Custom, Excise & Service Tax Tribunal
Bharti Airtel Ltd vs Commissioner Of Central Goods & Service ... on 27 January, 2025
CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
CHANDIGARH
REGIONAL BENCH - COURT NO. I
Service Tax Appeal No. 1768 of 2012
[Arising out of Order-in-Original No. 24/AKM/CST/(Adj)/2012 dated 04.04.2012
passed by the Commissioner of Service Tax (Adjudication), New Delhi]
Bharti Airtel Ltd ......Appellant
Airtel Centre, Plot No. 16, 4th Floor
Udyog Vihar, Phase-IV,
Gurgaon, Haryana
VERSUS
Commissioner of Central Goods & Service ......Respondent
Tax, Gurugram Plot No.36-37, Sector-32, Gurugram, Haryana-122001 APPEARANCE:
Present for the Appellant: Sh. B.L. Narasimhan, Advocate Ms. Krati Singh, Advocate Ms. Shreya Khunteta, Advocate Present for the Respondent: Sh. Shyam Raj Prasad, Special Counsel (AR) CORAM:
HON'BLE Mr. S. S. GARG, MEMBER (JUDICIAL) HON'BLE Mr. P. ANJANI KUMAR, MEMBER (TECHNICAL) FINAL ORDER NO. 60102/2025 DATE OF HEARING: 08.10.2024 DATE OF DECISION: 27.01.2025 P. ANJANI KUMAR:
The appellants, M/s Bharati Airtel Ltd, assail the impugned order, dated 04.04.2012, passed by Commissioner of Central excise and Service Tax, New Delhi
2 ST/1768/2012
2. Brief facts of the case are that the appellants are engaged in providing various taxable services and registered under "Telecommunication Service, Business Support Services, Sponsorship Service" etc. The appellant offers" Airtel Employees Services Scheme" to its employees („Scheme‟), under which, employees are granted waiver from payment of telephone charges up to the Call Free Allowance („CFA‟) limit for mobile phones and fixed line connections; the waiver is allowable only to the employees of the Appellant and not their relatives and employees of other group companies; CFA limit is on a monthly entitlement basis and any unused portion is not carried forward to the next month; in case an employee exceeds the CFA limit granted to him, the excess amount is collected by the Appellant along with appropriate amount of service tax payable, which is deposited by the Appellant; (Bills raised by Appellant are at pg.157-166 of the Appeal Memo); however, if the employee proves that the excess usage was directly related to work then exemption can be granted subject to approval from Function Heads or CEO/COO as specified under the Scheme; in case of the approval of the said waiver, waived amount is reimbursed as per a laid down process. Revenue conducted an Audit of the appellants circle in Karnataka; appellant was as ked to submit details of the waiver granted by the Appellant to its employees; show cause notices dated 21.08.2008 and 20.04.2009 (for the period April 2006 to March 2007and April 2007 to September 2008) were issued to the Appellant for the Bangalore Circle proposing the demand of service tax under 3 ST/1768/2012 „telephone services‟ on the amount of call free allowance waiver granted by the Appellant to its employees. Subsequently, after the issue of centralized registration, to the appellant at Gurgaon, dated 01.10.2009, the revenue issued the impugned Show Cause Notice dated 23.04.2010, proposing demand of Rs. 118,70,19,472/- for the period October 2004 to September 2009, along with interest and penalty, proposing best judgment assessment under Section 72 of the Act and invoking extended period of limitation, on the amount of waiver given to the employees on pan India basis for the Relevant Period. Learned commissioner, vide impugned order, confirmed the demand along with interest and imposed penalty of Rs. 125,00,00,000/- under Section 78 of the Finance Act, 1994; penalty of Rs 5000/- under Section 77 of Finance Act, 1994 and penalty of Rs. 200 per day or 2% of the tax per month, whichever is higher under Section 76 of the Finance Act, 1994. Hence, this appeal.
3. Shri B.L. Narshimhan, Learned Counsel for the appellants, submits that there is no consideration charged by the Appellant either in cash or in kind in respect of free calls made by the employees up to a certain limit. Thus, the Appellant is not liable to pay service tax for the services provided by Section 67 of the Act and Circular No. 23/3/97-ST dated 13.10.1997, which clarifies that no service tax is payable where the services are provided for free; the appellant is duly collecting and discharging the liability of service tax on the amounts which are collected from the employees when the usage of telephone exceeds the allowed usage; he submits further that it is a 4 ST/1768/2012 settled principle of law that value of goods or material supplied free of cost would not be included in "gross amount charged" under Section 67 of the Act; as per Section 68 read with Rule 6 of the Service Tax Rules, 1994, liability to pay service tax arises only on the receipt of the payment for the services provided by the service provider. He relies on the following.
M/S Bhayana Builders (P) Ltd. & Others Vs CST, Delhi & Others2013 (32) STR 49 (Tri. - LB)- CESTAT New Delhi (LB) [affirmed by SC in Bhayana Builders (P) Ltd. 2018 (10) GSTL 118 (SC)] Union Of India & anotherVs M/S. Intercontinental Consultants and Technocrats Pvt Ltd2018 (10) G. S. T. L. 401 (SC) M/S. Inox Air Products Limited, Vs CCE&C2012 (286) E.L.T. 26 (Bom.) M/S. Max Life Insurance Company Ltd Vs CCE&ST2022 (67) GSTL 569.
M/S Max Life Insurance Company Limited Vs CCE&ST, New DelhiFinal Order No. 50767/2023 dated 30.05.2023- CESTAT New Delhi M/S Bharat Sanchar Nigam Limited Vs CST, Delhi Final Order No. 51311/2019 dated 03.10.2019 - CESTAT New Delhi Minutes of the 2nd Regional Advisory Committee for year 2009- 10 held on 17.12.2009.
M/S SI Group India Ltd Vs CCE, Raigad 2015 (38) STR 81 (Tri.
