to the value of service. As a necessary corollary, it is the value of the services which are actually rendered, the value whereof is to be ascertained for the purpose of calculating the service tax payable thereupon. 24. In this hue, the expression such occurring in Section 67 of the Act assumes importance. In other words, valuation of taxable services for charging service tax, the authorities are to find what is the gross amount charged for providing such taxable services. As a fortiori, any other amount which is calculated not for providing such taxable service cannot a part of that valuation as that amount is not calculated for providing such taxable service . That according to us is the plain meaning which is to be attached to Section 67 (unamended, i.e., prior to May 1, 2006) or after its amendment, with effect from, May 1, 2006. Once this interpretation is to be given to Section 67, it hardly needs to be emphasised that Rule 5 of the Rules went much beyond the mandate of Section 67. We, therefore, find that High Court was right in interpreting Sections 66 and 67 to say that in the valuation of taxable service, the value of taxable service sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rse of providing or agreeing to provide a taxable service. Thus, only with effect from May 14, 2015, by virtue of provisions of Section 67 itself, such reimbursable expenditure or cost would also form part of valuation of taxable services for charging service tax. Though, it was not argued by the Learned Counsel for the Department that Section 67 is a declaratory provision, nor could it be argued so, as we find that this is a substantive change brought about with the amendment to Section 67 and, therefore, has to be prospective in nature. On this aspect of the matter, we may usefully refer to the Constitution Bench judgment in the case of Commissioner of Income Tax (Central)-I, New Delhi v. Vatika Township Private Limited [(2015) 1 SCC 1] wherein it was observed as under : 27. A legislation, be it a statutory Act or a statutory rule or a statutory notification, may physically consists of words printed on papers. However, conceptually it is a great deal more than an ordinary prose. There is a special peculiarity in the mode of verbal communication by a legislation. A legislation is not just a series of statements, such as one finds in a work of fiction/non-fiction or even in ..... X X X X Extracts X X X X X X X X Extracts X X X X
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