2014 (11) TMI 872 - AT - Service Tax

Valuation of goods - inclusion of the value of diesel supplied free of cost - Held that - Issue of includibility of the value of free supplies in the gross amount charged has been decided by the Larger Bench of CESTAT in the case of Bhayana Builders (P) Ltd. Vs. Commissioner of Service Tax. Delhi - 2013 (9) TMI 294 - CESTAT NEW DELHI (LB) , wherein it has been unambiguously held that the value of free supplies by the service receiver to the service provider is not includible in the gross amount charged by the service provider from the service receiver. In view of this, any further discussion on the issue involved is unnecessary and unwarranted. It is accordingly held that the demand confirmed on the basis that the value of diesel supplied free of cost by the service receiver is includible in the gross amount charged is unsustainable. When the demand itself is not sustainable, the question of any penalty simply does not arise. - Decided against Revenue.

Summary

Issues:
1. Whether the value of diesel supplied free of cost by the service receiver should be included in the gross amount charged by the service provider.

Analysis:
The judgment pertains to two appeals filed before the Appellate Tribunal CESTAT New Delhi. The first appeal was by the Commissioner of Central Excise & Service Tax against an order setting aside penalties imposed in a previous order. The second appeal was by a company against the same order that confirmed a demand for service tax. The appellants were engaged in providing various services to a company, and the core issue revolved around the inclusion of the value of diesel supplied free of cost in the gross amount charged for services rendered.

The Appellate Tribunal considered the argument that the value of free supplies, such as diesel, by the service receiver should not be part of the gross amount charged by the service provider. The Tribunal referred to a precedent set by the Larger Bench of CESTAT in the case of Bhayana Builders (P) Ltd. vs. Commissioner of Service Tax, Delhi. The precedent established that the value of free supplies from the service receiver should not be included in the 'gross amount charged' by the service provider. Based on this precedent, the Tribunal concluded that any demand based on including the value of diesel supplied free of cost in the gross amount charged was unsustainable.

Therefore, the Tribunal allowed the appeal filed by the appellants, ruling in their favor. It dismissed the department's appeal, emphasizing that when the demand itself is not sustainable, the question of imposing any penalty does not arise. The judgment highlights the importance of legal precedents and established principles in determining tax liabilities and penalties in service tax cases.