- Mumbai) M/S Leo Coal Movers Private Limited Vs CCCE&ST (Appeals), Raipur 2019-TIOL-3081-CESTAT-DEL
4. Learned Counsel submits further that the learned commissioner wrongly concludes that the Appellant earned goodwill by providing services to the employees under the Scheme and also receiving services of the employees constitute consideration for services rendered by the Appellant; that supply of free telephone services up to certain limits to the employees, does not create goodwill of the Appellant; also, there is no provision under service tax to treat goodwill as additional consideration; TRAI does not charge any 5 ST/1768/2012 license fee on free services; work done by the employees by using the facility provided under the Scheme cannot be treated as non- monetary consideration flowing from the employees to the employers; he relies on Carrier Point Infosystems Ltd Vs CCE, Jaipur- I 2019 (365) ELT 544 (Tri. - Del.) and M/s Resonance Eduventures Pvt Ltd and others Vs CST, Jaipur 2018 (10) GSTL 314 (Tri. - Del.). 4.1. Learned Counsel submits, without prejudice to the above submissions, that non-monetary consideration was not taxable prior to 18.04.2006; it was only after the amendment with effect from 18.04.2006, Section 67 of the Act provided for the valuation in case where the provision of service is for a consideration not wholly or partly consisting of money or where the consideration is not ascertainable; even if it is assumed that the appellants received good will, the same cannot be taxable till 18.04.2006 as held in M/S. Auromatrix Hotels Pvt Ltd. Vs CGST&CE 2019 (2) TMI 1246 - CESTAT Chennai and Circular: 334/4/2006-TRU dated 28-Feb-2006; Department counsel wrongly submits that the Appellant received non- monetary consideration in the form of indirect / unpaid perks as incentives for doing the allotted work. It is submitted that the Appellant did not receive any consideration in lieu of the CFA provided to the employees; invoices raised by the Appellant clearly show the gross amount charged as the discounted price.
5. Learned Counsel submits further that even if it is assumed (without admitting) that the Appellant is liable to pay service tax, the computation of tax demand has no legal basis; Best judgment 6 ST/1768/2012 assessment under Section 72 can be invoked, subject to the fulfillment of specified conditions, when return not furnished under Section 70 of the Act or when tax cannot be assessed as per the provisions of the Act; the Central Excise Officer, should have required the assessee to produce such accounts, documents or other evidence as he may deem necessary and has to take in account all the relevant material which is available or which he has gathered while making best-judgment assessment. He submits that in the instant case, the Appellant had been regularly furnishing returns; thus Section 72(a) would not be applicable; further, Central Excise Officer failed to collect relevant material for the assessment; this is evident from the letter dated 17.04.2010 wherein PAN India details of the charges waived were sought by the department, to which the Appellant responded vide letter dated 20.04.2010 to share the same after 25.04.2010 as the Appellant was busy in filing returns; however, the SCN was issued in complete disregard to the said request of the Appellant by invoking best judgment assessment and without providing sufficient time to the Appellant for producing proper documents and without considering relevant documents; no order was passed under section 72; the appellants were not given opportunity to represent against such invocation; as the conditions specified under Section 72(b) of the Act, were not satisfied, the best judgment assessment could not have been invoked. He places reliance on Ms Blue Star Communication and others Vs CCE&ST- Ludhiana 2019-TIOL-3789-CESTAT-CHD.
7 ST/1768/2012
6. Learned Counsel submits also that the demand proposed in SCN was based on the figures given by the Appellant for the Bangalore circle for the period from April 2006 to September 2009 vide letter dated 15.04.2010; the same was divided by 7 (seven) to arrive at a half year figure which was multiplied three times to arrive at one and half years‟ figure; it was further multiplied three times, to make up for the assumed increase in the number of employees and finally by 18 to cover all the circles to arrive at the total all India figure; service tax figure for the Relevant Period. He submits that the said calculation adopted by the department is without any factual basis; in reality, the number of employees reduced from 11876 to 9552 in the year 2007-08to 9020 in 2008-09 and 7996April 2009 to Sep 2009; moreover, the figures taken for valuation pertained to the Bangalore circle which is a larger one as compared to other circles. He submits that the alleged demand could not exceed Rs 21 Cr Approx based on the list of employees, certified by CA certificate; a chart showing the quantification of Rs 21 Cr was submitted but was not even considered while confirming the demand in the Impugned Order. He takes the Bench through the extracts of the policy and submits that the Adjudicating Authority further erred in taking into account the number of relatives of its employees and number of the employees of group companies, by assuming that CFA facility was also extended to relatives and employees of group companies. He submits that the show cause notices issued by Bangalore Commissionerate demand was proposed only with respect to CFA facility provided by the Appellant to its employees; while issuing the Impugned Order, the 8 ST/1768/2012 Adjudicating Authority framed the issue as whether free telephone services provided by the Appellant to its employees, their relatives and employees of group companies is chargeable to service tax on the basis of wrong understanding of facts. He submits that the object of the method of best judgment-assessment is to come to the nearest ascertainable value and not to arrive at a figure in an arbitrary manner. He relies on.
M/s. Shubham Electricals Vs CST & ST, Rohtak 2015 (6) TMI 786 - CESTAT New Delhi (affirmed by Hon‟ble Delhi High Court in 2016 (5) TMI 1055 - Delhi High Court) Dhillon Aviation Pvt Ltd Vs CCE-Delhi-II 2020 (37) GSTL 434 (Tri. - Del.)
7. Learned Counsel submits also that the demand for the substantial period is time barred; there was no element of mala fide and suppression on the part of the Appellant; as the show cause notices dated 21.08.2008 and 20.04.2009 issued to the Appellants‟ Bangalore circle, the Service Tax department was already aware about the activity of the Appellant; suppression of facts is not sustainable; even if the appellant has to pay service tax, the Appellant was eligible to avail Cenvat credit of the service tax so paid; entire demand is revenue neutral. Further, the issue involves interpretation of complex provisions and as held in the following demand cannot be sustained.
Hyundai Motor India Pvt Ltd Vs CCE&ST, Chennai 2019 (29) GSTL 452 (Tri. - Chennai) [affirmed in 2020 (32) GSTL J154 (SC)] Delhi Airport Metro Express Pvt Ltd Vs CCCE, Final Order No. 50031/2024 dated 11.01.2024,
8. Learned Counsel submits in addition that when the assessee 9 ST/1768/2012 believes that amount is not subject to service tax, there is no requirement for seeking clarifications; the reasoning of the department that the Appellant should have approached the service tax authority for clarification is fallacious. He submits that there is no specific column under the returns for showing the grant of free services to the employees and non-disclosure of the same does not amount to suppression of facts. He submits that self-assessment by the assessee cannot be the ground for invoking extended period of limitation; it is the duty of the central excise officer to scrutinize the returns files by assessee and seek details which he feels necessary to scrutinize them under Section 72; an assessee cannot be faulted for not providing any information which it was not required to provide in the ST-3 returns. He submits that the SCN is vague as it did not specify the category or nature of the taxable services alleged to have been provided by the Appellant; it merely proceeds on the premise that the waiver of charges up to a specified limit, granted by the Appellant to their employees is nothing but an additional consideration; it does not even mention as to what is the service that is being provided by the Appellant; it is settled principle of law that when the SCN, which is the foundation of the case of the department, is vague and lack details, it has to be held that the SCN is bad in law and cannot be sustained. He submits that in view of the above, extended period of limitation cannot be invoked in the instant case. He relies on the following.
