UNION OF INDIA & ANR. versus M/S. INTERCONTINENTAL CONSULTANTS AND TECHNOCRATS PVT. LTD.

Citation: [2018] 10 S.C.R. 309 · Decided: 07-03-2018 · Supreme Court of India · Bench: A.K. SIKRI · Disposal: Disposed off

Cited by 1 judgment(s) · cites 6 · see the full citation network in Lexace

Judgment (excerpt)

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UNION OF INDIA & ANR.
v.
M/S. INTERCONTINENTAL CONSULTANTS AND
TECHNOCRATS PVT. LTD.
(Civil Appeal No. 2013 of 2014)
MARCH 07, 2018
[A. K. SIKRI AND ASHOK BHUSHAN, JJ.]
Service Tax (Determination of Value) Rules, 2006 – r.5 – If
ultra vires the provisions of ss.66, 67 of 1994 Act – Respondents-
Assessees, provider of various services receive payments not only
for the services so rendered but are also reimbursed out of pocket
expenses incurred by them such as air travel, hotel stay, etc.–
Assessees paying service tax in respect of amounts received by them
for services so rendered but not for the out of pocket expenses
incurred by them, which was reimbursed by the clients – Under r.5,
the value of said reimbursable activities are also to be included as
part of services provided by the respondents – Challenge to – Writ
petition allowed by High Court – On appeal, held: Section 66 of
the 1994 Act is the charging section and refers to service tax, i.e. in
respect of those services which are taxable and specifically referred
to in various sub-clauses of s.65 of the 1994 Act – It is the value of
the services which are actually rendered, the value whereof is to be
ascertained for the purpose of calculating the service tax payable
thereupon – Any other amount which is calculated not for providing
such taxable service cannot be a part of that valuation – Thus,
service tax is to be paid only on the services actually provided by
the service provider – This is the plain meaning to be attached to
s.67 which deals with valuation of taxable services for charging
service tax – r.5 went much beyond the mandate of s.67 –  High
Court was right in interpreting ss.66 and 67 to say that in the
valuation of taxable service, the value of taxable service shall be
the gross amount charged by the service provider ‘for such service’
and the valuation of tax service cannot be anything more or less
than the consideration paid – Finance Act, 1994 – ss. 66, 67 and
s.94.
[2018]  10  S.C.R. 309
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SUPREME COURT REPORTS
[2018] 10 S.C.R.
Interpretation of Statutes – Conflict between statute (Act) and
subordinate legislation (Rules) – Held: Rules are framed for
achieving the purpose behind the provisions of the Act and thus,
cannot go beyond the statute – A rule which comes in conflict with
the main enactment has to give way to the provisions of the Act.
Dismissing the appeals and disposing of the transferred
writs, the Court
HELD: 1.1 Rule 5 of the Service Tax (Determination of
Value) Rules, 2006 brings within its sweep the expenses which
are incurred while rendering the service and are reimbursed,
that is, for which the service receiver has made the payments to
the assessees. As per these Rules, these reimbursable expenses
also form part of ‘gross amount charged’.  Prior to April 19, 2006,
i.e., in the absence of any such Rule, the valuation was to be
done as per the provisions of Section 67 of the Finance Act, 1994.
[Para 21] [343-E-F]
1.2 Section 67, Finance Act, 1994 refers to service tax, i.e.,
in respect of those services which are taxable and specifically
referred to in various sub-clauses of Section 65, Finance Act,
1994. Further, it also specifically mentions that the service tax
will be @ 12% of the ‘value of taxable services’. Thus, service
tax is in reference to the value of service. As a necessary corollary,
it is the value of the services which are actually rendered, the
value whereof is to be ascertained for the purpose of calculating
the service tax payable thereupon. In this hue, the expression
‘such’ occurring in Section 67 of the Act assumes importance. In
other words, in valuation of taxable services for charging service
tax, the authorities are to find what is the gross amount charged
for providing ‘such’ taxable services. As a fortiori, any other
amount which is calculated not for providing such taxable service
cannot a part of that valuation as that amount is not calculated for
providing such ‘taxable service’. That is the plain meaning which
is to be attached to Section 67 (unamended, i.e., prior to May 01,
2006) or after its amendment, with effect from, May 01, 2006.
Once this interpretation is to be given to Section 67, it hardly
needs to be emphasised that Rule 5 of the 2006 Rules went much
beyond the mandate of Section 67.  The High Court was right in
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interpreting Sections 66 and 67, Finance Act, 1994 to say that in
the valuation of taxable service, the value of taxa

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