TMI Blog2022 (9) TMI 743X X X X Extracts X X X X X X X X Extracts X X X X ..... and activity of packing, de-packing sorting etc. goes on within the premises. Inclusion of octroi charges for the period prior to 14.05.2015 - HELD THAT:- Considering the observation of Commissioner (Appeals) in the impugned order, no merits found in the appeal filed by Revenue for inclusion of value of electricity charges into the assessable value by invoking Rule 5(1) of Service Tax (Determination of Value) Rules, 2006 for the period prior to 14.05.2015. For the same reason, there are no merit in the appeal filed by SLP in respect of inclusion of electricity charges for period after 14.05.2015 - the appeal of Revenue on the count of inclusion of octroi charges for the period prior to 14.05.2015 by invoking Rule 5 of Service Tax (Determination of Value) Rules, 2006 cannot be upheld. Inclusion of the octroi charges collected by SLP from TIL for the period after 14.05.2015 - HELD THAT:- Any payment of octroi by SLP has to be treated as payment done by SLP on behalf of the owner of the goods, namely, TIL. The question raised by Revenue in its appeal regarding inclusion of octroi has been adequately answered by SLP in the above arguments. Under these circumstances, there ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e capacity as pure agent and therefore, the same are excludable from the value even after 14.05.2015. 3. Learned Authorized Representative relies on the impugned order in respect of electricity charges for the period after 14.05.2015. For the period prior to 14.05.2015, the learned Counsel relied on the grounds of appeal. In respect of electricity charges for the period prior to 14.05.2015, learned Authorized Representative argued that the term Gross Amount charged has been defined in explanation (c) of Section 67 as under: gross amount charged includes payment by cheque, credit card, deduction from account and any form of payment by issue of credit notes or debit notes and [book adjustment, and any amount credited or debited, as the case may be, to any account, whether called Suspense account or by any other name, in the books of account of a person liable to pay service tax, where the transaction of taxable service is with any associated enterprise It has been argued that the concept of classification has been done away with w.e.f. 01.07.2012 on account of omission of Section 65 of Finance Act, 1994. It has argued that the scope of work order issued by TIL to SLP ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... included in assessable value it would result in cascading effect. She argued that the said octroi was paid on behalf of their clients. She relied on the decision of Tribunal in the case of Traffic Manager, Mumbai Port Trust (In Service Tax Appeal No. 86265 of 2015) wherein CESTAT-Mumbai had examined similar issue relating to octroi collected by Mumbai Port Trust and held that octroi collected by Mumbai Port Trust was in the nature of Sovereign Function and the same cannot be taxed. She argued that collection of octroi is therefore, not an action that can be subjected to service tax. She also relied on Board Circular No. 192/02/2016-ST dated 13.04.2016 issued by CBIC wherein the following has been clarified. Sr. No. Issue Clarifications 3. Service Tax on taxes, cesses or duties Taxes, cesses or duties levied are not consideration for any particular service as such and hence not leviable to service tax. These taxes, cesses or duties include Excise duty, Customs duty, Service tax, State VAT, CST, Income tax, Wealth tax, Stamp duty, taxes on professions, trades, callings ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a taxable service, except in such circumstances and subject to conditions as may be prescribed. She pointed out that the said explanation was included in Section 67 w.e.f. 14.05.2015. She pointed out that the Revenue appeal merely relies on the definition of gross amount charged to assert that the electricity charges recovered by M/s SLP from TIL would be includible in the assessable value. She pointed out that gross amount charged does not include reimbursable expenditure up to 14.05.2015. She therefore argued that the decision of Commissioner (Appeals) in respect of Octroi charges and in respect of electricity charges for the period upto 14.05.2015 needs to be upheld. She also asserted that the decision of Commissioner (Appeals) for the period in respect of period after 14.05.2015 needs to be set aside and appeal of M/s SLP needs to be allowed. 5. We have gone through rival submissions. We find that the principal issue to be decided is if electricity consumed by the appellant for providing the services of managing IMP watch packing units and warehouse for accessories and sunglasses can be called as expenses incurred as pure agent. It is obvious that the electricity is cons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rred to procure such goods or services. Thus, to qualify as 'pure agent , one has to satisfy all the above four conditions. 