10 ST/1768/2012 Mahanagar Telephone Nigam Ltd Vs UOI & Ors. 2023-TIOL-
407-HC-DEL-ST.
Hon‟ble Apex Court in CCE & Ors Vs M/S Reliance Industries Ltd 2023-TIOL-94-SC-CX.
Principal Commissioner Of CGST, Delhi North Vs. M/S Oriental Insurance Company Ltd Final Order Nos. 55567-55568/2024 in ST 50020 of 2018 dated 18.04.2024 Shubham Electricals Vs CCCE &ST, Rohtak 2015 (40) STR 1034 [affirmed 2016 (42) STR J312 (Del.)] ESS Gee Real Estate Developers Pvt Ltd Vs CCE, Jaipur 2020 (34) GSTL 486 (Tri. - Del.) [affirmed by Supreme Court in 2020 (34) GSTL J93 (SC)] M/S Pepsi Food Private Limited Vs CST- Delhi 2020-TIOL-895- CESTAT-CHD
9. Shri Shyam Raj Prasad, Learned Special Counsel, appearing on behalf of Revenue, takes us through various clauses of the policy of the appellant as far as waiver/concession is concerned; grounds of appeal filed by the appellants and the relevant findings of the impugned order. He submits that there is no dispute that the appellant provided option of seeking mobile services, landline services, broadband, fixed wireless phone and blackberry services to its employees, employees of Bharti Group Company as well as selected relatives of such employees as per Clause 1 of the Policy; the employees of Bharti Group Company as well as relatives were deemed to be employees; all such beneficiaries were treated as Regular post-paid customers as per Section 3.1. of policy; exemption/waiver limit (CFA limit) varies from Rs. 400 to Rs. 13000 per month as per stakes of employees. The employees of UC cadre were allowed one landline/broadband service and 2 mobile numbers as per Section 3.3.3; charges for mobile phone are indicated at Section 3.3.4; fixed telephone/Broadband are indicated at Section 11 ST/1768/2012 3.3.5; of policy; mobile handset was provided to employees as per Section 5 of the policy along with ISD/STD/Roaming facilities; Special mobile number provided @50% discount on market rates as per Section 6.2. of policy; policy also provided that E-Bills to be generated for employee‟s number only in case it exceeds CFA limit and family members bills to be generated in employee‟s name as per Section 6.4; Excess amount over CFA limit will be deducted directly from the salary account or credit card; No carry forward of balance/ unused CFA amount allowed; Waiver needs to be reimbursed as per normal reimbursement process as per Section 6.4; exemption was permitted beyond CFA limit if employee proves that excess usage was directly related to work, in exceptional casesas per Section 6.4; Payment will be made like a normal customer (through various modes available) etc. 9.1. Learned special Counsel submits that there is no dispute that the appellant did not declare the value of free services as taxable value for providing telecom services in their ST-3 returns nor they paid service tax payable thereon; the appellant also failed to submit the information/details relating to free telecom services even when asked for by the department in writing in April 2010 for PAN India services provided by them to their employees and relatives thereof; despite 2 SCNs dated 21.08.2008 and 28.04.2009 issued for the period April 2006 to Sept 2008 by Bangalore service tax in respect of free services provided to employees in the state of Karnataka, the appellant did not come forward to declare the transaction value 12 ST/1768/2012 correctly in ST-3 returns for rest of the Country; even when the department asked them to furnish figures of free services so provided PAN India vide letter dated 20.04.2010, they expressed inability to provide the same, though the details were being maintained digitally by them; in such a situation, the department was compelled to resort to Best Judgment Method as prescribed in Section 72 of Finance Act, 1994 and to issue demand notice on 23.04.2010 to safeguard the revenue evaded deliberately by the appellant by suppressing the facts, with an intent to evade payment of service tax.
10. Learned special Counsel adverts to various grounds of appeal filed by the appellants and submits his arguments. As regards the grounds that the Show Cause Notice is vague, he draws attention to para 35 of impugned order and submits that the adjudicating authority dealt with it elaborately. he submits that the appellants reliance on cases of Brindavan Beverages- 2007 (213) ELT 487 (SC), Rajkamal Lakhichand-2010 (255) ELT 357 (Bom.) & BHEL- 2009 (245) ELT 201 (Tri. Del.) are factually distinguishable and as such are of no avail as the allegations have been explicitly brought out in the SCN dated 23.04.2010. He submits that it is settled law that if the essence of the SCN/allegations is clear and charges have been framed clearly - non mention or wrong mention of legal provisions shall not make the SCN invalid. He relies on Big Bags Pvt Ltd 2008 (228) ELT 400 (T-Bang) Pradyumna Steel Ltd 1996 (82) ELT 441 (SC) J K Steel Ltd 1978 (2) ELT J355 (SC) Shreeji Metal Works 2008 (227) ELT 549 (T-Mum).
13 ST/1768/2012
11. Learned special Counsel adverting to the submission that the appellant that they did not provide service to its employees, but they provided facility incentive in terms of employment or contract of service, submits that Income Tax Act recognizes it as perquisite; appellant is undisputedly engaged in providing telecom services/telephone services including to their employees and others treating them as regular postpaid consumer; hence, the appellant were employer and service receiver were employees; the appellant being a service provider is obliged to collect service tax from service receivers and remit the same to Govt exchequer as per Service Tax laws; the provision of telephone services to employees were not for business purposes; if so, there was no scope of billing to each employee, providing partial exemption from charges, charging of cash beyond permissible CFA limit; no scope for giving allowance to relatives of employees etc; the policy nowhere states that beyond CFA limit only, the employee shall be treated as regular postpaid subscriber; the scheme clearly considers each such employee as a regular postpaid consumer for the purpose; in absence of any exemption provided by the statute, the appellant cannot claim exemption from payment of service tax on telecom charges relating to the telephone/mobile used by the employees or their relatives; case law relied upon like Magnus Construction- 2008 (11) STR 225 (Gau.) , Tiger Sport Marketing- 2009 (13) STR 59 (Tri. Del.), IOCL- 2007 (8) STR 527 (Tri. Kol.) cannot be applied as the facts are clearly distinguishable; in case of IVL India P Ltd- 2010 (17) STR 292 (T) training provided by employer to employee held not taxable because 14 ST/1768/2012 no charges were being collected from the employee unlike in this case.
