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2018 (6) TMI 190 - AT - Service TaxValuation - inclusion of the cost of free supply of material by Kochi Refineries Limited in assessable value - Contract for Fabrication and Laying of cross country pipelines - Commercial or Industrial Construction Services - Held that - Apex Court in the case of Bhayana Builders (P) Ltd., 2013 (9) TMI 294 - CESTAT NEW DELHI (LB) has upheld the judgment and order of the Larger Bench of Tribunal holding that cost of free supply of the materials cannot be included for arriving at the gross value for calculation of service tax liability - demands raised on appellant for non inclusion of cost of free supply of materials stands held in their favor. Benefit of N/N. 04/2004-ST - service tax liability from June, 2006 to December, 2007 - Held that - Since the appellant has not contested non extension of benefit of Notification No. 04/2004-ST, the demand on this amount is liable to be upheld subject to the requantification of the service tax liability. Appeal allowed in part.
Issues:
1. Consideration of cost of free supply of material for service tax liability. 2. Eligibility for benefit of Notification No. 04/2004-ST. Issue 1: Consideration of cost of free supply of material for service tax liability: The appeal was against an Order-in-Appeal regarding the inclusion of the cost of free supply of material in the service tax liability calculation for a contract executed for Fabrication and Laying of cross country pipelines. The appellant argued that the cost of free supply of material should not be included based on a precedent set by the Larger Bench of the Tribunal in the case of Bhayana Builders (P) Ltd. The Tribunal, after considering submissions, held in favor of the appellant. The Tribunal cited the Apex Court's decision in the Bhayana Builders case, upholding that the cost of free supply of materials cannot be included in the gross value for calculating service tax liability. Consequently, the demands raised on the appellant for non-inclusion of the cost of free supply of materials were set aside, and the impugned order was overturned. Issue 2: Eligibility for benefit of Notification No. 04/2004-ST: The appellant contended that they were eligible for the benefit of Notification No. 04/2004-ST due to their association with a Special Economic Zone (SEZ) co-developer during a specific period. However, it was noted that the appellant did not contest this issue before the First Appellate Authority or the Tribunal. As a result, the demand for service tax liability based on the non-extension of the benefit of Notification No. 04/2004-ST was upheld, subject to the recalibration of the service tax liability determined in the previous issue. The Tribunal disposed of the appeal accordingly, emphasizing the appellant's failure to contest the eligibility for the notification during the relevant period. In conclusion, the judgment by the Appellate Tribunal CESTAT Hyderabad addressed two main issues. Firstly, it clarified that the cost of free supply of material should not be included in the calculation of service tax liability, aligning with the precedent set by the Larger Bench of the Tribunal and upheld by the Apex Court. Secondly, the appellant's eligibility for the benefit of Notification No. 04/2004-ST was not contested, leading to the decision to uphold the demand for service tax liability related to this issue. The Tribunal's detailed analysis and application of legal principles resulted in a comprehensive resolution of the appeal.
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