2016 (8) TMI 246 - AT - Service Tax

Recovery demand valuation - includibility of value of free supply in gross amount charged - Held that - The value of goods and materials supplied free of cost by a service recipient to the provider of the taxable construction service, being neither monetary or non-monetary consideration paid by or flowing from the service recipient, accruing to the benefit of service provider, would be outside the taxable value or the gross amount charged. Appellants have been able to establish a prima case in respect of demand pertaining to includibility of value of free supply in the gross amount charged. However, the appellants have not been able to make out a case in respect of demand of service tax on the activity related to construction of housing and power house, etc. The pre-deposit of ₹ 5 lakh would be sufficient to comply with the provisions of section 35F of Central Excise Act, 1944. - stay granted partly.

Summary

Issues:
- Stay application filed by M/s.P.S. Construction to halt recovery of service tax dues and penalty.
- Discrepancy in figures of ST-3 returns, 26AS form, and balance sheet.
- Allegations in show cause notice not upheld by impugned order.
- Registration dates discrepancy.
- Payment of service tax during specific periods.
- Value of free supply in gross consideration.
- Construction activities related to dams and power house.
- Prima facie case established for free supply inclusion in gross amount.
- Service tax demand on construction activities.
- Pre-deposit amount determination under section 35F of Central Excise Act, 1944.

Analysis:
1. The stay application was filed by M/s.P.S. Construction to prevent the recovery of service tax dues and equivalent penalty. The demand was based on discrepancies between the figures in the ST-3 returns, 26AS form, and balance sheet submitted by the appellant.

2. The appellant's counsel argued that the allegations in the show cause notice were not upheld by the impugned order. There was a discrepancy in the registration dates mentioned in the notice, and it was argued that the demand for the period in question should not be confirmed. Reference was made to previous Tribunal decisions to support the argument regarding the value of free supply in the gross consideration.

3. The respondent's representative contended that the construction activities undertaken by the appellants did not fall within the scope of service tax, citing examples of residential complex construction and power house activities. A circular was referenced to support the position that the value of free supply should be included in the gross amount charged.

4. The Tribunal referred to a previous ruling by a larger bench regarding the value of goods and materials supplied free of cost in taxable construction services. It was established that the value of free supplies by the service recipient should not be included in the gross amount charged under specific notifications.

5. The Tribunal found that the appellant had established a prima facie case regarding the inclusion of the value of free supply in the gross amount charged. However, the case for service tax demand on specific construction activities related to housing and power house was not substantiated.

6. Consequently, a pre-deposit amount of ?5 lakh was determined as sufficient under section 35F of the Central Excise Act, 1944, to comply with the provisions. Upon compliance with the pre-deposit requirement, the demand of duty, penalty, and interest would be stayed pending the appeal's disposal. Compliance was to be reported by a specified date.