Whether consideration to be treated as ‘cum-tax’ if tax not collected separately?

PJ/CASE LAW/2016-17/3109

Case:-C.S.T., MUMBAI-I VERSUS BLUECHIP CORPORATE INVESTMENT CENTRE LTD.

Citation:- 2016 (42) S.T.R. 50 (Tri. – Mumbai)

Brief facts:-The issue involved in this case is regarding the service tax liability on the respondent assessee on the commission received by them for sale of RBI bonds. The adjudicating authority has confirmed the demands raised but reduced the demand considering the amounts received as commission by the respondent company as cum-tax amount. The respondent has already discharged the service tax liability and the interest thereof. Revenue is aggrieved by the impugned order only on the ground that the adjudicating authority should not have considered the amount received by respondent company as cum-tax amount.

Appellant’s contention:- Learned Departmental Representative would reiterate the grounds of appeal which states that the transaction entered into by the contracting parties i.e. RBI and the respondent herein, is on the premise that the service rendered would not be liable to ‘service tax’; the respondent failed to adduce any evidence to prove that the value of taxable service was inclusive of service tax and the first appellate authority has incorrectly relied upon the judgment of the Tribunal in the case of Advantage Media Consultant- 2008 (10) S.T.R. 449 while the judgment of the Hon’ble Supreme Court in the case of Amrit Agro Industries Ltd.v. Commissioner of Central Excise - 2007 (210) E.L.T. 183 (S.C.) will be applicable and the ratio is exclusion of duty element from the price will arise only if manufacturer is able to prove that the price of goods includes excise duty payable.

Respondent’s contention:-The learned counsel would rely upon the same judgment of the Tribunal in the case of Advantage Media Consultant (supra) and would submit that this judgment has been upheld by the Apex Court by dismissing the civil appeals filed by the Revenue [2009 (14) S.T.R. J49 (S.C.)]. He would also rely upon Trade Notice No. 20/2002, dated 23-5-2002 issued by Delhi-II Commissionerate wherein it was clarified that the amounts recovered will be taken to constitute amounts inclusive of service tax.

Reasoning of judgement:- On consideration of the submissions made by both the sides and on perusal of the records, we find that the Revenue’s appeal is devoid of merits. The adjudicating authority has held that the respondent has received an amount of Rs. 7,01,26,712/- as commission from Reserve Bank of India for the sale of bonds. Undoubtedly, no service tax was paid on the said amount and accordingly the conclusion reached by the adjudicating authority that the entire amount needs to be considered as cum-tax amount and tax liability worked out on such value is the correct conclusion and the judgment of the Tribunal in the case of Advantage Media Consultant (supra) holds so. We reproduce the said judgment below :

“3. Service tax is an indirect tax. As per this system of taxation, tax borne by the consumer of goods/services is collected by the assessee (manufacturer/service provider) and remitted to the Government. When the amount is collected for the provision of services, the total compensation received should be treated as inclusive of service tax due to be paid by the ultimate customer of the services unless service tax is also paid by the customer separately. So considered, when no tax is collected separately, the gross amount has to be adopted to quantify the tax liability treating it as value of taxable service plus service tax payable. We find that this principle has been legislated in the following terms with effect from 18-4-2006 in Section 67(2) of the Finance Act, 1994 as amended :

67(2).Where the gross amount charged by a service provider, for the service provided or to be provided is inclusive of service tax payable, the value of such taxable service shall be such amount as with the addition of tax payable, is equal to the gross amount charged.

This principle has all along been relevant and had to be applied. In the circumstances, we find no reason to interfere with the impugned order and we reject both the appeals filed by the Revenue. The Cross Objection in respect of S.T. Appeal No. 55/06 is also disposed.”

The ratio of the said judgment has been upheld by the Hon’ble Apex Court by dismissing Civil Appeal filed by the Revenue after condoning the delay which would mean that the value received for the taxable purpose needs to be considered as cum-tax amount if the service tax is not charged. Relying upon the said judgment and in the peculiar facts and circumstances of this case, we hold that the impugned order is correct and legal to the extent it is challenged before Tribunal by the Revenue. Revenue’s appeal is rejected.

Decision:-Appeal Rejected.

Comment:- The analogy of the case is that the service tax is an indirect tax wherein the burden is to be borne by the service recipient. Consequently, if no service tax was separately collected by the assessee, the consideration received is to be treated as ‘cum-tax’ and the calculations should be made accordingly. This view is supported by the decision given in the case of Advantage Media Consultant which has been upheld by the Apex Court.

Prepared By: - Alakh Bhandari

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PJ/CASE LAW/2016-17/3109

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