2017 (1) TMI 1135 - AT - Service Tax

Benefit of abatement of 67% under N/N. 15/2004-ST dated 10.09.2004 and N/N. 01/2006-ST dated 01.03.2006 - denial on the ground that the appellant has suppressed the information about material supplied free of cost by the service recipient - Held that - the issue involved in this case is no more res integra in view of the decision of Larger Bench of this Tribunal in the case of Bhayana Builders (P) Ltd. 2013 (9) TMI 294 - CESTAT NEW DELHI (LB) , wherein it has been held that value of free supplies by service recipient do not comprise the gross amount charged for the purpose of levy of service tax - the appellant should be entitled for availing abatement of 67% - appeal allowed - decided in favor of appellant.

Summary

Issues:
Service tax demand confirmation, abatement denial, penalties imposition.

Service Tax Demand Confirmation:
The appeal was against an order confirming a service tax demand of ?7,27,61,579 along with interest, with a portion of the liability already deposited. The appellant had paid service tax on taxable services with a 67% abatement, which was denied due to alleged suppression of information about free material supplied. The appellant argued that the services rendered in connection with a composite works contract were not liable for service tax before 01.06.2007, citing relevant judgments. The Tribunal found that the contract involved both goods transfer and service rendering, falling under works contract service, and held that the service tax liability for the period after 01.06.2007 was not legally sustainable based on Supreme Court precedent.

Abatement Denial:
The appellant had discharged service tax liability on free material supplied by the service recipient before the show cause notice (SCN) was issued. The denial of the 67% abatement was based on the timing of payment after the investigation was initiated. The Tribunal noted that the appellant was entitled to the abatement as there was no restriction in the notifications regarding payment timing post-investigation. Citing a previous Tribunal decision, it held that the value of free supplies by the service recipient does not form part of the gross amount charged for service tax levy, thus allowing the appellant to avail the abatement.

Penalties Imposition:
Penalties were imposed under Sections 77 and 78 of the Finance Act, 1994. However, the Tribunal found no merit in the impugned order and set it aside, allowing the appeal in favor of the appellant. The decision highlighted that the appellant should be entitled to the abatement provided in the relevant notifications, emphasizing that the denial of such benefit and confirmation of the service tax demand were not justified.

This judgment addresses the issues of service tax demand confirmation, abatement denial, and penalties imposition, providing a detailed analysis of each aspect and ultimately ruling in favor of the appellant based on legal interpretations and precedents.