2018 (8) TMI 324 - AT - Service Tax

Valuation - inclusion of value of the free supply of materials in assesable value - inclusion of Bonus received from service recipient for economically using the diesel and explosives at the end of providing services. Whether the value of the free supply of materials viz., explosives and diesel by service recipient M/s SCCL has to be included for the purpose of reckoning the Service Tax payable? - Held that - Hon ble Apex Court in the case of Bhayana Builders 2018 (2) TMI 1325 - SUPREME COURT OF INDIA held that the value of free materials supplied by the service recipient cannot be included in the value for the purpose of reckoning Service Tax - demand set aside. Whether bonus which they receive from their service recipient for economically using the diesel and explosives at the end of providing services is liable to be included in the value of services rendered? - Held that - In almost an identical case, in the case of Intercontinental Consultants and Technocrats 2018 (3) TMI 357 - SUPREME COURT OF INDIA , it has been held by the Supreme Court that value of free diesel and explosives supplied by the service recipient cannot be included in the value of services rendered for the purpose of assessment of Service Tax under Section 67. As far as the issue of bonus received by the service provider for efficient use of diesel and explosives is concerned, this amount was not known at the time of provision of services - This amount cannot be included as value of taxable services rendered under Section 67. Appeal allowed - decided in favor of appellant.

Summary

Issues: Valuation of services for Service Tax purposes - Inclusion of value of free materials supplied by service recipient and bonus payments received by service provider.

In this case, the appellants were engaged by a company for various services and were provided with free materials like explosives and diesel by the service recipient. The issue revolved around whether the value of these free materials should be included in the calculation of Service Tax payable, and whether the bonus received by the appellants for efficient use of these materials should also be considered in the valuation of services rendered. The appellants argued that the free materials supplied should not be included in the taxable value as per the judgment in the case of Intercontinental Consultants and Tehnocrats Pvt Ltd. They also contended that the bonus received post-service completion should not be linked to the value of services rendered. The Revenue, however, insisted that both the value of free goods and the bonus payments should be included in the taxable amount.

The Tribunal considered the arguments from both sides and referred to relevant judgments. It was noted that the Supreme Court had ruled in the case of Bhayana Builders that the value of free materials supplied by the service recipient cannot be included in the calculation of Service Tax. Additionally, in a similar case, the Supreme Court held that the value of free diesel and explosives provided by the service recipient should not be included in the valuation of services. Regarding the bonus received for efficient use of materials, the Tribunal agreed that this amount, not known at the time of service provision, should not be considered in the taxable value. Citing the precedent set by CESTAT Bangalore in a similar case, the Tribunal set aside the Orders-in-Original, ruling in favor of the appellants.

Therefore, the Appeals were allowed, and the Orders-in-Original were set aside, based on the judgment that the demands made in the show cause notices did not hold valid, as per the established legal principles and precedents.