N TECH DIESEL vs PRINCIPAL COMMISSIONER OF CGST AND CENTRAL EXCISE-JAIPUR

Court
Customs, Excise and Service Tax Appellate Tribunal

CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL
New Delhi

PRINCIPAL BENCH – COURT NO.3
Service Tax Appeal No. 52202 Of 2019

[Arising out of Order-in-Original No. JAI-EXCUS-000-COM-07-08-19-20 dated
21.05.2019 passed by the Principal Commissioner, CGST and Central Excise,
Jaipur]

N Tech Diesel : Assessee
38, Heera Nagar-A, Chitrakoot
Vaishali Nagar Jaipur Rajasthan-302021

Vs

Principal Commissioner of CGST : Revenue
and Central Excise-Jaipur
NCR Building Statute Circle, C-Scheme, Jaipur


WITH
Service Tax Appeal No. 52275 Of 2019

[Arising out of Order-in-Original No. JAI-EXCUS-000-COM-07-08-19-20 dated
21.05.2019 passed by the Principal Commissioner, CGST and Central Excise,
Jaipur]

Principal Commissioner of CGST : Revenue
and Central Excise-Jaipur
NCR Building Statute Circle, C-Scheme, Jaipur

Vs
N Tech Diesel : Assessee
38, Heera Nagar-A, Chitrakoot
Vaishali Nagar Jaipur Rajasthan-302021

APPEARANCE:
Ms. Priyanka Goel, Advocate for the Assessee
Shri Rajiv Kapoor, Authorized Representative for the Revenue


CORAM :
HON’BLE MR. AJAY SHARMA, MEMBER (JUDICIAL)
HON’BLE MS. HEMAMBIKA R. PRIYA, MEMBER (TECHNICAL)

FINAL ORDER No. 51666-51667/2026

Date of Hearing:06.10.2026

Date of Decision:04.11.2026







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HEMAMBIKA R. PRIYA

1
The present two appeals have been filed by M/s N Tech Diesel

and the Revenue against the impugned Order-in-Original No. JAI-
EXCUS-000-COM-07-08-19-20 dated 21.05.2019 passed by the
Principal Commissioner, CGST and Central Excise, Jaipur.
2. The brief facts of the case are that the assessee was engaged in
providing Management, Maintenance or Repair Services as defined
under Section 65(64) of the Finance Act, 1994. The assessee entered
into similar contracts with (i) M/s AST Telecom Solar Pvt. Ltd. (ii) M/s
Bharti Hexacom Ltd. (iii) M/s Bharti Infratel Ltd, to perform activities
pertaining to procurement of diesel, its transport to various sites and
its filling into the mobile towers owned by the above said Companies.
The assessee was procuring Diesel by acting as agent of M/s Bharti
Hexacom Ltd. and others wherein the ownership of Diesel remained
with M/s Bharti Hexacom Ltd. and similar other companies as the
invoices issued by the diesel supplier were in the name of M/s Bharti
Hexacom Ltd., AST Telecom Star Private Limited etc. The assessee
was claiming reimbursement for such procurement of diesel on
periodical basis. The department formed an opinion that the cost of
diesel which had been procured by the assessee was liable to be
included in the taxable value of the services provided by the assessee
to the said Companies and by not including the said cost of diesel, the
assessee had short paid Service Tax amounting to Rs. 9,98,59,049/-
which was recoverable from the assessee under proviso to Section
73(1) of the Finance Act, 1994 along with interest under Section 75 of

