Page 133 - GSTL_7th May 2020_Vol 36_Part 1

2020 ] GLOBAL COAL & MINING PVT. LTD. v. COMMISSIONER OF SERVICE TAX, DELHI 91
The High Court noted that both the amended and unamended Section 67 author-
ised the determination of value of taxable services for the purpose of charging
Service Tax under Section 66 as the gross amount charged by the service provid-
er for such services provided or to be provided by him in a case where considera-
tion for such service is money. The High Court placed emphasis 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 provid-
ed 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 the Act. In taking this view, the
High Court observed that the expenditure or cost incurred by the service provid-
er for providing the taxable service can never be considered as the gross amount
charged by the service provider “for such service” provided by him.
39. The Supreme Court noticed the various reimbursable claims which
were included in the gross value. The Supreme Court noted that Rule 5 does
bring within its sweep the expenses which are incurred while rendering the ser-
vice 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
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 pre-
scribed. Thus, the Service Tax is on the “value of taxable services” and, therefore,
it is the value of the services which are actually rendered which has to be ascer-
tained for the purpose of calculating the Service Tax. It is for this reason that the
Supreme Court observed that the expression “such” occurring in Section 67 of
the Act assumes importance. It is in this context that the Supreme Court ob-
served in Paragraph 26 that the authority has to find what is the gross amount
charged for providing “such” taxable services and so any other amount which is
calculated not for providing such taxable service cannot be a part of that valua-
tion 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 ei-
ther 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.
40. Thus, the reimbursement charges could not have been included in
the taxable value. The order passed by the Principal Commissioner confirming
the demand for the reimbursement charges, therefore, needs to be set aside.
41. Thus, for all the reasons stated above, the impugned order dated
29 May, 2015 cannot be sustained and is set aside. The appeal is, accordingly
allowed.
(Operative portion of the order pronounced in the open Court)

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GST LAW TIMES  7th May 2020  133