The High Court of Bombay dismissed a writ petition challenging a Service Tax demand. The court held that since the petitioner had already filed civil suits for recovery of the disputed amounts and they were pending, the writ petition served no purpose and was refused admission.
The writ petition was dismissed for want of admission.
This page shows the compact analysis of this judgement. The full analysis — procedural history, issue-by-issue holdings with ratio and obiter, advocates, and paragraph-level evidence for every claim — is being added to the record in batches and will appear here when this judgement has been through it.
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IN THE HIGH COURT OF JUDICATURE AT BOMBAY BENCH AT AURANGABAD
WRIT PETITION NO.2334 OF 2014
M/s. Sai Labour Contractor,
Through its Proprietor
Sushila W/o. Dhondiram Phoke,
Age-50 years, Occu-Business,
R/o. Plot No. 1138, N-6,
Sai Nagar, CIDCO,
Aurangabad...PETITIONER
Versus
1. The Union of India, .. RESPONDENTS through Its Secretary, Excise Department, New Delhi.
2. National Textile Corporation Limited (Western Region) (A Government of India Undertaking-Ministry of Textile NTC House, 15, N.M.Marg Ballard Estate, Mumbai 400 001)
3. The Secondary School Board, Aurangabad at Aurangabad.
4. The Commissioner, Central Excise & Customs, Town Centre, N-5, Cidco, Aurangabad.
5. Aurangabad Textile Mill A Company incorporated under Company Act, (A Subsidary of National Textiles
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Corporation Ltd. Western Region)
through its General Manager/Officer
in Charge Having Office at
Post Box No. 97, Kotwalpura,
Mill Corner, Aurangabad
6.Barshi Textile Mills, Barshi
(Unit of National Textile Corporation
(SM) Ltd.) through its General Manager/
Officer situated at 2553,
Bhoyare Road, P.B. No. 36,
Barshi, Pin-413 401
Dist. Solapur (MS)
Mr. Mr.V.J. Dixit, h/f Mr.A.G.Talhar, Advocate for the
petitioner.
Mr.S.B.Deshpande, Advocate for respondent No.1
Mrs.Surekha Mahajan, Advocate for respondent No.3
Dr.Kalpalata Bharaswadkar, Advocate for respondent No.4
Mr.M.N. Navandar, Advocate for respondent Nos. 2 & 5 to
9.
CORAM : A.V. NIRGUDE &
A.M. BADAR,JJ.
DATED :25.06.2015
ORAL JUDGMENT: [PER: A.V. NIRGUDE, J.]
1.The petitioner is Proprietor engaged in supply
of man power to various Private Companies and Government
undertakings. The petitioner is also registered as
service tax payer. The petitioner deposited certain
amount as service tax. During 2008 service tax department
conducted audit of record and books of account of the
petitioner and in 2011 they issued show cause-cum-demand
notice to the petitioner, directing to show cause as to
why the taxable value of service tax payment for a period
between 2006-2010 should not be recomputed. They asserted
that taxable value of the service showed by the
petitioner was grossly less and the difference of the
service tax to the tune of Rs.95,00,000/- was demanded.
The petitioner resisted this demand but in vain. He then
filed an appeal before the Commissioner, Central Excise
Customs & Service Tax but the appeal was also dismissed.
The main bone of contention of the petitioner is thathe
is liable to pay service tax only on commission he earned
and not on gross amount he has charged and received from
his client. In order to substantiate this the petitioner
also gave a break-up of cost he incurred for providing
the service. In this calculation he included 4% service
tax on his commission and not on gross amount which he
received and utilized for providing service. Learned
counsel for the petitioner asserted that Section 67 and
Rule made thereunder clearly indicate that valuation of
taxable service would depend only on commission charged &
earned. In order to appreciate this submission we must
read Section 67 as under:-
“67. Valuation of Taxable Service for charging
Service Tax:
(1)Subject to the provision of the Chapter,
service tax chargeable on any taxable service
with reference to its value shall,
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(i) in case whether 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 him:
(ii)in a case where the provision of service is
for a consideration not wholly or partly
consisting of money, be such amount in money,
with the addition of service tax charged, is
equivalent to the consideration:”
(iii) in a case where the provision of service
is for a consideration which is not
ascertainable, be the amount as may be
determined in the prescribed manner.
(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.
(3) The gross amount charged for the taxable
service shall include any amount received
towards the taxable service before, during or
after provision of such service.
(4) Subject to the provisions of sub-sections
(1),(2) & (3), the value shall be determined in
such manner as may be prescribed.”
2.The wording of this provision is very clear.
When service is provided for a consideration in money the
gross amount charged by the provider would be the value
of such service for purpose of charging service tax. For
calculating of service tax, “Service Tax Determination of
Value Rules are made in 2006.
3.Rule 2-A of the Rules is relates to
determination of value of service involved in execution
of a work contract. Explanation-B to Sub-Rule 1 gives
list of items which are required to be taken into account
for calculating value of work contract. This provision
elaborates as to what would be taken into account for
calculating gross amount. These Provisions clearly
indicate that the service provider must realize before
providing service that the gross value of his service
would be taken into account for calculating service tax
and such tax should be recovered from the recipient of
the service. If the petitioner did not realize this at
the relevant time and apparently did not recover such
amount from recipient, filing this writ petition would
serve no purpose. The petitioner has admittedly filed
suits for recovery of such amounts against recipient of
service and such suits are still pending. In view of this
we find no reason for admitting the writ petition. The
petition stands dismissed.
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4.The arguments suggesting that Rule-5 of the
Service Tax (Determination of Value) Rules, 2006, is held
to be ultra vires to Section 67 is misplaced and not
relevant to the question that is involved in this case.
[A.M. BADAR,J.] [A.V. NIRGUDE,J.]
VishalK/wp2334.14
2 issues framed by the court
Whether the writ petition liable to be admitted considering the petitioner's pending civil suits for recovery of disputed service tax amounts.
Whether the gross amount charged by the service provider is the correct basis for valuation of taxable service under Section 67.
3 provisions across 2 enactments
M/s. Sai Labour Contractor
The Union of India
National Textile Corporation Limited (Western Region)
The Secondary School Board, Aurangabad
The Commissioner, Central Excise & Customs, Aurangabad
Aurangabad Textile Mill A
A.V. Nirgude
A.M. Badar
As recorded by the court registry
Judgements on the same questions, provisions and authorities, from every court