1 The Assessee

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the Finance Act, 1994 and the assessee had rendered themselves
liable to penalty under Section 76 of the Finance Act, 1994. A Show
Cause Notice C. No. V (H) Adj./ ST/02/2018/815 dated 13.04.2018
was issued proposing demand of service tax amounting to Rs.
9,98,59,049/- under Section 73(1) of the Finance Act, 1994. The
Commissioner vide the impugned Order-in-Original confirmed the
demand of service tax amounting to Rs. 3,69,54,819/-. The remaining
demand of service tax was dropped. A penalty of Rs. 36,00,000/-
was imposed on M/s N. Tech Diesel. Against the said order, both the
assessee and Revenue have filed the present appeals.
3. Learned counsel for the assessee submitted that the cost of
diesel procured by the assessee for filling the mobile towers owned by
the said Companies, being reimbursable charges was not required to
be included in the taxable value of the services provided by the
assessee. Therefore, the demand and interest was not liable to be
recovered from the appellants under Section 73(1) of the Finance Act,
1994. In addition, they were not liable to any penalty under Section
76 of the Finance Act, 1994. The Department in support of their claim
had relied upon the provisions contained in Rule 5(1) of Service Tax
(Determination of Value) Rules, 2006. In this regard, learned counsel
relied on the judgment of the Hon'ble High Court of Delhi in the case of
Intercontinental Consultants & Technocrats Private Limited
2
versus Union of India wherein the High Court of Delhi had declared
the said Rule 5(1) of Service Tax (Determination of Value) Rules, 2006
as ultra vires. Therefore, the Department’s reliance on the said Rule

2 2013 (29) S.T.R. 9 (Del.)

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5(1) was illegal and untenable, and on this ground alone, the
impugned Order-in-Original was liable to be set aside. She submitted
that the said judgment was affirmed by the Hon'ble Supreme Court of
India in the case of Union of India versus Intercontinental
3
Consultant and Technocrats Private Limited .
3.1 Learned counsel for the assessee further submitted that the
cost of diesel procured by the assessee for filling into the mobile
towers of the said Companies was being reimbursed to the assessee
by the said Companies. In this connection, learned counsel further
submitted that the assessee had provided services relating to
operation, maintenance or repair services of DG Sets installed at
mobile towers. The service tax on charges received by the assessee
towards provision of such services had been paid. She submitted that
the service tax was on provision of taxable services, and it was not a
tax on goods. Therefore, service tax was leviable only on the amount
charged for provision of services. In this respect, he submitted that
diesel was not required for providing services relating to operation,
repair and maintenance of DG Sets, but was required for generating
electricity and that property in goods had passed on to the service
recipients in the form of diesel. As per Section 67 of the Finance Act,
1994, service tax was chargeable on any taxable service with
reference to its value, and such value shall in a case where the
provisions of service is for a consideration in money, be the gross
amount charged by the service provider for such services provided or
to be provided by him. But in order to charge service tax only on

3 2018 (10) G.S.T.L. 401 (S.C.)

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service portion, exemption from value of goods was given from the
gross amount so charged. Learned counsel further submitted that the
entire exercise was revenue neutral, as whatever Service Tax had
been demanded vide impugned notice was admissible as Cenvat Credit
to service recipients Companies who would have adjusted this credit
while paying Service Tax on output services of telecommunication
provided by them. Hence, she prayed that appeal of the assessee be
allowed.
4. At the outset, learned Authorized Representative for the
Department reiterated the findings of the impugned order and
submitted that ―Consideration‖ had been defined in the Explanation (a)
of Section 67 of the Act. Rule 5 of the Service Tax (Determination of
Value) Rules, 2006 defined the inclusion in or exclusion from value of
certain expenditure or costs.
4.1 Learned Authorized Representative further submitted that a
conjoint reading of Section 67 of the Finance Act, 1994 and Rule 5 of
the Service Tax (Determination of Value) Rules, 2006 provided that
"any reimbursable expenditure or cost incurred by the service provider
and charged, in the course of providing or agreeing to provide a
taxable service, except in such circumstances, and subject to such
conditions, as may be prescribed" shall be treated as consideration for
the provision of service and that "where any expenditure or costs are
incurred by the service provider in the course of providing taxable
service, all such expenditure or costs shall be treated as consideration
for the taxable service provided or to be provided and shall be included
in the value for the purpose of charging service tax on the said

