2011 (11) TMI 189 - AT - Service Tax

Business of construction - exemption under Notification No. 01/2006 for providing commercial and industrial construction services availed - appellant required to pay service tax on 33% value of gross bills i.e. including free supply of materials from the service recipient. - Held that - Goods supplied free by service recipient is includable in taxable value. Accordingly, appellant is directed to make a pre-deposit and report compliance thereof before the Commissioner (Appeals) who will dispose off the appeal.

Summary

Issues:
1. Stay application for demands dismissal by Commissioner (Appeals) for non-compliance of conditions.
2. Exemption under Notification No. 01/2006 for construction services.
3. Tax liability on free goods and materials received.
4. Pre-deposit requirement for appeal hearing.
5. Tribunal's decision on inclusion of free goods in taxable value.
6. Direction for pre-deposit and further appeal proceedings.

Analysis:
The appellant filed an appeal with a stay application due to the dismissal of their appeal by the Commissioner (Appeals) for non-compliance with conditions mentioned in the stay order. The appellant, engaged in construction services, availed exemption under Notification No. 01/2006. During inspection, it was found that they received goods and materials free of cost from the service recipient, on which they claimed CENVAT credit. A show-cause notice was issued for payment of service tax on 33% of the gross bills, including the value of free supplies. Both lower authorities confirmed the demands. The Commissioner (Appeals) directed the appellant to pay the service tax demand along with interest as a pre-deposit for the final hearing of the appeal. The appellant failed to comply, leading to the dismissal of the appeal.

The appellant argued that the Commissioner's order lacked merit and cited cases where the Tribunal held that the construction of roads should not be included in the gross value of services. After hearing both sides, the Tribunal referred to the case of Jaihind Projects Ltd. vs. Commissioner of Service Tax, where it was held that goods supplied free by the service recipient should be included in the taxable value. Accordingly, the Tribunal directed the appellant to make a pre-deposit of Rs.2,00,000 within eight weeks. The Commissioner (Appeals) was instructed to hear the matter on merits and dispose of the appeal after providing a reasonable opportunity for the appellant to be heard.

In conclusion, the stay application and the appeal were disposed of with the direction for the pre-deposit and further appeal proceedings as per the Tribunal's decision in the case referenced.