11.1. Learned Special Counsel submits that there exists a service provider and service recipient relationship in terms of Section 68(1) read with Rule 6 of Service Tax Rules; TR; had these employees not opted for the AESS Scheme, they would have paid service tax for telecom services availed by them from other operators or same appellant but for the said AESS scheme; the design of the entire scheme was such to allow perquisite to the employees in the garb of free calls at reduced rates beyond CFA limit without payment of tax at the cost of Revenue; the appellant‟s pleat hat this was one of the perquisites to employees is incorrect as they have failed to satisfy that value of said services were so disclosed in their books of account and disclosed to Income Tax authority; even licence fees waived by TRAI does not help the appellant for want of any such provision in Finance Act, 1994 or Rules made there under; CBEC Circular dated 01.12.2008 relating to commission received by directors under BAS is not applicable to this case involving a different service; the case of European Court of Justice, cited by the appellant, supports the case of the department.
12. On the contention of the appellant that no consideration is involved for supply of service in cash or kind up to a specified limit, learned special counsel submits that the amount charged is discounted price over and above CFA limit; Para 38 of impugned order categorically finds that the appellant is receiving consideration 15 ST/1768/2012 in the form of indirect / unpaid perks as incentives for doing allotted work of the employees; it was held in the case of Bee Am Ind. P Ltd 2017 (4) GSTL 185 (Tri-Del), that monetary value of rent free accommodation is liable to be included in the taxable value; he also placed reliance on Idea Cellular Ltd 2019 (26) GSTL 224 (T-Mum) and Bharti Hexcom Ltd 2019 (24) GSTL 588 (T-Del), wherein in similar circumstances Hon‟ble Tribunal has held service tax is payable on cellular telephone free services provided to employees; the case of BSNL relied upon by the appellant has not discussed the issue in detail but arrived at final decision without any reason or justification; cases of Carrier Point and Resonance relate to coaching classes, hence not relevant to the facts of the case; Circular dated 13.10.1997 quoted by the appellant stands withdrawn by circular No.96/7/2007- ST dated 23.08.2007 and even otherwise, the context was different. 12.1. On the submission of the appellant that no non-monetary consideration not taxable till 18.04.2006, learned special counsel submits that in view of explicit legal provisions contained in Section 67 (i), (ii) & (iii), the argument is not valid; Cases of Assam Gas Company-2008 (11) STR 73 (T)& Shri Pillai & Sons Motor Co- 2008 (10) STR 403 (T)as well as Bharti Infotel Ltd-2006 (3) STR 554 (Tri. Del.) are interim orders and therefore not persuasive in nature; in the case of European Court of Justice, as per the Article 11A (1)(a) of Sixth directives, it was held that the taxable amount was the consideration actually received by taxable person hence leviable to VAT on actual price charged to the employees; there is no such 16 ST/1768/2012 provision in Service tax laws; on the contrary, Section 67 r/w Rule 3(a) of Valuation Rules provides otherwise.
12.2 Learned Special Counsel submits that valuation applied was most reasonable as the same is based upon the figures supplied by the appellant for Karnataka State to Bangalore authority; consideration was received indirectly as incentive part of remuneration packages other than cash but at the cost of revenue by evading service tax; had there been no exercise of option, the employees would have availed service of other operators and paid charges along with service tax at market rate; Telecom service provided by the appellant had value in monetary term under law being taxable under Section 65 (105) of Act, hence, it is not correct to plead that there was no consideration involved for supply of service.
13. As regards the computation of tax and invocation of the Best judgment method, learned special counsel submits that the appellant despite being given sufficient opportunity, failed to submit the details/information regarding total waiver granted PAN India prior to issue of SCN - which was likely to get time barred; the burden to provide information for Best judgment assessment lies with the person to be assessed; even otherwise the actual figures supplied by the appellant for Bangalore circle have been considered for computing the assessable value for 18 circles by applying reasonable adjustments; appellant‟s computation of liability at Rs. 21 Cr (approx.), is incorrect; the number of employees furnished by 17 ST/1768/2012 appellant have been rejected rightly on the grounds as from 2004-05 to 2009-10 there has been many fold increase in subscribers, requiring more numbers of employees to cater; the appellant has not taken into account the number of employees of other Bharti Group Companies and relatives of the employees; hence the computation arrived by the appellant is flawed and therefore not reliable; while the appellant objects to adopting 18 multiples of figures available for Bangalore zone, they have not appreciated that zones like Mumbai, Delhi, Chennai, Kolkata, Hyderabad, Ahmedabad, State of UP etc, comprise of much bigger consumer base than Bangalore; the appellant has failed to put forward the exact amount of waiver/relaxation in mobile charges allowed to employees and others during the relevant period.
13.1. The calculation adopted by the department is not arbitrary but based on proper justification which stands uncontroverted by any material evidences produced by appellant. The 5 CA certificates submitted did not take into account the number of employees of Bharti Group of companies and relatives; hence the same are not admissible being incorrect.
13.2. Learned special counsel submits that in the case of Kachwala Gems Vs JCIT 2006 (12) TMI 83 (SC) or 288 ITR (10) (SC), it was held that if the assessee did not maintain books of accounts, he himself has to be blamed for Best judgment assessment; in case of NBC Corporation Ltd Vs CST 2014 (1) TMI 151 (Del HC), it was held 18 ST/1768/2012 that best judgment order passed will be akin to exparte order when assessee fails to produce records/details and officer passes the order on the basis of other information or data available. He submits that the appellant‟s reliance on Rajasthan Spinning- 2007(218) ELT 641 (SC), RS Enterprises- 2003 (159) ELT 766 (Tri. Del.)and Yogesh Sood- 2001 (129) ELT 674 (Tri. Del.), Vardhaman Steel- 2006 (197) ELT 401 (Tri. Mumbai)is incorrect as the facts of the cases are different.
13.3. Learned special counsel submits that the plea regarding cum duty value has been rightly addressed by the impugned order; Explanation 2 to Section 67 up to 18.04.2006 and thereafter sec 67(2) provided clearly that where the gross amount charged by a service provider is inclusive of service tax payable, the value shall be such amount as with the addition of tax payable, is equal to the gross amount charged; the appellant while discharging service tax on the value exceeding the CFA limit did not consider as cum-duty value; they treated the same as in case of normal customers (value being exclusive of service tax); hence the plea of cum-tax value lacks any merit in terms of explanation 2 to section 67 or section 67(2) of FA 1994; if the value is clearly not inclusive of service tax, the same cannot be treated to be cum tax value; He submits that the appellants wrongly relied upon Srichakra Tyre and Maruti Udyog Ltd(citation not provided)the cases relate to Central Excise section 4(4)(d)(ii), hence not relevant; it is settled principle that unless the assessee proves the value to be inclusive of duty, cum-duty is liable 19 ST/1768/2012 to be rejected; it cannot be accepted just because there was an exemption etc. He relies on Rudra galaxy Channel Ltd 2015 (38) STR 445 (Tri. - Mumbai) Cellebrum Technologies Ltd 2015 (40) STR 707 (Tri. - Del.) Amit Agros v. CCE [2007 (210) ELT 183 (SC)].
