2009 (1) TMI 220 - AT - Service Tax

Civil Contract commercial or industrial construction service abatement of 67% - demand of tax was raised after including the value of Cooling Tower parts and components being the gross amount charged. Appellant submits that Cooling Tower are not related with construction of commercial and industrial services held that - On perusal of the agreement, it is seen that the second part of the agreement includes civil works, errection and commission of equipment. - they have already included the value of steel and cement in the civil construction of service. - Prima facie, it appears that the Cooling Towers parts or components are not related to construction of commercial and industrial services stay granted

Summary

Issues Involved:
Whether the appellant is entitled to abatement of 67% from the value of commercial and industrial construction service under Notification 15/2004-S.T., dated 10-09-2004, without including the value of free supplied material in the gross amount of taxable service.

Detailed Analysis:
The applicant filed an application seeking waiver of pre-deposit of tax and penalties. The central issue in this case revolved around the entitlement of the appellant to abatement of 67% from the value of commercial and industrial construction service under Notification 15/2004-S.T., dated 10-09-2004, without incorporating the value of free supplied material in the gross amount of taxable service. The learned Consultant for the applicant argued that the demand of tax included the value of Cooling Tower parts and components in the gross amount charged, contending that Cooling Towers were unrelated to the construction of commercial and industrial services. He referenced the relevant agreement and highlighted that free supplied material should not be considered in the gross amount, citing legal precedents such as the decision of the Hon'ble Delhi High Court in Era Infra Engineering Ltd. v. Union of India [2008 (11) S.T.R. 3 (Del)] and the Tribunal's decision in P. Chandran v. CCE, Salem - 2008 (12) S.T.R.33 (Tri-Chennai).

The Jt. CDR representing the respondent argued that the agreement's two parts were interconnected, implying that the value of Cooling Tower parts and components should be included in the gross amount charged as they were part of industrial construction. He distinguished the cited case laws by stating that they pertained to construction contracts, whereas the appellants were manufacturers of Cooling Towers. Upon hearing both sides and examining the records, the Tribunal found merit in the submissions made by the learned Counsel. The Tribunal observed that the Cooling Towers parts or components were not directly related to the construction of commercial and industrial services, as indicated by the agreement's provisions. Notably, the Tribunal referenced a similar situation where the Hon'ble High Court had granted a stay. Consequently, the Tribunal decided to waive the pre-deposit of tax and penalties until the appeal's final disposal, thereby allowing the stay petition.

In conclusion, the Tribunal's judgment focused on the interpretation of the relevant notification regarding abatement in the context of including the value of free supplied material in the gross amount of taxable service for commercial and industrial construction services. The decision to grant a waiver of pre-deposit was based on the prima facie assessment that the Cooling Tower parts or components were not integral to the construction services provided by the appellants, aligning with the provisions of the agreement and supported by legal precedents.