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service‖. The only exclusion that is provided under Rule 5(2) of the
Service Tax (Determination of Value) Rules, 2006 is for "the
expenditure or costs incurred by the service provider as a pure agent
of the recipient of service" and the said exclusion is subject to the
conditions provided at points (i) to (viii) of said Rule 5(2). In the
present case, the appellant had entered into Agreements with the
Telecom companies, along with other things, to ensure provision of
uninterrupted power either from utility provider or from backup DG
set. Diesel was an essential requirement for the provisions of the main
service and none of the requirement, as provided under Sub-Rule (2)
of Rule 5 of the Service Tax (Determination of Value) Rules, 2006 are
fulfilled, hence, reimbursement of cost of diesel is nothing but part of
the consideration and service tax was payable on the same.
5. We have heard the learned counsel for the assessee and the
learned AR for the Department. The issue before us relates to the
inclusion of value of diesel in the value of the services being provided.
We have perused the facts of the case.
6. In order to appreciate the submission, it would be relevant to
reproduce the relevant Section 67 of the Finance Act, 1994:
―(1) Subject to the provisions of this Chapter, service tax
chargeable on any taxable service with reference to its value
shall—

(i) in a case where the provision of service is for a consideration
in money, be the gross amount charged by the service provider
for such service provided or to be provided by him;

(ii) in a case where the provision of service is for a
consideration not wholly or partly consisting of money, be such
amount in money, with the addition of service tax charged, is
equivalent to the consideration;

(iii) in a case where the provision of service is for a
consideration which is not ascertainable, be the amount as may
be determined in the prescribed manner.

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(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 shall be such amount
as, with the addition of tax payable, is equal to the gross
amount charged.

(3) The gross amount charged for the taxable service shall
include any amount received towards the taxable service
before, during or after provision of such service.

(4) Subject to the provisions of sub-sections (1), (2) and (3),
the value shall be determined in such manner as may be
prescribed.

Explanation.—For the purposes of this section,—

(a) ―consideration‖ includes-

(i) any amount that is payable for the taxable services

provided or to be provided:
(ii) any reimbursable expenditure or cost incurred by
the service provider and charged, in the course of
providing or agreeing to provide a taxable service,
except in such circumstances, and subject to such
conditions, as may be prescribed:
(iii) any amount retained by the lottery distributor or
selling agent from gross sale amount of lottery ticket
in addition to the fee or commission, if any, or , as
the case may be, the discount received, that is to
say, the difference in the face value of lottery ticket
and the price at which the distributor or selling
agent gets such ticket.


(b) [ * ]

(c) ―gross amount charged‖ includes payment by cheque, credit
card, deduction from account and any form of payment by issue
of credit notes or debit notes and [book adjustment, and any
amount credited or debited, as the case may be, to any
account, whether called ―Suspense account‖ or by any other
name, in the books of account of a person liable to pay service
tax, where the transaction of taxable service is with any
associated enterprise.‖

7. We find that this issue relating to gross amount charged for
service tax under Section 67 is no more res-integra in view of the
Supreme Court’s judgment in Intercontinental Consultants and
Technocrats Private Limited (supra) wherein the Supreme Court
noted that the charging Section 66 provides that there shall be levied
service tax @ 12% of the value of taxable services referred to in the

