2015 (5) TMI 636 - AT - Service Tax

Admissibility of CENVAT credit - Penalty u/s 78 - non inclusion of value of steel, cement and other materials received free of cost by respondent from their customers while arriving at the value of construction service for payment of service tax on the construction services provided by them - Held that - Issue of inclusion of free material provided to the service provider by the customer and computation of value thereof for the purpose of payment of service tax by the service provider is decided by the Larger Bench of this Tribunal in the case of Bhayana Builders (P) Ltd. & others vs. CST, Delhi 2013 (9) TMI 294 - CESTAT NEW DELHI (LB) in favour of the assessee. As a matter of judicial discipline we follow the above decision and reject the appeal of the Revenue on this matter The amount of ₹ 2,75,255/- is 25% of the penalty of ₹ 11,01,017/- which was set aside by Commissioner (Appeals). - Therefore penalty is not imposable under Section 78 because show-cause notice was not required to be issued under Section 73(3) as no mens rea for wilfull suppression of facts has been established. Therefore, refund of ₹ 2,75,255/- should be granted. As regards the interest of ₹ 1,94,084/- on the service tax demand of ₹ 9,42,920/-, we have already set aside the demand. Therefore the interest of ₹ 1,94,084/- paid by appellant merits refund - Decided against Revenue.

Summary

Issues:
Admissibility of CENVAT credit on three counts: (i) non-inclusion of value of materials received free of cost, (ii) availment of CENVAT Credit on input service, (iii) failure to pay service tax on GTA services.

Analysis:

Issue 1: Non-inclusion of value of materials received free of cost
The Commissioner (Appeals) held that the service was provided before the relevant notification, hence no demand was justified. The Revenue appealed, citing Notification 15/2004, which requires inclusion of all material costs. However, the Tribunal followed a precedent favoring the assessee and rejected the appeal and corresponding penalty.

Issue 2: Availment of CENVAT Credit on input service
The Commissioner upheld the demand with interest but set aside the penalty. The Revenue's argument regarding discontinuation of simultaneous penalties was dismissed as it was not raised before the Commissioner (Appeals).

Issue 3: Failure to pay service tax on GTA services
The Commissioner upheld the demand with interest but set aside the penalties. The Tribunal ordered refunds for penalties set aside and interest paid due to the absence of mens rea for wilful suppression of facts.

Refund Claim
A refund claim was filed by the respondent based on a previous order. The Commissioner sanctioned the refund, which the Tribunal upheld due to penalties being set aside and no mens rea established for wilful suppression of facts.

Conclusion
Both appeals were dismissed, and the miscellaneous application was disposed of. Refunds were ordered for penalties and interest paid, and the Tribunal linked the matters to ensure refunds were granted to the respondent.