2026-VIL-1431-CESTAT-DEL-ST
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SERVICE TAX CESTAT Cases

Service Tax – Manpower supply and manufacturing services – Taxability of manufacture on job work basis – Appellant entered into agreements with clients to manufacture goods on job work basis on per piece rate basis – Whether Appellant liable to pay service tax when activity amounted to manufacture of goods instead of provision of service – HELD – Where an activity constitutes manufacture and not supply of service, it is not chargeable to service tax as per Notification No. 25/2012-ST dated 20.6.2012 Section No. 30(i). Once it is found as matter of fact that any activity was not chargeable to service tax or was exempted, service tax cannot be demanded or confirmed. Even if amount has been collected as representing service tax but service tax is not payable, amount collected must be deposited with Central Government as per Section 73A of Finance Act, 1994 – However, fact that amount was collected and deposited does not create charge of service tax – Demand under Section 73 of Act is for service tax not levied, not paid, short levied or short paid; the inherent supposition is that such service tax was payable but not paid – The amount to be deposited under Section 73A is only amount wrongly collected, not service tax. Department cannot demand additional amounts as if wrongly collected – Demand of service tax on activity of manufacture undertaken by appellant for client is not chargeable to service tax and is set aside - Service Tax – Valuation – Inclusion of reimbursable expenses in value of taxable services – Appellant provided manpower to clients and charged actual wages, PF, ESI and service charge – Department demanded service tax including reimbursable expenses for period up to 13.5.2015; Appellant claimed no service tax was chargeable on reimbursable expenses – Whether service tax chargeable on reimbursable expenses before 14.5.2015 when Section 67 was later amended to include reimbursable expenses – HELD – As per Supreme Court judgment in Union of India versus Inter-continental Consultants and Technocrats Ltd., no service tax could be charged on reimbursable expenses – Charge of service tax comes from charging section; service tax has to be paid at rate specified on value as per Section 67 – If Appellant wrongly paid service tax on reimbursable expenses in some invoices, it does not give Department right to charge similarly wrong service tax on other reimbursable expenses or in other invoices – Amounts wrongly collected as representing service tax must be deposited but neither has assessee responsibility to collect more money wrongly as service tax nor can officer issue order to that effect – Demand of service tax on reimbursable expenses for period up to 13.5.2015 is not sustainable and is set aside - Service Tax – Extended period of limitation – Appropriation of amount deposited during investigation – Whether appropriation of amount deposited during investigation is permissible for period beyond five years extended period of limitation – HELD – When SCN was issued on 6.1.2020, extended period of limitation could extend to five years i.e. up to January 2015 – Demand for period beyond extended period of limitation cannot be sustained – No demand was proposed in SCN for period April 2014 to September 2014; appropriation of amount deposited for this period in adjudication proceedings was beyond scope of SCN – Appropriation was not proposed in SCN but was done by Commissioner in impugned order – Since appropriation was part of adjudication proceedings, proceedings could not have extended beyond five year period – Appropriation of amount deposited by Appellant for period beyond extended period of limitation deserves to be set aside - Service Tax – Whether refund can be denied when amount was deposited for period not covered by SCN and not proposed for appropriation in SCN – HELD – Service tax was deposited by Appellant for period April 2014 to September 2014 – SCN covered periods both before and after this period but did not issue any proposal demanding service tax for this period nor was any proposal made to appropriate amount paid – Appropriation of amount in impugned order was clearly beyond scope of SCN – SCN could not have demanded duty for this period because it was beyond normal period of limitation – Since no SCN was issued either demanding duty or proposing to appropriate amount paid during investigation, Revenue was bound to refund amount so deposited – Rejection of refund by lower authorities is not correct – Service tax deposited by Appellant must be refunded along with interest.
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