2015 (10) TMI 2224 - AT - Service Tax

Waiver of Pre-deposit valuation - Commercial or Industrial Construction Services Held That - the value of free supplies is not includible in the assessable value and to that extent prima-facie the appellant s contention that it had already paid service tax on a value higher than the correct assessable value has force, although, in that situation the appellant may not be entitled to avail of cenvat credit taken on cement and steel which would make it a case of taking unauthorised cenvat credit rather than short payment of service tax. - stay granted.

Summary

Issues:
1. Recovery of interest under Section 75 of the Finance Act, 1994 along with penalty under Section 76.
2. Inclusion of value of free supplies in assessable value for service tax calculation.
3. Availment of cenvat credit on free supplies and its impact on assessable value.
4. Entitlement to waiver of pre-deposit and stay on recovery during appeal.

Analysis:
1. The appeal was filed against an order directing recovery of interest and penalty under Sections 75 and 76 of the Finance Act, 1994. The appellant contended that they provided Commercial or Industrial Construction Services (CICS) to a company, receiving cement and steel in return. They argued that the value of these free supplies should not be included in the assessable value for service tax calculation, citing the judgment in Bhayana Builders Pvt. Limited and Others.

2. The Departmental Representative (DR) argued that since the appellant availed cenvat credit on the cement and steel received, the value of these supplies should be included in the assessable value. It was contended that receiving free supplies amounted to payment towards the service provided, making service tax applicable from the date of receipt of such supplies, thus justifying the interest recovery.

3. The Tribunal considered both arguments and referred to the judgment in Bhayana Builders Pvt. Limited and Others, agreeing that the value of free supplies should not be included in the assessable value. However, it noted that availing cenvat credit on these supplies might lead to unauthorized credit rather than short payment of service tax. Despite this, the Tribunal found merit in the appellant's claim that they had paid tax on a value higher than the correct assessable value. Therefore, the Tribunal waived the pre-deposit requirement and stayed the recovery of the disputed liability during the appeal process.

4. In conclusion, the Tribunal granted the appellant's request for waiver of pre-deposit and stayed the recovery of the interest amount and penalty during the pendency of the appeal, considering the arguments presented regarding the inclusion of free supplies in the assessable value for service tax calculation and the availed cenvat credit on those supplies.