Bharati Tele-Ventures Ltd. 2014 (35) S.T.R. 418 (Tri. -
Mumbai) Midas Events 2016 (41) S.T.R. 233 (Tri. - Mumbai)
14. Learned special counsel submits that the argument that the appellants were paying service tax on excess charges mistakenly is far from the legal provisions and authority of law; there is no dispute that the appellant were Telegraph authority and providing Telecom services taxable under Section 65(109a) read with 65(105) (zzzx) of Finance Act, 1994, 1994 w.e.f. 01.06.2007;prior to that, telephone/mobile related services were taxable under Section65(105)(b)(c)(zd) as telephone service, pager service, leased circuit etc; as per company policy also, the employees are treated as regular customer or recipient of service, receiving service from the employer being service provider; there is no estoppel in taxation as held in Bipin Singh Rana, Proprietor M/s. Shivalik Construction and Shivalik Hotel Vs ACIT, Circle-3, Nainital-2023 (2) TMI 447-ITAT, Delhi.
15. Learned special counsel submits, on the issue of Cenvat credit admissibility & revenue neutrality, that undisputedly the appellant treated all employees including relatives and Group company as regular post-paid consumers; if the contention of the appellant is presumed to be correct, they could have possibly taken credit of tax 20 ST/1768/2012 paid in respect of each consumer; moreover, Moreover, the link of employees of Bharti Group Companies cannot be justified; in fact, the telecom service provided to these employees is an output service to the appellant and not input service within the meaning of sec 2(l) of CCR, 2004; it is not clear if the appellant were availing credit of service tax paid on the amounts recovered from others and employees over above, the credit limit; appellants produced no evidence to establish the nexus between free services/discounted services provided by the appellant and its output services or in relation to activity of business of the appellant; In view of non- admissibility of credit, question of revenue neutrality does not arise; admissibility of credit is subject to various terms and conditions prescribed in the Cenvat Credit Rules, 2004 which include those related to time frame for availing and utilizing credit; Hence, a blanket remark cannot be made and credit claimed. He relies on Punjab Tractors Ltd 2005 (181) ELT 380 (SC) Dharampal Satyapal 2005 (183) ELT 241 (SC) Mahindra & Mahindra Ltd 2005 (179) ELT 21 (SC) Mahanagar Gas Ltd vs CCE Thane -II 2011(24)STR 376 (Tri-
Mumbai)
16. Learned special counsel submits on the claim of Bona fide belief of the appellants and invocation of extended period, that in view of the fact that no tax has been paid so far even after being pointed out by the department; after confirmation as well and even after expiry of 10 years from the date of confirmation of demand and stay order; correct figures of free call charges not yet submitted by the appellant; the appellant obtained Centralized Registration on 21 ST/1768/2012 01.10.2009 at Gurgaon; Service Tax authorities at Gurgaon were never aware that the appellant was providing free usage of mobile to employees PAN India like Bangalore Zone/circle; it was also not known whether they continued with the practice even after being pointed out by audit in Bangalore; even after Gurgaon unit started investigation, the appellant chose not to furnish details/info regarding such modus of not paying service tax on free mobile service, obviously with intent to evade payment of tax by resorting to suppression of facts; even after issue of 2 SCNs, the appellant didn‟t come forward and pay service tax on the full value of services provided to employees or to seek clarification from other circle administration; they cannot now plead that extended period is not invokable; in the era of self-assessment, the assessee is required to pay tax due on his own volition and furnish the details in return u/s 70 & 71 of Finance Act,1994; the appellant did neither declare the said transaction value nor sought for exemption in the returns filed by them, concealing the information deliberately; free call charges were not accounted for by the appellant in order to conceal the facts; hence, extended period is rightly invoked; he submits that the appellant cannot rely on the Case of Kilburn Egg Ltd- 2009 (13) STR 285 as the facts are distinguishable; case of Kilburn pertains to a manufacturer registered under same formation whereas in this case, Delhi/Gurgaon jurisdiction was never informed by the appellant about the affairs until investigation commenced. He submits that the claim of Bona fide belief was negated and extended period demand upheld in following cases.
22 ST/1768/2012 Provident fund department 2006 (2) STR 369 (T-Del) Bharti Cellular Ltd. 2005 (179) ELT 334 (T-Del) Mysore Rolling Mills P Ltd 1987 (28) ELT 50 (SC) Idea Cellular Ltd 2019 (26) GSTL 224 (T-Mum) Bharti Hexcom Ltd 2019 (24) GSTL 588 (T-Del)
17. Learned special counsel submits on the chargeability of interest that it is leviable when demand is sustained on merit; even otherwise it is a Civil liability gets attracted by virtue of law. He relies on Pratibha Processors Vs UOI 1996 (88) ELT 12 (SC) and UOI vs Valecha Egg Ltd 2010 (249) ELT 167 (Bom).
17.1. Learned special counsel submits on the issue of penalties that mala fide intent is vividly clear from their contumacious conduct, evasive reply and deliberate concealing the material facts leading to evasion of service tax to the tune of Rs. 118 crores; once extended period is invokable, equal penalty under Section 78 becomes corollary; the appellant has not been able to justify the reasonable grounds for invocation of Section 80; Explanation providing for retrospective amendment of Section78 proviso was omitted on 08.04.2011; hence, simultaneous penalty not imposable from 10.05.2008 only; however, both the penalties are imposable against the appellant for the period October 2004 to 09.05.2008. Learned special counsel relies on the following in support of his arguments on the issue of penalties.
Dharmendra Textile Processors 2008(231) ELT 3 (SC) Rajasthan Spinning & Weaving Mills 2009 (238) ELT 3 (SC) Lark Chemicals Pvt Ltd 2016 (42) STR 417 (S.C.) Idea Cellular Ltd 2019 (26) GSTL 224 (T-Mum) Bharti Hexcom Ltd 2019 (24) GSTL 588 (T-Del).