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sub-clauses of Section 65 and collected in such manner as may be
prescribed. Thus, the service tax is on the ―value of taxable services‖
and, therefore, it is the value of the services which are actually
rendered which has to be ascertained for the purpose of calculating the
service tax. It is for this reason that the Supreme Court observed that
the expression ―such‖ occurring in Section 67 of the Act assumes
importance. It is in this context that the Supreme Court in paragraph
26 observed that the authority has to find what is the gross amount
charged for providing ―such‖ taxable services and so any other amount
which is calculated not for providing such taxable service cannot be a
part of that valuation as the amount is not calculated for providing
―such taxable service.‖ This according to the Supreme Court is the
plain meaning attached to Section 67 either prior to its amendment on
st
1 May, 2006 or after this amendment and if this be so, then Rule 5
went much beyond the mandate of Section 67. The Supreme Court,
therefore, held that the value of material which is supplied free by the
service recipient cannot be treated as ―gross amount charged‖ as that
is not a ―consideration‖ for rendering the service. In fact, in regard to
free supply of diesel and explosives, the Supreme Court specifically
observed that they would not warrant inclusion while arriving at the
gross amount charged on the service tax to be paid.
8. Further, we also note that the coordinate Bench of this Tribunal
in M/s Adept Versus Principal Commissioner of CGST & Central
Excise, Lucknow in Service Tax Appeal No. 70240 of 2023 dated
19.10.2023, in similar factual matrix held as follows:-
“ 3.2 Arguing for the Appellant learned counsel submits that:

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 The Appellant were, inter alia, engaged in the business of
providing taxable service i.e. "Operation and Maintenance of
Telecom/Mobile towers". During the period in dispute, the
Appellant provided service of diesel filling in the DG sets
installed near the telecom towers maintained by BCL Secure
Premises Private Limited. For providing such service, the
parties entered in to a memorandum of understanding
("'MOU').
 The Appellant received agreed service charges for providing
the above service and also paid the applicable service tax.
Independently they had supplied diesel to be filled in the DG
Sets at telecom tower site of the recipient. For the same they
received agreed diesel charges. The supply of diesel has no
connection/relation with the above output services. In any
case, the recovery of diesel charges is almost on a cost to
cost basis. Further, the supply of diesel is a supply of goods.
Therefore, the same is outside the purview of service tax.
 Apart the above services and supply of diesel, the Appellant,
during the period of dispute, also provided mobile DG Sets
for rent to the company in case of malfunctioning of the DG
Sets installed at the tower sites of the company. The
appellant received agreed rental charges for the mobile DG
sets arranged by the Appellant. The Appellant has paid
applicable service tax on provision of such rending service.
This fact is also not in dispute
 Department issued a notice dated 12.03.2019, the whereby,
it was alleged that upon scrutiny of ST-3 returns for the
period FY 2014-15 to 2017-18 (upto June 2017), total service
tax dues against the appellant is Rs.4,68,552/- Therefore, it
was requested to pay the same along with interest.
Thereafter, based on the information received from the
Income Tax Department, a show cause notice dated
08.11.2019 was issued to the appellants for the period FY
2014-15 upon the same issue.

29. It will also be useful to refer to the decision of the
Supreme Court in Bhayana Builders. Section 67 either prior
to its amendment or subsequent to its amendment was
interpreted by the Supreme Court and it was held that the
cost of free supply of goods provided by the service recipient
to the service provider is neither an amount “charged ” by the
service provider nor can it be regarded as “a consideration
for the service provided by the service provider. ” The
Supreme Court further held that on first principle also a value
which is not a part of the contract between the service
provider and the service recipient has no relevance in the
determination of the value of taxable services provided by
the service provider. The Supreme Court also repelled the
contention of the Revenue based on Explanation (c) to sub-
section (4) of Section 67 that payment received in “any form ”
and “any amount credited or debited as the case may be” is
to be included for the purposes of arriving at a gross amount
charges and is leviable to service tax. Paragraphs 12, 13, 14,
15 and 16 dealing with this aspect are reproduced below:
“12. On a reading of the above definition, it is clear that both
prior and after amendment, the value on which service tax is

