Principally, the worker being employee of the assessee, the assessee is required to contribute and deposit PF/ESI amount from his pocket, however he is recovering the same from the service receiver and getting financial benefit, hence the same is includible in gross value of service in terms of Section 67 of the Finance Act’1994 read with Rule 5(1) if Service Tax (Determination of Value) Rules’2006. Also it is clarified in CBED circular No. B11/1/98-TRU dated 07.10.1998, amount of PF/ESI is to be covered in taxable value of service. Also, in para 22.4 of Circular F.No.B1/6/2005-TRU dated 27.07.2005, it is clarified that,
“22.4:- Service tax is to be charged on the full amount of consideration for the supply of manpower , whether full-time or part-time. The value includes recovery of staff costs from the recipient e.g. salary and other contributions. Even if the arrangement does not involve the recipient paying these staff costs to the supplier (because the salary is paid directly to the individual or the contributions are paid to the respective authority) these amounts are still part of the consideration and hence form part of the gross amount. “
In recent judgment in case of Neelav Jaiswal & Brothers Vs. CCE, Allahabad [2013 (3) ECS (212) (Tri-Del)], it is held that,
“M/s Hindalco consideration for such taxable service provided by the appellant had remitted to the appellant not only the amount agreed to between the parties for remunerating the personnel so deployed but also the amount of provident fund payable by the appellant to Provident Fund authorities, in terms of the appellant's statutory obligation. Both these amounts therefore constitute the gross amount charged by the appellant for the taxable service provided to M/s Hindalco Industries Ltd., since the taxable service was provided for a consideration in money. Both these amounts therefore constitute the gross amount charged by the appellant for having provided the taxable service.” [Para7]
Thus, value of service cover salary/wages of worker, PF/ESI/Insurance and whatever other perks(even in case paid directly to workers by service receiver) on which service tax is required to be paid.
The excuse that service tax is not charged and collected can not be accepted, any how.