2014 (2) TMI 1043 - AT - Service Tax

Valuation - construction service - inclusion of free supplies - Held that - free supplies made by the Customers to the construction service provider would not get added in the gross amount charged for providing construction services. - Following the decision in the case of Bhayana Builders Pvt. Ltd. vs. CST, Delhi 2013 (9) TMI 294 - CESTAT NEW DELHI decided in favor of assessee.

Summary

Issues:
- Interpretation of notification No. 1/06 dated 1.3.06 regarding abatement of service tax.
- Whether the value of tanks and pumps supplied free by M/s. IOCL should be included in the gross amount charged by the service provider for providing taxable services.

Analysis:
1. The appeals of the Revenue were disposed of by the Appellate Tribunal as they arose from the same impugned order with identical issues. The Revenue challenged the order passed by the Commissioner (Appeals) in the present appeal. The respondents did not appear, and only the learned DR for the Revenue presented arguments.

2. The respondents had a contract with M/s. IOCL for erecting tanks and pumps supplied by M/s. IOCL. The service provider discharged the service tax liability by claiming a 67% abatement as per notification No. 1/06 dated 1.3.06.

3. The central question was whether the value of tanks and pumps supplied free by M/s. IOCL should be included in the gross amount charged by the service provider for availing the abatement. The Commissioner (Appeals) ruled in favor of the respondents based on the interpretation of the notification.

4. The notification specified that the gross amount charged by the service provider for taxable services should include the value of plant, machinery, equipment, and other materials sold. It did not mention the cost of materials supplied by the service receiver. The Tribunal found that the tanks and pumps were essential for installation and could not be considered as materials supplied by the clients for installing other goods.

5. Referring to a precedent set by the Larger Bench of the Tribunal in a similar case, it was established that free supplies made by customers to the service provider should not be added to the gross amount charged for providing services. The Tribunal found the Commissioner (Appeals) decision aligned with this interpretation and rejected the Revenue's appeals.

6. Both appeals by the Revenue were dismissed, and the Cross Objections by the respondents were disposed of as written submissions. The Tribunal's decision was pronounced in the open court.