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payable has to satisfy the following ingredients: a. Service
tax is payable on the gross amount charged:- the words
"gross amount" only refers to the entire contract value
between the service provider and the service recipient. The
word "gross" is only meant to indicate that it is the total
amount charged without deduction of any expenses. Merely
by use of the word "gross" the Department does not get any
jurisdiction to go beyond the contract value to arrive at the
value of taxable services. Further, by the use of the word
"charged", it is clear that the same refers to the amount
billed by the service provider to the service receiver.
Therefore, in terms of Section 67, unless an amount is
charged by the service provider to the service recipient, it
does not enter into the equation for determining the value on
which service tax is payable. b. The amount charged should
be for "for such service provided": Section 67 clearly
indicates that the gross amount charged by the service
provider has to be for the service provided. Therefore, it is
not any amount charged which can become the basis of value
on which service tax becomes payable but the amount
charged has to be necessarily a consideration for the service
provided which is taxable under the Act. By using the words
"for such service provided" the Act has provided for a nexus
between the amount charged and the service provided.
Therefore, any amount charged which has no nexus with the
taxable service and is not a consideration for the service
provided does not become part of the value which is taxable
under Section 67. The cost of free supply goods provided by
the service recipient to the service provider is neither an
amount "charged" by the service provider nor can it be
regarded as a consideration for the service provided by the
service provider. In fact, it has no nexus whatsoever with the
taxable services for which value is sought to be determined"
13. A plain meaning of the expression 'the gross amount
charged by the service provider for such service provided or
to be provided by him' would lead to the obvious conclusion
that the value of goods/material that is provided by the
service recipient free of charge is not to be included while
arriving at the 'gross amount' simply, because of the reason
that no price is charged by the assessee/service provider
from the service recipient in respect of such goods/materials.
This further gets strengthened from the words 'for such
service provided or to be provided' by the service
provider/assessee. Again, obviously, in respect of the
goods/materials supplied by the service recipient, no service
is provided by the assessee/service provider. Explanation 3
to subsection (1) of Section 67 removes any doubt by
clarifying that the gross amount charged for the taxable
service shall include the amount received towards the taxable
service before, during or after provision of such service,
implying thereby that where no amount is charged that has
not to be included in respect of such materials/goods which
are supplied by the service recipient, naturally, no amount is
received by the service provider/assessee. Though,
subsection (4) of Section 67 states that the value shall be
determined in such manner as may be prescribed, however,
it is subject to the provisions of sub-sections (1), (2) and (3).
Moreover, no such manner is prescribed which includes the

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value of free goods/material supplied by the service recipient
for determination of the gross value.
14. We may note at this stage that Explanation (c) to
subsection (4) was relied upon by the learned counsel for the
Revenue to buttress the stand taken by the Revenue and we
again reproduce the said Explanation herein below in order to
understand the contention: (c) "gross amount charges"
includes payment by cheque, credit card, deduction from
account and any form of payment by issue of credit notes or
debit notes and book adjustment, and any amount credited
or debited, as the case may be, to any account, whether
called 'suspense account' or by any other name, in the books
of account of a person liable to pay service tax, where the
transaction of taxable service is with any associated
enterprise."
15. It was argued that payment received in 'any form' and
'any amount credited or debited, as the case may be...' is to
be included for the purposes of arriving at gross amount
charges and is leviable to pay service tax. On that basis, it
was sought to argue that the value of goods/materials
supplied free is a form of payment and, therefore, should be
added. We fail to understand the logic behind the aforesaid
argument. A plain reading of Explanation (c) which makes
the 'gross amount charges' inclusive of certain other
payments would make it clear that the purpose is to include
other modes of payments, in whatever form received; be it
through cheque, credit card, deduction from account etc. It is
in that hue, the provisions mentions that any form of
payment by issue of credit notes or debit notes and book
adjustment is also to be included. Therefore, the words 'in
any form of payment' are by means of issue of credit notes or
debit notes and book adjustment. With the supply of free
goods/materials by the service recipient, no case is made out
that any credit notes or debit notes were issued or any book
adjustments were made. Likewise, the words, 'any amount
credited or debited, as the case may be', to any account
whether called 'suspense account or by any other name, in
the books of accounts of a person liable to pay service tax'
would not include the value of the goods supplied free as no
amount was credited or debited in any account. In fact, this
last portion is related to the debit or credit of the account of
an associate enterprise and, therefore, takes care of those
amounts which are received by the associated enterprise for
the services rendered by the service provider.
16. In fact, the definition of "gross amount charged" given in
Explanation (c) to Section 67 only provides for the modes of
the payment or book adjustments by which the consideration
can be discharged by the service recipient to the service
provider. It does not expand the meaning of the term "gross
amount charged" to enable the Department to ignore the
contract value or the amount actually charged by the service
provider to the service recipient for the service rendered. The
fact that it is an inclusive definition and may not be
exhaustive also does not lead to the conclusion that the
contract value can be ignored and the value of free supply
goods can be added over and above the contract value to
arrive at the value of taxable services. The value of taxable
services cannot be dependent on the value of goods supplied

