2014 (11) TMI 38 - AT - Service Tax

Denial of Abatement Notification No. 1/2006-S.T., dated 1-3-2006 - inclusion of value of free supply - Held that - while the value of goods transferred or deemed to have been transferred during the course of execution of composite works contract involving supply/rendition of goods and services, must exclude the value of goods for levy of service tax; reiterated the principle that since the exemption/abatement Notifications provide an alternative facility to assessees to have their tax liability computed by approximation formulae instead of being subjected to detailed assessment and evaluation of the value of the goods, for exclusion of this component for levy of service tax; the exemption/abatement Notifications cannot be challenged as ultra vires the charging provisions of service tax legislation. The Notification however was the specific subject matter of Bhayana Builders (P) Ltd. 2013 (9) TMI 294 - CESTAT NEW DELHI (LB) - Decided in favour of assessee.

Summary

Issues:
Interpretation of Notification No. 1/2006-S.T. regarding service tax demand and abatement benefits.

Analysis:
The appellant appealed against the order confirming a service tax demand, citing denial of benefits under Notification No. 1/2006-S.T. due to failure to declare the gross consideration received from service recipients, including the value of goods freely supplied. The Larger Bench's decision in Bhayana Builders (P) Ltd. clarified that the value of free supplies by service recipients is not included in the "gross consideration received." The Explanation to the Notification was interpreted to exclude the value of free supplies by service recipients.

The respondent contended that the Larger Bench's decision in Bhayana Builders (P) Ltd. was no longer valid based on the Delhi High Court's ruling in G.D. Builders v. UOI. However, the Tribunal rejected this contention, emphasizing that the High Court's decision did not address the specific interpretation of Notification No. 1/2006-S.T. The Tribunal reiterated the principle that exemption/abatement Notifications provide an alternative method for tax computation, allowing exclusion of certain components for service tax levy without challenging the legislation's charging provisions.

The Tribunal concluded that the Delhi High Court's decision in G.D. Builders did not provide clarity on Notification 1/2006-S.T., and the interpretation of this Notification was only addressed in Bhayana Builders (P) Ltd. As a result, the Tribunal upheld the validity of the Larger Bench's judgment in Bhayana Builders (P) Ltd., allowing the appeal without costs based on the analyses and the scope explained in the earlier decision.