23 ST/1768/2012 Krishna Poduwal 2006 (1) STR 185 (Kar) KonguEngg College 2009 (16) STR 578 (T) Mukund Zymkhana 2009 (15) STR 543 (T) Bajaj Travels Ltd 2012 (25) STR 417 (Del) Board of Control for Cricket in India 2015 (37) S.T.R. 785 (Tri- Mumbai) (affirmed by Apex Court 2015 (37) STR. J176 (S.C.)]. Joe Transports 2015 (39) STR. 366 (Mad.) Dhandayuthapani Canteen 2015 (39) STR. 386 (Mad.) First Flight courier 2007 (8) STR 225 (Kar) Jai Ram Yadav 2010 (18) STR 44 (T-Del)
18. In his written reply submitted after the hearing on 22.04.2024, learned counsel, for the appellants, submits that the reliance placed by the Learned Authorised Representative on the cases of Idea Cellular Ltd 2019(26) GSTL 224 (T-Mum); Bee Am Ind P Ltd 2017(4) GSTL 185 (T-Del); Bharti Hexcom Ltd. 2019 (24) GSTL 588 (T-Del) and National Building Construction Corporation Ltd. v Commissioner of Service Tax 2014 (33) STR 113 (Del.) is misplaced and the cases are distinguishable on the facts and law. He submits that interest under Section 75 of the Act and penalties under Section 76, 77 and 78 of the Act are not imposable; in any case, benefit of waiver of penalty under Section 80 of the Act must be extended to the appellant; appellant is entitled to benefit of cum-tax benefit in case demand of service tax is confirmed.
19. Heard both sides and perused the records of the case. Brief issue that requires to be decided in the instant appeal is whether the waiver from payment of telephone charges, given by the appellants to their employees, referred to as CFA is to be included for the purpose of calculating the service tax payable by the appellants. The 24 ST/1768/2012 appellants are discharging the applicable service tax on the amounts collected for the telephone services rendered by them to their employees. There is no dispute on this count. We find that Department is of the opinion that the appellants are required to include the CFA also in the service tax payable by the appellants. In certain cases, it is provided that allowance over and above the CFA is granted to the employees, of different grades, subject to the approval by their superior authorities. We find that as per the Bharati Airtel Ltd. Employee Phone Policy dated 05.09.2007, it is stated that:
1. ELIGIBILITY The policy is applicable to all employees of Bharti Airtel Limited (The Company). For the purpose of this policy, the following people are deemed to be 'employees':
Those who are on the employment rolls of The Company. Selected relatives of those who are on the employment rolls of the Company (relatives defined as Parents / Children / Spouse / In Laws (Father and Mother In law) / Siblings)* Employees of Bharti Group Companies"* *Only rates are applicable, CFA [call free allowance] not possible.
*Associate Employee - as per the Associate Phone Policy.
20. From the policy, it is clear that the CFA is permissible to the employees of Bharati Airtel Ltd. only. Learned Special Counsel for the Department tries to argue that the CFA is also extendable to the relatives of the employees where there is no employee-employer relation. It appears that the clarification given below the eligibility that only the rates applicable to CFA are applicable to relatives of the employees and employees of the Group Company but CFA per se to such relatives. Going by the scheme of the things, learned Counsel
25 ST/1768/2012 for the appellants submits that the CFA extended by the appellants to their employees is in the nature of a discount and that the appellants have discharged duty on the amounts collected by them and there was no law during the relevant period to consider the deemed value.
21. The appellant submits that in the instant case, the appellant is not receiving any consideration either in cash or in kind in respect of free calls made by the employees to a certain limit; Section 67 of the Finance Act, 1994 read with Rule 3(a) of the Service Tax (Determination of Value) Rules, 2006 provides for a situation where there is some consideration flowing from the service receiver to the service provider and such consideration received by the service provider is not wholly or partly consists of money. In the instant case, the appellant submits that there is no consideration received by the service provider i.e the appellant from the service receivers i.e the employees and their relatives over and above the amount charged; therefore, the demand of service tax is beyond the provisions of law.
22. The appellants rely on the Circular No.23/3/97-ST dated 13.10.1997. We find that the Circular clarifies as under:
"IV. Issue: Whether the companies are right in not paying service tax on the free telephone provided to their employees and friendly users from whom they do not recover any charges, but pay service tax only on line laying charges which represents value of calls made through the network other than cellular phone. Cellular telephone operators provides services to a category called "friendly users" which is mainly provided to its sister concerns and to their employees from whom they do not recover any air time charges and only recover "land line charges" which represents the value of the calls made 26 ST/1768/2012 through the network other than cellular phones (DOT Number) Decision: The value of taxable services in relation to telephone connection provided to subscribers is the gross total amount received by the telegraph authority from the subscriber. In case the service is provided free and no amount is received by the telegraph authority, the question of service tax liability does not arise. Only land line charges will be liable for tax.
23. It is clear from the above that telephone service providers are required to pay service tax on the consideration received by them, the consideration being the gross amount charged; in this case, the gross amount charged by the appellant is the amount they collected from their employees and not the discount given to the employees in the form of CFA. We find that learned Counsel for the appellants relies on a number of cases, including that of M/s Bhayana Builders (supra) wherein the principle of law was settled to state that the value of goods or material supplied free of cost would not be included in the gross amount charged under Section 67. We find that this particular submission is not relevant to the facts of the case as there is no goods or material supplied free of cost by the service receivers to the service provider i.e the appellant. What is to be seen in the present case is whether the discount or free allowance extended by the appellants to their employees is includable in the assessable value. In the scheme of the service tax taxation, includability of any amount in the gross amount charged for service requires to be the consideration flowing from the service receiver to the service provider. In the instant case, we find that it is the service recipient that is getting benefitted monetarily in the form of free allowance or 27 ST/1768/2012 discount and there is no flow of consideration from the service recipients to the service provider.
24. We find that learned Commissioner finds that the appellants are getting goodwill from the employees and that goodwill is the consideration received by the service provider/ appellant. We find that learned Commissioner observes that:
38(i). The assessee is providing call free allowance to its employees. The value of these charges, as per their policy, is at a reduced rate from market price. As per standing instructions, Annexure-15, the employees authorize the assessee to directly debit their monthly bills on account of telephone/mobile charges. The value of telephonic services provided by the assessee is worked out on the basis of monetary amounts. The CFA limit is also being fixed on the basis of monthly amounts. The charges in excess of CFA limit is deducted/adjusted from the salary of the employees and reimbursed to them when waived. It is the indirect method of charging the gross amount for the services provided by the assessee, The amount of CFA limit per month, which is not paid directly by the employees or recipients of service to the assessee is indirectly deducted/adjusted from their salary/Accounts. It is therefore wrong to contend that they are not receiving any consideration from the employees. Thus, the assessee is receiving the consideration in the form of indirect/unpaid perks included in the package of employees as incentives and they are receiving the services of the employees, who are doing the allotted work. The relatives of the employees of the assessee, the employees of Bharati group of companies and their relatives are also receiving free usage of telephone/mobile services up to certain limits it is not the case that assessee is providing this facility free of charge to others also. By providing its services to its employees and their relatives in the guise of CFA, the assessee has increased its volume of service and earned "goodwill" in the competitive market. Thus, taking services of the employees, providing them telecommunication services vis-à-vis CFA is one of the consideration received by the assesses. Hence it is 28 ST/1768/2012 wrong to contend that they are not receiving any consideration from the employees and therefore, there is no justification in not paying service tax on taxable services provided to them. The value of CFA limit, not directly paid by the employees, is also not paid by the assessee to them along with their pay packages, but adjusted. The contention of the assessee that they have not received any payment in terms of Sec. 68(1) and Rule 6 of the Act & rules and liability to pay tax does not arise is not correct. As per Sec. 68(1) "Every person providing taxable service to any person shall pay service tax at the rate specified in section 66 in such manner and within such period as may be provided." Rule 6 provides the manner and period for payment of service tax. Section 68(1) was substituted by the Finance (No.2) Act, 1998 with effect from 16-10-
98. The assessee is the service provider and 'any person' in the section is the recipient of service, which includes the 'employees' as per the General Clauses Act. Thus, being a service provider, the assessee is liable to pay service tax. In Central Excise matters also the free samples supplied or gifted by the assessee are not exempt from levy of excise duty.
