2019 (1) TMI 443 - AT - Service Tax

Valuation - Construction services - inclusion of materials required for such construction service supplied free of cost by the clients in assessable value - period from June, 2005 to March, 2008 and April, 2009 to March, 2010 - Held that - The issue under dispute has been finally laid to rest by the Hon ble Supreme Court judgment in Bhayana Builders (P) Ltd. 2018 (2) TMI 1325 - SUPREME COURT OF INDIA , where the Apex Court has held that the goods/materials supplied free of cost by the service recipient and used for providing taxable service of construction of Commercial or Industrial Construction is not to be included gross amount charged for the purpose of arriving tax liability - the impugned orders cannot be sustainable and requires to be set aside - appeal allowed - decided in favor of appellant.

Summary

Issues involved:
1. Interpretation of the definition of "gross amount charged" in relation to service tax on construction services.
2. Applicability of notifications regarding the calculation of service tax on construction services.
3. Consideration of the value of goods/materials supplied free of cost by the service recipient in determining the taxable service value.

Detailed Analysis:
1. The case involved a dispute regarding the inclusion of the value of materials supplied free of cost by clients in the "gross amount charged" for service tax calculation on construction services. The department contended that the value of goods and materials supplied should be included as per Notification No. 1/2006-ST. The original authority upheld this view, leading to the issuance of show cause notices and imposition of penalties. The period of dispute was from June 2005 to March 2008 and April 2009 to March 2010. The Commissioner (Appeals) affirmed the orders, prompting the appellants to file appeals ST/398/2012 & ST/609/2012.

2. During the hearing, the appellant's advocate cited a Supreme Court judgment in CST Vs. Bhayana Builders (P) Ltd, which clarified that goods/materials supplied free of cost for construction services should not be included in the "gross amount charged" for tax liability determination. The advocate argued that this judgment settled the issue in question. On the contrary, the respondent's representative supported the impugned orders.

3. The tribunal, after reviewing the facts and the Supreme Court judgment in Bhayana Builders (P) Ltd, concluded that the value of goods/materials supplied free of cost by the service recipient should not be considered in arriving at the taxable service value. The tribunal highlighted that the definition of "gross amount charged" does not allow the department to ignore the contract value or the amount actually charged for the service. The tribunal emphasized that the value of taxable services should not depend on the value of goods supplied free of cost. Additionally, the tribunal noted that exemption notifications for taxable services do not cover composite works contracts unless specifically included by the legislature. Therefore, the impugned orders were deemed unsustainable and were set aside, with the appeals being allowed with consequential benefits.

This detailed analysis highlights the key legal issues, arguments presented, relevant case law references, and the tribunal's final decision based on the interpretation of the law and applicable notifications.