International Commerce Limited Vs Principal Commissioner of CGST & Central Excise (CESTAT Kolkata)
The appeal before the Customs, Excise and Service Tax Appellate Tribunal (CESTAT), Kolkata challenged an order confirming demand of service tax along with interest and penalty under Section 78 of the Finance Act, 1994. The appellant, engaged in ferrous scrap processing and trading, had undertaken work for Steel Authority of India Limited (SAIL) under a tender for excavation and processing of slag dumps. The scope involved recovery and processing of ferrous scrap, with a fixed service charge of ₹1708 per metric tonne plus service tax. The appellant discharged service tax on the invoiced amount and deposited it with the government.
As part of the arrangement, processed scrap was sold by SAIL to the appellant’s sister concern, which paid central excise duty on such purchases. The department alleged that such sale constituted additional consideration flowing to the appellant and sought to include the income earned by the sister concern in the taxable value of services under Section 67 of the Finance Act, 1994. Based on this, a service tax demand of ₹2.23 crore along with interest and penalty was confirmed.
The appellant contended that the service tax liability had already been discharged on the agreed consideration received from SAIL and that the purchase of scrap by the sister concern was a separate transaction between SAIL and the sister concern, carried out on market-driven rates and subject to excise duty. It was argued that there was no provision to include third-party income in the valuation of taxable services and that any alleged violation of tender conditions was a matter between SAIL and the appellant, not the service tax authorities. It was also contended that the proceedings were time-barred.