8.2 The appellant is relying on the payment terms of the Work Order dated 31.05.2012 and the invoices issued by them in this regard to canvass their argument that they acted as pure agent while recovering the expenditure incurred towards electricity charges. It is their contention that clause 3(e) of the said Work Order pertaining 'Reimbursement' very explicitly indicates this nature of transaction. The relied clause 3(e) above reads as under: e) Reimbursement: The expenses incurred towards Security Services, staff welfare, fuel, electricity, water, communications. Extra hours of working, housekeeping, pest control Administration will be reimbursed in actual with the monthly limit of Rs.7.8 L but not exceeding the yearly cumulative amount of Rs.93.6 L Sequel shall take the prior approval and provide necessary supporting for all expenditures. Details are as per Annexure-2 attached herewith. The relevant entry, Sr.No.5, pertaining to Electricity Charges at Annexure-2 is reproduced below: Sr. No. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... exclusion was allowed as an exception in certain circumstances, which I find that they failed to do. Further, it is observed that as per Work Order, there is provision for payment of service tax and TDS as applicable for items specified in sub-clause (a) to (g) of Clause (3) which also included 'Reimbursement' at sub clause (e) and the appellant was paying service tax on all reimbursement expenses except Electricity Charges. The Work Order does not seem to specify anywhere that electricity charges reimbursable are not be considered for the purpose of payment of service tax. Therefore, there does not seem to be any specific exclusion for reimbursement of electricity charges as per agreement for the purpose of service tax on such charges. In view thereof, I am of the considered view that the consideration received by the appellant by way of reimbursement of electricity charges in the case would form part of the taxable value of service provided by them and the service tax would be payable accordingly for the period after 14.05.2015 covered in the demand. Since the appellant fails to qualify the test of being a pure agent so far as reimbursement of electricity charges, I do no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not include currency that is held for its numismatic value. (c) gross amount charged includes payment by cheque, credit card, deduction from account and any form of payment by issue of credit notes or debit notes and (book adjustment, and any amount credited or debited, as the case may be, to any account, whether called Suspense account or by any other name, in the books of account of a person liable to pay service tax, where the transaction of taxable service is with any associated enterprise.]] The said Section was amended w.e.f. 14.05.2015 to read as follows: Amendment of section 67. - In section 67 of the 1994 Act, in the Explanation, for clause (a), the following clause shall be substituted, namely: (a) consideration includes (i) any amount that is payable for the taxable services provided or to be provided; (ii) any reimbursable expenditure or cost incurred by the service provider and charged, in the course of providing or agreeing to provide a taxable service, except in such circumstances, and subject to such conditions, as may be prescribed; (iii) any amount retained by the lottery distributor or selling agent from gross sale amount of lottery tick ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eaning which is to be attached to Section 67 (unamended i.e. prior to 1-5-2006) or after its amendment, with effect from 1-5-2006. 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 the High Court was right in interpreting Sections 66 and 67 to say that in the valuation of taxable service, the value of taxable service shall be the gross amount charged by the service provider for such service and the valuation of tax service cannot be anything more or less than the consideration paid as quid pro qua for rendering such a service. 27 . This position did not change even in the amended Section 67 which was inserted on 1-5-2006. Sub-section (4) of Section 67 empowers the rule-making authority to lay down the manner in which value of taxable service is to be determined. However, Section 67(4) is expressly made subject to the provisions of sub-section (1). Mandate of sub-section (1) of Section 67 is manifest, as noted above viz. the service tax is to be paid only on the services actually provided by the service provider. 28 . It is trite that rules ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hysically consist 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 a judgment of a court of law. There is a technique required to draft a legislation as well as to understand a legislation. Former technique is known as legislative drafting and latter one is to be found in the various principles of interpretation of statules . vis- -vis ordinary prose, a legislation differs in its provenance, layout and features as also in the implication as to its meaning that arise by presumptions as to the intent of the maker thereof. 