25. The appellants submits that goodwill cannot be termed as „consideration‟ and that supply of free telephone services up to certain limits to the employees does not create goodwill for the appellant. He further submits that there is no provision under service tax to consider goodwill as additional consideration and that TRAI also does not charge any license fee on the free services. We find that Tribunal in the case of Resonance Eduventures Pvt. Ltd. (supra) held that:
5. We have heard both the sides and perused the appeal record. The central point of dispute is whether the main appellant are correct in discharging Service Tax only on the amount received from the candidates who participated in the coaching classes without taking the consideration uniformly for all the candidates. In other words, whether the concessional rate of fee collected from certain category of candidates can be considered as a bona fide transaction eligible for 29 ST/1768/2012 treatment as gross value under Section 67 for tax purpose or not. We have perused a sample prospectus announcing the scholarship programme. It is clear that said scholarship programme is to extend concession in the course fee to a particular set of candidates listed therein. The nature of candidates is either based on their proficiency in particular field based on their qualification or being an old student of the main appellants or brothers or sisters attending courses with the main appellant. It is apparent that this is a scheme to promote their business and it is notified to the public. In terms of Section 67, the Service Tax liability will arise on gross value. In the present case, the appellants are not contesting their liability to pay Service Tax on the gross value on the amount whatever they received from the candidates. We find no reason to consider the concessional portion of fee which is as per the pre-declared publicity material, as part of non-
monetary consideration requiring addition to the monetary consideration to arrive at the gross value. We find no reason to invoke valuation rules in the present set of facts. There is no sustainable reason to reject the scheme published by the appellants for fee concession as long as it is a bona fide trade practice. We could not find any reason to hold that the scheme is other than a bona fide practice. As this is the only dispute in the present appeals, we hold that the appellants will succeed on this point.
26. We find that it is not provided in the Service Tax law to amortize the goodwill to arrive at the gross value of consideration for the purpose of levy of service tax. It is not correct on the part of learned Commissioner to come to a conclusion that the appellants are receiving goodwill for the free telephone services provided to their employees. For the purpose of valuation of service tax, the goodwill cannot be taken into consideration. We find that learned Commissioner did not arrive at the value of the goodwill for the purpose of taxation, even if goodwill is considered to be an additional consideration. It is incorrect to take the entire free allowance given 30 ST/1768/2012 to the employees as monetary value of goodwill. We further find that arguments on the basis of goodwill were not part of the Show Cause Notice and the adjudicating authority sets up a new case in the impugned order. Therefore, we consider that the attempt made by the adjudicating authority has no legal basis. Moreover, the Department relies on the case of M/s BSNL (supra) to support their argument that even if there is an employer and employee relationship, services are to be taxed. We are of the opinion that this issue is not relevant to the impugned case. It is not the case of the Department that the appellant is not paying service tax on the consideration received from their employees towards the telephony services rendered by them. In fact, the appellants are paying service tax on the same. Anyway, this cannot be the argument for including the free allowance in the assessable value of the service tax payable by the appellant.
27. Learned Counsel for the appellants agitates that in either case, non-monetary consideration was not taxable prior to 18.04.2006. He relies on Auromatrix Hotels Pvt. Ltd. (supra). We find that the Bench finds in the case that:
6.7 The Board vide Letter No. 334/4/2006-TRU dated
28.2.2006, in para 8(1)(f) has clarified that the amendment to Section 67 proposes to include consideration received not wholly in terms of money. The same reads as under:- ―Substitute the existing section 67 with a new section67 to provide for determination of value of taxable service. At present, service tax is charged on the gross amount received. The proposed section provides determination of taxable value in cases where the consideration received for taxable services provided is not wholly in money terms 31 ST/1768/2012 and the consideration received is in money terms but not known explicitly. Separate valuation rules are proposed for this purpose‖. 6.8 In Vistar Construction (P) Ltd. Vs. Union of India reported in 2013 (31) STR 129(Del.), the Hon‟ble High Court of Delhi held that taxable event for service tax was rendition of service and that rate of tax applicable is the one on date on which services were rendered and not the rate on which payments were received. Since the amended Section 67 has come into effect only with effect from 18.4.2006, the immovable property which is part of consideration of Settlement Agreement dated 1.3.2006 would not be subject to levy of service tax.
28. We also find that in the Scheme of Service Tax, no liability to tax arises when consideration is not received and is not receivable. We find that Tribunal in the case of M/s S.I Group India Ltd. (supra) held as follows:
7. We have gone through the Technology Licensing Agreement. We find that under Article 5 technical services are indeed to be rendered to the appellants by way of training of personnel, selection of suppliers of machinery, for commissioning and testing of the plant and machinery as well as for testing of samples of products for inspection and examination by SSI. It is Article 7.2 which refers to payment of royalty. It states that "in consideration of SII providing technical services to the Indian company, the Indian company shall pay to SII royalty at the rate of 4% on the Net Sales subject to ......" We do not agree with the argument of the ld. Sr. Advocate that the service provided is Intellectual Property Service and service of Engineer Consultancy is not provided, notwithstanding the fact that the royalty is paid for such services which is determined on basis of Net Sales. It is well established in law that measure of taxation does not determine the nature of taxation. But the pertinent fact of this case is that whereas the show cause notice was issued in September, 2003, the royalty on account of technical services for the years 2000-2001 and 2001-2002 was paid in 2004. This fact has been also certified by the Chartered Accountant and not controverted by Revenue. The Service Tax provisions under the Service Tax Rules, 1994, as applicable during the period in 32 ST/1768/2012 dispute, clearly provided that Service Tax is payable when the value of taxable services is received. The relevant provisions in law was Rule 6(1) which stated that Service Tax is payable when payments are received towards the value of taxable services. ------
29. We find that in the impugned case, Revenue has taken recourse to the best judgment method. Learned Counsel for the appellants submits that this method cannot be used because the conditions under Section 72 are not satisfied; as the Returns as per Section 70 were being filed regularly, provision of Section 72(a) cannot be invoked; Revenue has written a letter dated 17.04.2010 to the appellant seeking details of the transactions of the appellants all over India; the appellant vide their letter dated 20.04.2010 submitted that the same will be submitted after 25.04.2010. We find that the appellants were given too little a time to furnish the details and disregarding their letter dated 20.04.2010, Show Cause Notice dated 23.04.2010 was issued. We find that Revenue had sufficient time to call for the records of the appellants, consequent upon the issue of Show Cause Notices dated 21.08.2008 and 20.04.2009 to the Karnataka Circle of the appellants. The Department has waited till 17.04.2010, at least a clear one year and decided to write a letter. It is not fair on the part of the Department to take recourse to best judgment method, as a cover up to the delay that occurred on their side. We find that Tribunal in the case of Bluestar Communication & Others (supra) held that the appellants not being given enough time for supply of data, recourse to best judgment method was not correct.