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free of cost by the service recipient. The service recipient can
use any quality of goods and the value of such goods can
vary significantly. Such a value, has no bearing on the value
of services provided by the service recipient. Thus, on first
principle itself, a value which is not part of the contract
between the service provider and the service recipient has no
relevance in the determination of the value of taxable
services provided by the service provider.”
(emphasis supplied)
30. The finding recorded in the impugned order that the cost
of diesel which is reimbursed has to be included in the gross
amount charged by the service provider has to be examined
in the light of the aforesaid two decisions of the Supreme
Court in Intercontinental and Bhayana Builders. As noted
above, the appellants were required to perform various
services including diesel filing. It needs to be remembered
that the scope of this service was limited to the activity of
“filling ” the diesel in DG sets for which the appellants were
paid service fee of Rs.500/- or Rs.750/- per site. The diesel
was to be procured from the filling stations authorised by the
service recipients and the value of diesel was paid to the
appellants only upon appropriate verification. The value of
diesel was in the nature of reimbursement. The appellants
had paid service tax on the element of service involved in
“filling of diesel ” and by no stretch of imagination it can be
urged that any “service ” was rendered by the appellants
corresponding to the value of diesel. The valuation of taxable
service for charging service tax could only be the gross
amount charged for providing such “taxable services ” which
in the present case is the filing of diesel and any other
amount cannot be a part of the valuation as it cannot be an
amount for such “taxable services”. The Department cannot
go beyond the contract value and arrive at the value of
taxable service merely because of the use of the word “gross ”
in Section 67 of the Act. The use of the word “charged ”
makes it clear that it refers to the amount billed by the
service provider to the service recipient and, therefore,
unless an amount is charged by the service provider to the
service recipient, it does not enter into the equation for
determining value on which service tax is payable as was
observed by the Supreme Court in Bhayana Builders. The
cost of free supply of goods provided by the service recipients
to the service provider is neither an amount “charged ” by the
service provider nor can it be regarded as a consideration for
the service provided by the service provider. It has no nexus
with the taxable services for which value is sought to be
determined.
31. Even if diesel is considered to be free of cost supplied
by the service recipient to the service provider, no service tax
can be levied on it in view of the decision of the Supreme
Court in Bhayana Builders. The impugned order proceeds on
the footing that diesel is an input required for provision of the
output services. This is a completely wrong impression as the
diesel filling is „the service„ for which a separate consideration
has been provided in the contract and diesel cannot be
considered as an input for the provision of this service. What
further needs to be noted is that the total amount raised in
the Bill issued in the month of December, 2011 is

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Rs.1,16,000/- towards filling of diesel at 125 sites, while the
reimbursement claimed by the Appellants towards value of
diesel is Rs.49,95,668/-. The Department is seeking to levy
service tax on this value of diesel as according to it, the
Appellant has used the diesel as input for providing the
service.”
8. We note that the aforesaid decision applies squarely to the
instance case. Consequently, we modify the impugned order to the
said extent and allow the appeal filed by the assessee. The appeal filed
by the Department stands dismissed.
(Order pronounced on 04.11.2026)


(AJAY SHARMA)

MEMBER (JUDICIAL)



(HEMAMBIKA R. PRIYA)
MEMBER (TECHNICAL)
G.Y.