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2019 (12) TMI 1018 - AT - Service TaxWorks Contract Service - appellant s contention is that in terms of Notification No.12/2003-ST dated 21.08.2003 read with subsequent Notification No.24/2012 dated 06.06.2012, in case of composite contract, service tax shall be payable at the rate of 40% of the gross amount charged - HELD THAT - The issue is no more res-integra. The Hon ble Allahabad High Court in the case of COMMISSIONER CENTRAL EXCISE VERSUS M/S. MAHENDRA ENGINEERING LTD. 2014 (9) TMI 480 - ALLAHABAD HIGH COURT has held that Tribunal correctly held that assessee was not liable to pay Service Tax on the gross amount charged in repair of transformers including value of consumables like transformer oil and component part. Appeal allowed - decided in favor of appellant.
Issues:
1. Service Tax liability on a composite contract. 2. Exclusion of material cost from the gross value for Service Tax calculation. 3. Interpretation of relevant Notifications for Service Tax calculation. Issue 1: Service Tax liability on a composite contract The appellant, a registered Service Tax assessee, provided services to a Thermal Power Project under 'Management, Maintenance & Repair Services' and 'Works Contract Service.' The appellant discharged its Service Tax liability based on the contract value. However, a Show Cause Notice was issued, demanding Service Tax for the period 2006-07 to 2010-11. The appellant argued that they had paid VAT on materials supplied along with services, and if material cost is excluded from the gross value, they correctly paid the Service Tax on the service element. Issue 2: Exclusion of material cost from the gross value for Service Tax calculation The Original Adjudicating Authority did not consider the appellant's plea and confirmed the demand, including interest and penalty. On appeal, the Commissioner (Appeals) accepted the appellant's position that VAT paid on materials should be excluded from the gross value. The Commissioner recalculated the demand, reducing it to &8377; 19,92,170. The appellant contended that they had already paid Service Tax on a significant portion of the gross contract value, as per relevant Notifications, and the Lower Authorities erred in not disputing the material cost calculation. Issue 3: Interpretation of relevant Notifications for Service Tax calculation The Tribunal referred to previous judgments to support the appellant's position. The Hon'ble Allahabad High Court and CESTAT rulings highlighted that the cost of materials used in providing services should be excluded from Service Tax calculation. The Tribunal found no merit in the Revenue's argument, setting aside the impugned order and allowing the appeal with consequential relief to the appellant. In conclusion, the Tribunal ruled in favor of the appellant, emphasizing the exclusion of material costs from the gross value for Service Tax calculation in line with relevant Notifications and legal precedents. The judgment provided clarity on the treatment of material costs in composite contracts for Service Tax purposes, ensuring a fair and accurate assessment of tax liabilities.
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