2026-VIL-558-CESTAT-KOL-ST
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SERVICE TAX CESTAT Cases

Service Tax demand on difference between taxable value in ST-3 returns and gross income in audited balance sheet Fact - Department raised service tax demand on the appellant claiming that the appellant suppressed the taxable value by showing a lower figure in ST-3 returns compared to the gross income in the audited balance sheet - Whether the demand of service tax based solely on the difference between the taxable value in ST-3 returns and the gross income in the audited balance sheet is legally sustainable - HELD - It observed that during the period under dispute, service tax was payable on actual receipt of consideration, whereas books of accounts and balance sheet are maintained on accrual basis. Therefore, the two figures cannot match by their very nature and any comparison is inherently flawed. The gross amount in the balance sheet includes reimbursable expenses such as cost of diesel supplied to clients, which do not form part of the taxable value - Demands cannot be sustained solely on the basis of mismatch between ST-3 returns and balance sheet/income tax returns without further proof. The demand based purely on differential figures between balance sheet and ST-3 is legally unsustainable and set aside - The impugned order is set aside and the appeal is allowed - Service Tax on reimbursement of wages for supply of field consultants to Directorate of Horticulture - The appellant was engaged to supply field consultants to the Directorate of Horticulture, and was paid a fixed service charge along with a separate identifiable amount towards wages of the field consultants - Whether the amount received towards wages of the field consultants is includable in the assessable value for computation of service tax liability - HELD - The wages reimbursed by the service recipient is in the nature of reimbursements and not part of the taxable value. The tribunal noted that the Directorate of Horticulture itself confirmed that out of the total payment, Rs. 72.34 lakhs was towards wages of the field consultants and only Rs. 2.88 lakhs was the service charge. The Supreme Court in Union of India vs. Intercontinental Consultants & Technocrats Pvt. Ltd. held that reimbursements are not includable in the assessable value prior to 2015. The demand of service tax on the reimbursable wage component is not sustainable and set aside - Service Tax on supply of diesel under security services - The appellant was awarded separate work orders by Reliance Infocomm, one for security services and another for supply of diesel - Whether the value of diesel supplied under the independent work order can be included in the assessable value for computation of service tax on security services - HELD - The supply of diesel is a supply of goods and cannot be clubbed with the provision of security services, as they were under distinct work orders with separately identified rates and quantities. The Notification No. 12/2003-ST exempts from service tax the value of goods and materials sold by the service provider to the recipient, subject to documentary proof. Where the value of goods and services are separately disclosed, service tax cannot be levied on the goods component. The demand of service tax on the value of diesel supplied under the independent work order is set aside - Classification of soil supply as 'Site Formation Service' - Appellant provided earth-filling/soil supply services to Reliance Infocomm for preparation of BTS tower sites - Whether the activity of supplying and unloading soil can be classified as 'Site Formation Service' under Section 65(97a) of the Finance Act, 1994 - HELD - The task of the appellant was strictly restricted to procurement and unloading of specified quantities of soil, and it had no role in any further site preparation activities like levelling, stabilisation etc. The Section 65(97a) defines 'Site Formation Services' to include activities like drilling, boring, soil stabilisation, etc. which are pre-construction site preparation activities - Mere supply of soil as a commodity does not fall within any of these categories. The CBIC Circular clarify that Site Formation Services cover preparatory activities like blasting, drilling, overburden removal, and earthmoving for making land suitable for construction, which was not the case here. The appellant's activity of delivering and unloading soil does not constitute a 'Site Formation Service' under Section 65(97a) - The demand of service tax on the soil supply activity under the category of 'Site Formation Service' is set aside.
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