28. Of the various rules guiding how a legislation has to be interpreted, one established rule is that unless a contrary intention appears, a legislation is presumed not to be intended to have a retrospective operation. The idea behind the rule is that a current law should govern current activities. Law passed today cannot apply to the events of the past. If we do something today, we do it keeping in view the law of toda ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... etermination of Value) Rules, 2006, went much beyond the mandate of Section 67. In these circumstances, and also considering the observation of Commissioner (Appeals) in the impugned order reproduced in para 5 above, we do not find any merit in the appeal filed by Revenue for inclusion of value of electricity charges into the assessable value by invoking Rule 5(1) of Service Tax (Determination of Value) Rules, 2006 for the period prior to 14.05.2015. For the same reason, we also do not find any merit in the appeal filed by SLP in respect of inclusion of electricity charges for period after 14.05.2015. 9. For the same reason, the appeal of Revenue on the count of inclusion of octroi charges for the period prior to 14.05.2015 by invoking Rule 5 of Service Tax (Determination of Value) Rules, 2006 cannot be upheld. 10. In respect of the inclusion of the octroi charges collected by SLP from TIL for the period after 14.05.2015 is concerned, we find that the Commissioner (Appeals) has observed as follows: 9. As regards the issue of reimbursement of Octroi charges, it is observed that the said expenditure was incurred by the appellant on behalf of their customers during the cours ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l mutual consent between the two parties would suffice to cover as a 'contractual agreement' in the given context. In the present case, the invoice Issued by the appellant to their customers for reimbursement of charges paid towards Octroi by them by specifically mentioning the same amply indicates the presence of such a 'contractual agreement between them to incur the said expenditure for the customer by the appellant. Therefore, I do not agree with the adjudicating authority's observation that there was no such contractual agreement in the case between the appellant and service recipient. Regarding the second condition that the person should neither intends to hold nor holds any title to the goods or services so procured or provided as pure agent of the recipient of service, it is observed that such a condition is not applicable in the present case as it was not a case of procurement of any service or goods for the receiver of the service but was a mandatory payment to be made to a statutory authority under a legal obligation that falls upon the of goods while entering the specified station. Even otherwise, the facts that Octroi is a statutory levy collected on th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lters or affects the compliance of the above condition as the amount of reimbursement of Octroi and the service charge are separately mentioned in the Invoice issued by the appellant to their customer and it is not the case that they were recovering Octroi charges in excess of what they have actually paid. Therefore, the fourth condition also stand satisfied by the appellant. Having fulfilled all the conditions required as discussed above, the appellant qualifies as a pure agent while making payment of Octroi on behalf of the customers. 9.2 However, acting as pure agent simply does not allow the appellant to exclude the reimbursable expenditure from the purview of taxable value of service, but for that they also have to satisfy certain conditions stipulated under Rule 5(2) of the Valuation Rules which are discussed hereunder condition-wise: (i) the service provider acts as a pure agent of the recipient of service when he makes payment to third party for the goods or services procured; This condition actually does not apply in cases of reimbursable expenditure incurred towards payment of statutory levies. As discussed earlier, the payment of octroi in the case was not to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ade by the appellant on behalf of the recipient of service viz. their customer has been separately clearly indicated in the invoice issued by the appellant to their customer and there is no dispute to this fact . (vii) the service provider recovers from the recipient of service only such amount as has been paid by him to the third party; and The reimbursement of Octroi recovered/received by the appellant from their recipient of service viz. their customer was exactly the same amount they had paid as Octroi to the Municipal Authority on behalf of their customer. (viii) the goods or services procured by the service provider from the third party as a pure agent of the recipient of service are in addition to the services he provides on his own account; It is an obvious fact that Octroi was a statutory levy payable by the importer of goods, in the present case the customer of the appellant. It, in no way, form the part of service being provided by the appellant. Therefore, making payment of Octroi to the Municipal Authority on behalf of the customers was in addition to the service the appellant provided on his own account. We find that the Commissioner (Appeals) h ..... X X X X Extracts X X X X X X X X Extracts X X X X
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