By Puloma Dalal, Jayesh Gogri, Mandar Telang Chartered Accountants
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Pre-deposit – Whether Rule 3 of Service Tax
(Determination of Valuation Rules) 2006 (“Valuation Rules”) is
attracted, when monetary consideration for service is specified in the
agreement and department has alleged suppression of value without
following procedure in Rule 4 of Valuation Rules? Held, No.
Facts:
The
appellant had entered into two agreements with the persons holding
mining licenses, one for providing mining services and the other for
purchasing the goods (i.e. extracted minerals) exclusively by the
appellant from the license holders. Department resorting to Rule 3(b) of
the valuation rules included certain expenses from the Profit and Loss
A/c such as “Over Burden Removal; Raising and Stacking Charges; Hire
Charges; Mining Expenses, Screening Charges; Sampling and Analysis;
Power and Fuel; Wages; Maintenance, etc.” in the value of taxable
services. Appellant contended before the Tribunal but did not succeed
and appealed before the High Court.
Held:
When there
are two agreements independent of one another, and a specific amount is
charged by the service provider under the agreement, that agreement has
to be tested on its own merits in terms of section 67(1)(i) of the
Finance Act, 1994 and invoking Rule 3(b) of the Valuation Rules, may not
be justified. Further, Rule 3(b) comes into play only when Rule 3(a) of
the Valuation Rules fails, and prima facie, there is no cogent reason
shown in the adjudication order as to how Rule 3 of the Valuation Rules
is applicable when there is a specific agreement. In this context,
Tribunal observed that, no provision under the Act or the Valuation
Rules, 2006 calls upon the assessee to prove the cost of services in any
manner and that the Revenue has also not followed the procedure
prescribed under Rule 4 of the Valuation Rules. It reduced the amount of
pre-deposit setting aside the order of the Tribunal
