2014 (10) TMI 646 - AT - Service Tax

Valuation of the taxable service - inclusion of value of free supply - construction of commercial or industrial complex - section 67 - whether the value of free issue material supplied by the service recipient has to be included while computing the gross amount charged for the purpose of exemption Notification No. 15/04-ST and 1/06-ST - Held that - Just because the materials were sold by the service provider to the buyer and he in turn provided it as free supply for construction work, the nature of transaction between the service receiver and the service provider that of supply of goods free of cost in our opinion does not change. As regards other decisions relied upon by the learned A.R., we find that all of them were decisions which were rendered before the case of Bhayana Builders (Pvt) Ltd 2013 (9) TMI 294 - CESTAT NEW DELHI (LB) and therefore the Larger Bench decision would prevail. We also take note of the fact that appellants have deposited an amount of ₹ 96,57,536/- in our opinion, this amount is sufficient towards pre-deposit for hearing the appeal. - stay granted.

Summary

Issues:
1. Whether the value of free issue material supplied by the service recipient should be included in computing the gross amount charged for the purpose of exemption Notification No. 15/04-ST and 1/06-ST.

Analysis:
The Appellant, engaged in commercial or industrial construction services, availed a 67% abatement on the gross amount charged. An investigation revealed that the Appellant had different contracts, one of which involved supplying machinery, equipment, and goods to the service recipient, who then returned them for use in the project. The issue arose as the value of these free issue materials was not included in calculating the service tax liability. The Appellant argued that the decision in the case of Bhayana Builders (Pvt) Ltd. Vs Commissioner of Service Tax Delhi supported their position. The Appellant contended that the Larger Bench decision in the Bhayana Builders case was applicable, as it clarified that the value of goods supplied free of cost by the service recipient should not be considered in the taxable value or gross amount charged for service tax purposes. The Tribunal agreed that the issue in the present case was covered by the Tribunal's decision in the Bhayana Builders case, emphasizing that the nature of the transaction remained one of supplying goods free of cost, regardless of the intermediate sale and supply chain. The Tribunal also noted that previous decisions cited by the opposing party were rendered before the Bhayana Builders case and thus the Larger Bench decision prevailed.

The Tribunal highlighted that the show-cause notice acknowledged the free supply of materials in the case. The Tribunal found the Appellant's pre-deposit of a certain amount to be sufficient for hearing the appeal and waived the requirement for further pre-deposit. Consequently, a stay against recovery was granted for 180 days from the date of the order.