2014 (10) TMI 568 - AT - Service Tax

Valuation of the taxable service - inclusion of value of free supply - construction of commercial or industrial complex - abatement of 67% - exemption under Notification No. 15/2004-ST dated 10.09.2004, Notification No. 1/2006-ST dated 01.03.2006 or Notification No. 18/2005-ST dated 07.06.2005 - Held that - adjudicating order in its discussion and finding portion has not devoted even a single line to discuss the includibility of the value of free supplies in the assessable value for the purpose of granting 67% abatement under the aforesaid notifications. However, this omission loses its significance considerably as the impugned Order-in-Appeal has discussed this issue - In view of the law relating the free supplies having now been settled by the CESTAT Larger Bench in the case of Bhayana Builders 2013 (9) TMI 294 - CESTAT NEW DELHI (LB) , it is deemed appropriate to remand the case to the original adjudicating authority for de novo adjudication. Accordingly we set aside the impugned order and remand the case to the original adjudicating authority for adjudicating the same afresh in view of, and in accordance with the judgment of CESTAT Larger Bench in the case of Bhayana Builders (supra) after giving the appellants an opportunity of being heard - Decided in favour of asessee.

Summary

Issues:
1. Appeal against Order-in-Appeal upholding Order-in-Original.
2. Service tax demand on construction contracts.
3. Inclusion of value of free supplies in gross amount charged.
4. Applicability of Notifications 15/2004-ST, 1/2006-ST, and 18/2005-ST.
5. Impact of CESTAT Larger Bench judgment in Bhayana Builders case.

Issue 1: Appeal against Order-in-Appeal upholding Order-in-Original:
The appellants filed an appeal against Order-in-Appeal No. 205/ST/DII/2012 dated 25.10.2012, which had upheld Order-in-Original No. 01/JC/1/2011/ dated 14.01.2011.

Issue 2: Service tax demand on construction contracts:
The appellants had undertaken construction contracts for commercial and residential buildings but failed to pay service tax or obtain timely registration. The adjudicating authority confirmed a service tax demand of &8377; 28,78,235/- along with interest and penalties invoking the extended period.

Issue 3: Inclusion of value of free supplies in gross amount charged:
The appellants argued that the demand calculation allowed for a 67% abatement after adding the value of material supplied free of cost by the principals. They contended that the value of free supplies should not be included in the gross amount charged to avail exemption under various notifications.

Issue 4: Applicability of Notifications 15/2004-ST, 1/2006-ST, and 18/2005-ST:
The appellants relied on Notification No. 15/2004-ST, Notification No. 1/2006-ST, and Notification No. 18/2005-ST to support their contention that the value of free supplies should not be included in the assessable value for granting abatement.

Issue 5: Impact of CESTAT Larger Bench judgment in Bhayana Builders case:
The CESTAT Larger Bench decision in the Bhayana Builders case clarified that the value of goods and materials supplied free of cost by the service recipient should be outside the taxable value or gross amount charged. This judgment influenced the present case's computation of the demand. The Tribunal noted that the original adjudicating authority and the Commissioner (Appeals) had not considered this decision as it was not available at that time.

In light of the settled law on free supplies by the CESTAT Larger Bench in the Bhayana Builders case, the Tribunal remanded the case to the original adjudicating authority for a fresh adjudication. The impugned order was set aside, and the authority was directed to re-examine the case in accordance with the Bhayana Builders judgment, providing the appellants with an opportunity to present their case.

This detailed analysis of the judgment covers all the issues involved and provides a comprehensive overview of the Tribunal's decision and reasoning.