2012 (7) TMI 23 - AT - Service Tax

Construction of Residential Complexes undertaken by the appellants - value of free supplied materials - adjudicating authority has not given the benefit of Notification No. 15/2004 Held that - If free materials were supplied by the principals to the appellant, if the value needs to be included in the gross value, that is claimed as a portion of the material, if so, the benefit of the Notification No. 15/2004 could not be restricted and it is for the adjudicating authority to see whether the records maintained by the assessee/supplier are enough to come to a conclusion, that the appellant can avail the benefit of Notification No. 15/2004 and only charge service tax on the balance of 33% of the value sought to be included - matter remanded to the adjudicating authority

Summary

Issues:
Tax liability on 'Commercial or Industrial Construction' and 'Construction of Residential Complexes' for the period 2004-05 to 2008-09. Calculation of service tax including the value of free materials supplied. Eligibility for benefit of Notification No. 15/2004-ST and 1/2006.

Analysis:
The appeal challenged the Order-in-Original passed by the Commissioner of Central Excise, Mangalore. The appellant was directed to deposit the entire service tax amount confirmed by the adjudicating authority along with interest, but failed to comply, resulting in the dismissal of the appeal. Subsequently, a Writ Petition was filed before the High Court of Karnataka, which directed the appellant to deposit 50% of the tax demand within four weeks. The High Court instructed the Tribunal to expedite the appeal process. The issue revolved around the tax liability on construction activities undertaken by the appellants, specifically concerning the inclusion of the value of free materials supplied in the calculation of service tax. The appellant argued that the adjudicating authority erred in not considering the gross amount billed and received, and failed to apply the benefits of relevant notifications.

The learned Counsel contended that the adjudicating authority incorrectly included the value of free materials in the gross value of services without providing the benefit of relevant notifications. The Jt. CDR acknowledged the correctness of the calculation but suggested a reconsideration regarding the free supply of materials. The Tribunal observed that the adjudicating authority failed to grant the benefit of Notification No. 15/2004 regarding the abatement of 67% after including the value of free materials in the gross amount. It was emphasized that if free materials were supplied, the appellant could claim a portion of the material cost under the notification. The Tribunal remanded the matter to the adjudicating authority for a fresh consideration, highlighting the need for reevaluation based on legal principles and factual circumstances. The adjudicating authority was directed to reexamine the issues within three months, focusing on the Show Cause Notice dated 14.10.2009. The appeal was allowed by way of remand to ensure a fair and comprehensive review of the tax liability issues involved.