Page 193 - GSTL_2nd July 2020 _Vol 38_Part 1

2020 ] HAJEE A.P. BAVA & CO. v. COMMR. OF C. EX. & SERVICE TAX, JAIPUR-II 111
amount received by the appellant for hiring of cranes/supply of manpower that
has been disputed by the Department. In spite of a specific statement made by
the appellant that the amount received for supply of cranes/mobilization of
manpower through separate work orders (other than the work orders issued for
erection of plants) could not have been included in the taxable value, there is no
discussion of this contention of the appellant in the impugned order and only a
bald statement has been made that this amount has also been received by the
appellant for the work orders relating to erection of plant. This statement is not
based on any evidence on the record and in fact, as noticed above is contrary to
the documents on record. The income of Rs. 5,50,53,066/- is not in connection
with the work order issued for erection of plant.
20. It is not the case of the Department that the income received from
supply of cranes/mobilization of manpower could be subject to levy of Service
Tax. In fact the appellant has discharged the Service Tax liability for supply of
cranes w.e.f. 16 May, 2008 when a specific category of “supply of tangible goods”
was introduced w.e.f. 16 May, 2008 under Section 65(105)(zzzzj) of the Act.
21. What is also important to notice is that the income derived from
supply of cranes/mobilization of manpower has been included in the value of
taxable services by placing reliance upon Rule 5(1) of the 2006 Rules. This Rule
5(1) was struck down by the Delhi High Court in Intercontinental Consultants
which was ultimately upheld by the Supreme Court.
22. The submission of Learned Counsel for the appellant is that the
amount received for supply of cranes/mobilization of labour cannot be treated
as a consideration for the provision of service under the works contract for erec-
tion of plant in terms of Section 67 of the Act.
23. This Section 67 of the Act deals with valuation of taxable services
for charging Service Tax. Sub-section (1) of Section 67 provides that where Ser-
vice Tax is chargeable on any taxable service with reference to its value, then
such value shall where 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 the service provider. It is, therefore, clear that only such
amount is subject to Service Tax which represents consideration for provision of
service and any other amount which is not a consideration for provision of ser-
vice cannot be subjected to service tax.
24. Section 67 of the Act was considered and explained by the Supreme
Court in Intercontinental Consultants. The appellant therein was providing con-
sulting engineering services. It received payment not only for the services pro-
vided by it but was also reimbursed for the expenses incurred by it on air travel,
hotel stay, etc. It paid Service Tax on the amount received by it for services ren-
dered to its clients but did not pay any Service Tax in respect of expenses in-
curred by it which were reimbursed by the clients. A show cause notice was is-
sued to it to explain why Service Tax should not be charged on the gross value
including reimbursable and out of pocket expenses. The provisions of Rule 5(1)
of the Rules were resorted to for this purpose. A writ petition was filed challeng-
ing the vires of Rule 5 as being unconstitutional as well as ultra vires the provi-
sions of Sections 66 and 67 of the Act. The High Court of Delhi accepted the said
contention and declared Rule 5 to be ultra vires the provisions of Sections 66 and
67 of the Act. The High Court noted that both the amended and unamended Sec-
tion 67 authorized the determination of value of taxable services for the purpose
of charging Service Tax under Section 66 as the gross amount charged by the ser-
GST LAW TIMES  2nd July 2020  193