TMI Blog2024 (1) TMI 677X X X X Extracts X X X X X X X X Extracts X X X X ..... ourt noted that rule 5 does bring within its sweep the expenses which are incurred while rendering the service and are reimbursed and, therefore, what was required to be decided was whether section 67 of the Act permits subordinate legislation to be enacted as was done by rule 5. It needs to be noted that prior to 19 April, 2006, in the absence of a rule, the valuation was required to be done as per the provisions of section 67 of the Act. The Supreme Court noticed that the charging section 66 provides that there shall be levied service tax @ 12% of the value of taxable services referred to in the sub-clauses of Section 65 and collected in such manner as may be prescribed. Thus, the service tax is on the value of taxable services and, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncy 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 Intercontinental Consultants Technocrats Pvt Ltd vs. Union of India [2013 (38) STR 375], the Commissioner did not consider it appropriate to rely upon the same for the reason that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l 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 only such amount is subject to service tax which represents consideration for provision of service and any other amount which is not a consideration for provision of ser ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 view, the High Court observed that the expenditure or cost incurred by the service provider for providing the taxable service can never be considered as the gross amou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 service. The appeal filed by the Department was, therefore, dismissed. 10. Thus, in view of the decisions of the Supreme Court and the Delhi High Court in Interc ..... X X X X Extracts X X X X X X X X Extracts X X X X
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