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TMI Blog2024 (1) TMI 677X X X X Extracts X X X X X X X X Extracts X X X X ..... rgo Pvt Ltd [the Appellant]. 2. The sole issue that arises for consideration in this appeal is whether the appellant, who had paid service tax on the amount received towards agency charges while providing clearing and forwarding agent service, is also required to pay service tax on the reimbursement amount which it had incurred for the service recipient. 3. The Commissioner has recorded a finding based on rule 5(1) of the Service Tax (Determination of Value) Rules 2006 [2006 Rules] that the expenditure incurred by the service provider in the course of providing taxable service shall be treated as a consideration for the taxable service. Though the appellant had placed before the Commissioner, the decision of the Delhi High Court in Interc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eme Court. 5. Shri Rajeev Kapoor, learned authorized representative appearing department supported the impugned order. 6. The submissions advanced by the learned counsel for the appellant and the learned authorized representative appearing for the department have been considered. 7. Section 67 of the Finance Act deals with valuation of taxable services for charging service tax. Sub-section (1) of section 67 provides that where service tax is chargeable on any taxable service with reference to its value, then such value shall, 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 the service provider. It is, therefore, clear that o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by the service provider for such services provided or to be provided by him in a case where consideration for such service is money. The High Court placed emphasis on the words "for such service" and took the view that the charge of service tax under section 66 has to be on the value of taxable service i.e. the value of service rendered by the assessee and the quantification of the value of service can, therefore, never exceed the gross amount charged by the service provider for the service provided by him. On that analogy, the High Court opined that the scope of rule 5 goes beyond the scope of section 67 which was impermissible as rules could be framed only for carrying out the provisions of Chapter V of the Finance Act. In taking this v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urt in paragraph 26 observed that the authority has to find what is the gross amount charged for providing "such" taxable services and so any other amount which is calculated not for providing such taxable service cannot be a part of that valuation as the amount is not calculated for providing "such taxable service." This, according to the Supreme Court, is the plain meaning attached to section 67 either prior to its amendment on 1 May, 2006 or after this amendment and if this be so, then rule 5 went much beyond the mandate of section 67. The Supreme Court, therefore, held that the value of material which is supplied free by the service recipient cannot be treated as "gross amount charged" as that is not a "consideration" for rendering the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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