2014 (4) TMI 38 - AT - Service Tax

Waiver of pre deposit - Valuation of goods - Whether the valuation of the services provided by the appellant has been correctly taken by the appellant - Whether the disputed contracts entered into by the appellant can be vivisected and whether the sale value of the goods charged by the appellant from its customers represent only the price of the goods or also include consideration for performing a service also - Held that - The issue is contentious one and needs deeper consideration, which can be gone into detail at the time of final hearing of the matter - Conditional stay granted.

Summary

Issues:
Valuation of services provided by the appellant under different contract types.

Analysis:
The appellant filed a stay application against the order confirming a demand of Rs.5,01,03,330/- along with interest and penalties under Sections 76, 77, and 78 of the Finance Act, 1994. The main issue framed was whether the valuation of services provided by the appellant was correctly taken. The appellant's representative argued that the contracts involved supplying cooling towers and parts, separate orders for supply and installation, and single orders showing supply and installation separately. Revenue claimed service tax on the profit made on goods sale, beyond the Service Tax law's scope. The appellant contended that the value of material supplied need not be added while discharging duty liability in Works Contract, citing Rule 2A (i) of the Service Tax Rules, 2006.

During the hearing, both sides presented their arguments. The key question was whether the contracts could be vivisected and if the sale value of goods charged by the appellant included consideration for services. The appellant asserted that the price charged represented only the goods' value and should be excluded from service tax payment under Rule 2A(i). The adjudicating authority disagreed, stating that Rule 2A did not apply as VAT/CST had not been paid on the actual value of goods transfer. Considering the contentious nature of the issue, the appellant was directed to make a pre-deposit of Rs.50,00,000 within eight weeks. This deposit would stay the recovery of the remaining amounts and penalties until the appeal's disposal. The matter was scheduled for further orders after compliance verification by the Deputy Registrar.

This judgment highlights the complex issue of contract valuation for service tax purposes, emphasizing the need for detailed consideration during the final hearing. The decision to require a pre-deposit reflects the tribunal's cautious approach to balance the interests of the appellant and revenue authorities pending final resolution of the appeal.