Adept Vs Principal Commissioner of CGST & Central Excise (CESTAT Allahabad)
CESTAT Allahabad held that supply of diesel in Operation & Maintenance contract, being supply of goods, is outside the purview of service tax. Accordingly, value of diesel is not includible in the assessable value of operation and maintenance service.
Facts- Appellant is a partnership firm. During the audit of the records of the Party for the F.Y. 2015-16 & 2016-17, it was observed that Appellant was engaged in Operation & Maintenance of Telecom/Mobile towers. Services provided included Diesel Filling services for M/s VIOM Networks Limited. After introduction of ‘Negative List Based Taxation of Services’ w.e.f. 01.07.2012, the said services were neither included under the negative list of Services (u/s. 66D) nor exempted under any notification. Accordingly, notice was issued and demand was confirmed.
Conclusion- 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. In fact, in regard to free supply of diesel and explosives, the Supreme Court specifically observed that they would not warrant inclusion while arriving at the gross amount charged on the service tax to be paid.
The valuation of taxable service for charging service tax could only be the gross amount charged for providing such ―taxable services” which in the present case is the filing of diesel and any other amount cannot be a part of the valuation as it cannot be an amount for such ―taxable services.
FULL TEXT OF THE CESTAT ALLAHABAD ORDER
This appeal is directed against Order-in-Original No.51/PC/2022-23 dated 28.02.2023 of the Principal Commissioner CGST and Central Excise, Lucknow. By the impugned order following has been held:
“ORDER
(1) I confirm the demand and order recovery of Service Tax amounting to Rs.5,13,91,838/- (Rupees Five Crore Thirteen Lakh Ninety-One Thousand Eight Hundred and Thirty-Eight only) inclusive of Cess against M/s Adept, 2/148, Vishal Khand, Gomti Nagar, Lucknow under proviso to Section 73 (1) of the Finance Act, 1994, read with Section 173, 174 & 142 of Central Goods & Services Tax Act, 2017 (hereinafter referred as “CGST Act”);
(2) I also demand and confirm interest due thereon at the applicable rate from the Noticee under Section 75 of the Act read with Section 173, 174 & 142 of CGST Act on the amount of Service Tax being confirmed at (1) above;
(3) I impose a penalty of Rs.5,13,91,838/- (Rupees Five Crore Thirteen Lakh Ninety-One Thousand Eight Hundred and Thirty-Eight only) upon M/s Adept, 2/148, Vishal Khand, Gomti Nagar, Lucknow under Section 78 of the Act for nonpayment of due Service Tax by suppressing the value of taxable services with intent to evade the payment c of Service Tax from the department read with Section 173, 174 & 142 of CGST Act. The penalty imposed herein shall be further reduced to 25% of the demand of Service Tax confirmed herein subject to the condition that the benefit of reduced penalty shall be applicable only if the amount of such reduced penalty is also paid along with the Service Tax confirmed and the interest payable thereon within a period of 30 days of receipt of this order.”
2.1 Appellant is a partnership firm, registered with registration number AAQFA8925JSD001. During the audit of the records of the Party for the F.Y. 2015-16 & 2016-17, it was observed that Appellant was engaged in Operation & Maintenance of Telecom/Mobile towers. Services provided included Diesel Filling services for M/s VIOM Networks Limited (abbreviated as ‘VNL’). After introduction of ‘Negative List Based Taxation of Services’ w.e.f. 01.07.2012, the said services were neither included under the negative list of Services (under Section 66D) nor exempted under any notification
2.2 During the course of scrutiny of the Profit and Loss Statements of the Party for the period from the F.Y. 2015-16 to F.Y. 2016-17, it was observed that the Party had shown following incomes in their Profit/Loss Statements:-
