A service provider cannot claim cum-tax benefit under Section 67(2) of the Finance Act, 1994, if the service tax is explicitly shown as a separate component in the invoice, regardless of whether the tax was actually collected from the recipient.

PER: P. A. AUGUSTIAN

The issue in the present appeal is whether the Appellant is eligible to claim the benefit of cum duty on the amount collected from the tenant when the service tax is shown separately in invoice but the tenant has not paid the service tax.

Appellant holding Service Tax registration and rendering service under the categories of Construction of Residential Complex Service, Advertising Agency Service, Renting of Immovable Property Service, Repair and Maintenance Service. During course of Audit, it is observed that the Appellant have raised invoices for the agreed amount with service tax. Since the issue regarding payment of service tax is a disputed issue, the tenant refused to pay service tax as demanded by the Appellant and due to that reason, the Appellant had calculated the service tax on cum tax benefit and paid. Accordingly for the period from 01.10.2012 to 31.03.2014, an amount of Rs. 5,54,873/- was short paid and for recovery of the same, a show cause notice was issued on 06.02.2015 proposing to demand service tax on the gross amount.

Adjudication authority held that the Appellant liable to pay service tax on the basis of invoice issued by them since non-payment of service tax by the tenant is not a ground for not paying the service tax by the Appellant. Adjudication Authority also held that the Appellant can recover the differential amount of service tax by way of recovery proceedings under statutory provision.

Aggrieved by said order, an appeal was filed before the Commissioner (Appeals) and Commissioner (Appeals) as per the impugned order, confirmed the demand but dropped the balance amount of penalty payable by the Appellant. Aggrieved by the said order, present appeal is filed.

When the appeal came up for hearing, Learned Counsel submits that the Appellant had entered into rental agreement in 2006. At the relevant time, no service tax was leviable on renting of immovable property service. However later when it is levied with retrospective effect, only as an abundant precaution to ensure compliance of the statutory provision, Appellant charged service tax on the invoice but the tenant did not pay the service tax for the reason that service tax element is not there in the agreement. Therefore, merely for the reason that service tax amount was mentioned in the invoice, when they have not received the service tax amount from the tenant, Appellant was forced to pay service tax out of rent received. Thus, Appellant is eligible for cum tax benefit under Section 67(2) of the Finance Act, 1994.

The Learned Counsel further submits that as per Rule 6(3) of the Service Tax Rule, 1994 , Appellant could have raised a credit note for the value reduced in the gross amount but did not raise any such credit note. It is merely a procedural lapse and claim of CUM tax benefit cannot be denied. This issue was considered by the Tribunal in the matter of CCE Vs. M/s Advantage Media Consultant (2008 (10) STR 449 (Tri. Kolkata) where it is held that :-

“3. Service tax is an indirect tax. As per this system of taxation, tax borne by the consumer of goods/services is collected by the assessee (manufacturer/service provider) and remitted to the Government. When the amount is collected for the provision of services, the total compensation received should be treated as inclusive of service tax due to be paid by the ultimate customer of the services unless service tax is also paid by the customer separately. So considered, when no tax is collected separately, the gross amount has to be adopted to quantify the tax liability treating it as value of taxable service plus service tax payable. We find that this principle has been legislated in the following terms with effect from 18-4-2006 in Section 67(2) of the Finance Act, 1994 as amended:

"67(2). Where the gross amount charged by a service provider, for the service provided or to be provided is inclusive of service tax payable, the value of such taxable service s