Page 194 - GSTL_2nd July 2020 _Vol 38_Part 1

112 GST LAW TIMES [ Vol. 38
vice provider for such services provided or to be provided by him in a case
where consideration 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, there-
fore, never exceed the gross amount charged by the service provider for the ser-
vice provided 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 Chapter 5 of the Act. In
taking this view, the High Court observed that the expenditure or cost incurred
by the service provider for providing the taxable service can never be considered
as the gross amount charged by the service provider “for such service” provided
by him. The Supreme Court noticed the various reimbursable claims which were
included in the gross value and in respect of certain appeals, the value of diesel
supplied free of cost by the service recipient was also considered. The Supreme
Court noted that Rule 5 does bring within its sweep the expenses which are in-
curred while rendering the service 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 14 may be prescribed. 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 ascertained 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 in paragraph 26 observed 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 can-
not be a part of that valuation 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 either 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 Sec-
tion 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.
25. Thus, reliance placed in the impugned order on Rule 5(1) of the
2006 Rules for including the cost of cranes/mobilization of labour in the value of
taxable services under Rule 5(1) of the 2006 Rules is not justified.
26. As it is not possible to sustain the demand under the impugned or-
der, it will not be necessary to examine the contention raised by Learned Counsel
for the appellant that the extended period of limitation under Section 73 of the
Act could not have been invoked in the present case.
27. Thus, for all the reason stated above, it is not possible to sustain the
impugned order. It is accordingly, set aside and the appeal is allowed.
(Dictated in the open Court)
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GST LAW TIMES  2nd July 2020  194