2018 (3) TMI 704 - AT - Service Tax

Valuation - civil construction activity - Revenue held a view that the appellants have to discharge the tax under industrial and commercial construction service on the full value (including the value of material received free from the recipient of service) - Held that - reliance placed upon the decision of DV Patel & Company Vs. CCE, Nagpur 2017 (10) TMI 404 - CESTAT MUMBAI , where the Tribunal examined the works contract service with reference to Commercial, Industrial and construction service and held that the value of free supplied material are not includable. The tax liability confirmed on the appellant under Commercial Industrial construction service for the period prior to 1.3.2006 is not leviable - appeal allowed - decided in favor of appellant.

Summary

Issues:
Service Tax liability for construction activity under industrial and commercial construction service for the period 1.9.2006 to 31.3.2008.
Interpretation of composite works contract liability to service tax.
Inclusion of value of free supplied material in the gross amount charged for works contract service.
Applicability of abatement in taxable value under Notification No.1/2006 ST dated 1.3.06.

Analysis:
The case involved a dispute regarding the Service Tax liability of an appellant engaged in civil construction activity for a commercial mall construction project. The Revenue contended that the appellant was liable to pay tax under industrial and commercial construction service for the period from 1.9.2006 to 31.3.2008. The lower authorities confirmed a tax liability of &8377; 46,68,210 against the appellant.

Upon hearing both parties and examining the appeal record, it was argued by the appellant's counsel that the contract was composite in nature, involving both the supply of goods and the provision of services. Citing a Supreme Court decision in the case of Larsen and Toubro Ltd., it was contended that composite works contracts were liable to service tax only from 1.6.2007. The appellant had registered under works contract service and discharged the Service Tax using the composition scheme under Works Contract Rules, 2007.

The Tribunal examined the Letter of intent related to the contract in question and found that it involved both the provision of services and the supply of goods. Consequently, the Tribunal ruled that the appellant could not be subjected to tax before 1.7.2007 for the work in question.

Regarding the inclusion of the value of free supplied material in the gross amount charged for works contract service, the Tribunal referred to relevant rules and precedents. It was noted that the gross amount charged should not include free supplied material received from the recipient of service, based on interpretations by the Tribunal in previous cases. Relying on these interpretations, the Tribunal concluded that the tax liability confirmed on the appellant for the period before 1.3.2006 was not leviable, as the works contract service tax liability had been discharged by the appellant under the 2007 Rules. Consequently, the appeal was allowed based on the legal position discussed.

In summary, the Tribunal's decision revolved around the interpretation of the composite nature of the works contract, the applicability of tax liability based on specific dates, and the exclusion of the value of free supplied material in the gross amount charged for works contract service. The appellant's arguments regarding the composition scheme and relevant legal precedents played a crucial role in the Tribunal's decision to allow the appeal.