2026-VIL-1820-CESTAT-HYD-ST
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SERVICE TAX CESTAT Cases

Service Tax - Inclusion of wages paid to labourers in taxable value of Manpower Recruitment or Supply Agency Service - Appellant supplied manpower to a service recipient and raised separate invoices towards wages payable to labourers and towards service charges or commission - Department demanded service tax on the entire amount including wages - Whether wages are includible in the taxable value or service tax is payable only on the commission retained by the Appellant - HELD - Only the amount representing consideration for the service can be taxed under Section 67, and reimbursement of expenditure cannot become taxable merely because it flows through the service provider. The controversy does not depend entirely on whether every condition of Rule 5(2) is satisfied, since the fundamental question is whether the reimbursement of wages is itself consideration for the service. Following the orders of Hon'ble High Court and the Larger Bench of the Tribunal, wages separately identifiable and passing through the contractor without any element of profit cannot be treated as its income. The Hon'ble Supreme Court has held that taxability depends on the substance of the arrangement and not on nomenclature, and consolidated invoices do not alter this distinction. The Department produced no material to show that any portion of wages was retained as consideration - The order is set aside to the extent it includes wages in the assessable value, and the matter is remanded for limited re-quantification of tax on the commission actually retained - The essential facts were available from the contractual documents themselves, and the allegation of deliberate suppression is not sustainable. The issue relates to interpretation of valuation provisions on which divergent judicial views existed during the relevant period, so that the extended period is not justified, and once it fails the penalties cannot survive - The demand for the extended period and the penalties are set aside and the appeal is allowed by way of remand
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