2018 (11) TMI 1215 - AT - Service Tax

Valuation - inclusion in assessable value - cost of HSD received free of cost from M/s. Ultratech Cement Ltd. to whom services were provided - Held that - There is no dispute that the appellants have received HSD free of cost - The Hon ble apex court, in the case of Commissioner of Service Tax Vs M/s. Bhayana Builders Pvt. Ltd., 2018 (2) TMI 1325 - SUPREME COURT OF INDIA has held that the value of goods/materials supplied free of cost by the service recipient is not included in the gross amount for the purpose of service tax - demand cannot sustain - appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Inclusion of the cost of High-Speed Diesel (HSD) in the value of taxable service for service tax assessment.
2. Validity of the show-cause notice issued by the department.
3. Applicability of the value of goods/materials supplied free of cost in the gross amount for service tax purposes.

Analysis:

Issue 1: Inclusion of HSD cost in taxable service value
The appellants provided services to M/s. Ultratech Cement Ltd. and received High-Speed Diesel (HSD) free of cost. The department contended that the cost of HSD should be included in the value of taxable service for service tax assessment. The original authority confirmed the demand, which was upheld by the Commissioner (Appeals). However, the appellant argued that the HSD was received free of cost and should not be included in the taxable value of services. The Tribunal noted that the department did not specify the service to which the value of HSD should be included in the show-cause notice. Citing a relevant case law, the Tribunal held that goods/materials supplied free of cost by the service recipient are not included in the gross amount for service tax purposes. Consequently, the Tribunal set aside the demand, stating that it cannot sustain without proper categorization of the service and considering the free nature of the supplies.

Issue 2: Validity of the show-cause notice
The show-cause notice issued by the department did not specify the category of service on which the demand was raised. The Tribunal emphasized that a notice lacking clarity on the service for which the tax is demanded cannot be considered proper. This lack of specificity in the notice was a crucial factor in determining the validity of the demand raised by the department.

Issue 3: Applicability of free supplies in service tax assessment
The appellant received free supplies of HSD as per the contractual agreements with cement manufacturers. The Tribunal highlighted a legal precedent where it was established that goods supplied free of cost by the service recipient should not be included in the gross amount for service tax calculation. By analyzing the facts and relevant legal provisions, the Tribunal concluded that the demand, which included the cost of HSD, was not sustainable. Consequently, the impugned order was set aside, and the appeal was allowed with any consequential relief deemed necessary.

This detailed analysis of the judgment showcases the Tribunal's considerations on the issues raised, including the interpretation of relevant legal principles and their application to the specific case at hand.