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2008 (8) TMI 577 - HC - Service TaxFOC material - material supplied free of charge - Division Bench in Era Infra Engineering Ltd. v. Union of India 2008 - TMI - 4494 - HIGH COURT OF DELHI was of the opinion that the respondents cannot include in the gross amount charged any material that is supplied free of charge by any party in respect of a contract of service - held that - adjudication proceedings may go on and be concluded by the respondents but they will not include for the purpose of determining the taxable service the supply of free material to the petitioner
Issues: Challenge to Show Cause-cum-Demand Notice under Section 67(3) of the Finance Act, 1994; Consideration of free material supply in taxable service; Jurisdiction of Assessing Officer.
The judgment by the High Court of Calcutta dealt with a writ petition challenging a Show Cause-cum-Demand Notice issued by the Commissioner of Service Tax, Kolkata, on the grounds of violating Section 67(3) of the Finance Act, 1994. The petitioner argued that free-of-charge supplied material should not be included in the "gross amount charged" as per the Act, thus not constituting taxable service under Section 67. Reference was made to a similar case in the Delhi High Court where an interim order was passed excluding free material from taxable service determination. The respondent contended that since the petitioner responded to the notice, directions should be issued to dispose of the matter. The Court directed the filing of an affidavit-in-opposition by a specified date and scheduled further proceedings. Considering the Explanation against Serial No. 7 and Section 67(3) of the Finance Act, the Court found a prima facie case for an interim order. The order directed the adjudication proceedings to continue without including the supply of free material in determining taxable service, in line with the Delhi High Court's decision. The order was passed without prejudice to the parties' rights and subject to further orders. The judgment emphasized that all parties must act based on the signed copy of the order's operative portion. The decision highlighted the importance of the interim order in excluding free material from taxable service determination, ensuring fairness and adherence to legal provisions while allowing the adjudication proceedings to proceed.
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