33 ST/1768/2012
30. We further find that not only the legal premise on which the Department tries to establish the case but also the method of calculation/ computation of the tax liability was incorrect and erroneous. The demand was based on figures given by the appellant for the Bangalore Circle for the period from April 2006 to September 2009; the figure was divided by seven to arrive at a half yearly figure; such figure was then multiplied by three to obtain figure for one and half year; thereafter, such figure was multiplied by three times under the assumption that the work force of the appellants must have grown threefold because of the increase in business; finally, such figure has been multiplied by eighteen times to cover all the eighteen circles of the appellants. As can be seen the computation is totally based on assumptions as follows:
(i) Six months‟ turnover of each of the Circles was assumed to be 1/7th of the turnover of Karnataka Circle for a period of three and half years.
(ii) The number of employees must have grown three times.
(iii) Periodical turnover of all the Circles across India is equal.
(iv) Free allowance was also extended to relatives of the employees and to the other group companies.
31. We find that such approximation has no place in demanding and confirming service tax. A fundamental principle of taxation is that tax has to be levied and collected not a rupee more and not a rupee less; therefore, there is no scope for approximation. We find that 34 ST/1768/2012 learned Adjudicating Authority has an occasion to look at the Chartered Accountant certificated dated 14.02.2012, which indicated band-wise number of employees of the appellant and the group companies. The adjudicating authority has neither relied upon the Chartered Accountant certificate nor discarded the same with evidence. Such an approach is not acceptable. Understandably, Revenue cannot be expected to establish tax evasion with a mathematical precision. However, when it‟s come to computation, it can never be on the basis of mathematical formulas and equations; it has to be on hard and factual figures. The assumptions that the number of employees is bound to grow over the years and that the turnover of all the Circles would be similar, border on fallacy. Such confirmation of demand cannot be accepted. We find that Principal Bench in the case of Shubham Electricals (supra) has held as follows:
11. Neither the show cause notice dated 21-10-2011 nor the impugned adjudication order dated 18-1-2013 record any assertion/conclusion whatsoever as to which particular or specific taxable service the appellant had provided. In the absence of an allegation of having provided a specific taxable service in the show cause notice and in view of the failure in the adjudication order as well, neither the show cause notice nor the consequent adjudication order could be sustained.
12. Shri Amresh Jain, learned DR would strenuously contend that Revenue was handicapped and crippled by the total non-cooperative attitude of the appellant which failed to respond in time to the several notices issued, failed to furnish the relevant transactional documents and to assist the adjudication process in its efforts to identify the specific taxable service provided by the appellant.
13. We have noticed earlier that the show cause notice itself adverts to the fact that the appellant had provided copies of 20 work orders executed in relation to CWG Projects, particulars of which are set out in a
35 ST/1768/2012 tabular form in para 5 of the show cause notice. From the description of the works in this table, officers could have classified the several works into the appropriate taxable service which may appropriately govern rendition of these services. In any event officers are not handicapped and the Act provides ample powers including of search under Section 82 of the Act to obtain information necessary to pass a proper, disciplined and legally sustainable adjudication order. The disinclination to employ the ample investigatorial powers conferred by the Act is illustrative of gross Departmental failure and cannot afford justification for passing an incoherent and vague adjudication order. The failure to gather relevant facts for issuing a proper show cause notice cannot provide justification for a vague and incoherent show cause notice which has resulted in a serious transgression of the due process of law.
32. In view of the above discussion, we find the following:
(i) Service tax cannot be levied when there is no consideration received. Free allowance given to the employees by the appellant is in the nature of discount/ concession and as the same has not accrued to the service provider-appellant, the same cannot form part of the consideration for the purpose of levy of service tax.
(ii) Under the facts and circumstances of the case, Department has not made out any strong argument in favour of best judgment method.
(iii) Computation of service tax cannot be on the basis of assumptions and presumptions.
(iv) The Show Cause Notice is vague and does not specify the service which is rendered by the appellant; moreover, the benefit of discounts/ free allowance is accruing to the employees rather than the appellant who is the service provider. Consideration flowing 36 ST/1768/2012 towards the service recipient cannot be included for the purpose of taxing the service provided by the appellant.
(v) In view of (i), (ii), (iii)& (iv) above, the impugned Show Cause Notice and the impugned order cannot be sustained.
33. We find that as submitted by the learned Counsel for the appellants, the case laws relied upon by the learned Authorized Representative is distinguishable. In the case of the M/s BSNL (supra), such discounts given to the employees were shown in the books of accounts as amounts written off. Amounts are written off only when the same are treated as receivables and have not been received even after concerted efforts. In the case of M/s BSNL, it is evident that the appellant therein treated the discounts as recoverable and therefore, the Bench has taken a view that such written off amounts are includable in the assessable value of the service tax payable by M/s BSNL. In the instant case, it is not the case of the Department that the appellant has treated the amounts as receivable in their books of accounts. In such circumstances, consideration actually received/ receivable only forms part of the assessable value. To that extent, we find that the case of M/s BSNL is distinguishable from the facts of the present case and to that extent; the same cannot be read upon.
34. In addition to the above, learned Counsel for the appellants has also taken a plea that the demand did not specify the category of service under which demand has been proposed; is substantially time 37 ST/1768/2012 barred. As we find that the impugned order does not stand on merits, we are not going into these issues.
35. In view of the above, the impugned order is set aside and the appeal is allowed.
(Order pronounced in the open court on 27/01/2025) (S. S. GARG) MEMBER (JUDICIAL) (P. ANJANI KUMAR) MEMBER (TECHNICAL) PK