TMI Blog2021 (3) TMI 614X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 66 and 67 of Finance Act, 1994 and the said judgement has been upheld by the Hon ble Supreme Court in Intercontinental Consultants and Technocrats Pvt Ltd case [ 2018 (3) TMI 357 - SUPREME COURT ] - thus confirmation of demand by the adjudicating authority by including the reimbursable expenses in the gross taxable value cannot be sustained. Whether the service tax amount initially paid by the appellant under rule 2(1)(d)(iii) of Service Tax Rules, 1994 and later adjusted with the commission paid to the agents to be deposited under Section 73A(2) of the Finance Act, 1994? - HELD THAT:- The issue has been addressed at length by this Tribunal in Bajaj Allianz Life Insurance Company Ltd [ 2019 (6) TMI 104 - CESTAT MUMBAI ] where this Tribunal held that The service tax initially paid by the Appellants and later collected from the insurance agents by adjusting the commission paid, cannot be directed to be deposited under Section 73A(2) of Finance Act, 1994. Appeal allowed - decided in favor of appellant. - SERVICE TAX APPEAL NO: 86940 OF 2016 - A/86107/2020 - Dated:- 25-11-2020 - HON BLE DR D M MISRA, MEMBER (JUDICIAL) AND HON BLE MRC J MATHEW, MEMBER (TECHNIC ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that these expenses had not been incurred by the appellant. It is his contention that the amount which has nexus to soliciting of business of insurance will alone be included in the gross taxable value of services provided under the taxable category of insurance auxiliary service . This has been clarified by the CBEC in its Circular dated 1st August, 2002. Also, in support he has referred to the judgment of this Tribunal in the case of Rolex Logistics Private Ltd v. Commissioner of Service Tax, Bangalore [2009 (13) STR 147], Kirloskar Pneumatic Co Ltd v. Commissioner of Central Excise, Pune [2015 (38) STR 1198, Reliance Industries Ltd v. Commissioner of Central Excise, Rajkot [2008 (12) STR 345, upheld by the Hon ble Supreme Court reported in [2011 (23) STR J226 (SC)]. 4. Further, the Ld. Advocate have also argued that Rule 5(1) of Service Tax (Determination of Value) Rules, 2006 has been held ultra vires by the Hon ble Delhi High Court in Intercontinental Consultants and Technocrats Pvt Ltd v. Union of India Ors [2012-TIOL-966-HC-DEL-ST] which have been upheld by the Hon ble Supreme Court in the case of Union of India v. Intercontinental Consultants and Technocrats Pvt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... endering the service and are reimbursed, that is, for which the service receiver has made the payments to the assessees. As per these Rules, these reimbursable expenses also form part of gross amount charged . Therefore, the core issue is as to whether Section 67 of the Act permits the subordinate legislation to be enacted in the said manner, as done by Rule 5. As noted above, prior to April 19, 2006, i.e., in the absence of any such Rule, the valuation was to be done as per the provisions of Section 67 of the Act. 22. Section 66 of the Act is the charging Section which reads as under: there shall be levy of tax (hereinafter referred to as the service tax) @ 12% of the value of taxable services referred to in sub-clauses of Section 65 and collected in such manner as may be prescribed. 23. Obviously, this Section refers to service tax, i.e., in respect of those services which are taxable and specifically referred to in various sub-clauses of Section 65. Further, it also specifically mentions that the service tax will be @ 12% of the value of taxable services . Thus, service tax is reference to the value of service. As a necessary corollary, it is the value of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iple is reiterated in Chenniappa Mudaliar holding that a rule which comes in conflict with the main enactment has to give way to the provisions of the Act. 28. It is also well established principle that Rules are framed for achieving the purpose behind the provisions of the Act, as held in Taj Mahal Hotel: the Rules were meant only for the purpose of carrying out the provisions of the Act and they could not take away what was conferred by the Act or whittle down its effect. 29. In the present case, the aforesaid view gets strengthened from the manner in which the Legislature itself acted. Realising that Section 67, dealing with valuation of taxable services, does not include reimbursable expenses for providing such service, the Legislature amended by Finance Act, 2015 with effect from May 14, 2015, whereby Clause (a) which deals with consideration is suitably amended to include reimbursable expenditure or cost incurred by the service provider and charged, in the course 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 fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation by which the conduct of mankind is to be regulated when introduced for the first time to deal with future acts ought not to change the character of past transactions carried on upon the faith of the then existing law. 29. The obvious basis of the principle against retrospectivity is the principle of fairness , which must be the basis of every legal rule as was observed in L'Office Cherifien des Phosphates v. Yamashita-Shinnihon Steamship Co. Ltd. Thus, 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 purpose of supplying an obvious omission in a former legislation or to explain a former legislation. We need not note the cornucopia of case law available on the subject because aforesaid legal position clearly emerges from the various decisions and this legal position was conceded by the counsel for the parties. In any case, we shall refer to few judgments containing this dicta, a little later. 30. As a result, we do not find any merit in any o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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