2023 (4) TMI 323 - AT - Service Tax

Valuation - Erection, Installation and Commissioning service or Construction Service? - non-inclusion of value of material supplied by their clients in the gross value of the service for payment of service tax - applicability of N/N. 19/2003-ST dated 21.08.2003, N/N. 15/2004-ST dated 10.09.2004 and N/N. 1/2006-ST dated 01.03.2006 - HELD THAT - This issue now is no longer res-integra as in the various judgments including the judgment of BHAYANA BUILDERS 2013 (9) TMI 294 - CESTAT NEW DELHI (LB) , the Tribunal has held that for availing abatement under notifications 19/2003-ST dated 21.08.2003, 15/2004-ST dated 10.09.2004 and Notification No. 1/2006-ST dated 01.03.2006, the value of the material provided by the service recipient to the service provider shall not be included in the gross value for the purpose of charging service tax - The said Larger Bench decision of Bhayana Builders (P) Limited has been upheld by the Hon ble Supreme Court in COMMISSIONER OF SERVICE TAX ETC. VERSUS M/S. BHAYANA BUILDERS (P) LTD. ETC. 2018 (2) TMI 1325 - SUPREME COURT . As per Section 67 of Finance Act, 1994 only that value which is charged by the service provider to the service recipient shall be considered the gross value. Value of the material supplied by the service recipient since not charged by the service provider, cannot be included in the gross value of the service. In view of the settled legal position by the Apex Court, charge of the department clearly fails and on that basis exemption cannot be denied. Charge of mis-declaration of classification - HELD THAT - Whether the service classified under Construction Service as claimed by the appellant or under Erection, Commissioning or Installation service as held by the Revenue, the abatement of 67% is available in both the categories therefore, the misclassification of service does not have any revenue implications. It is observed that the appellant have rented out Hydra Crane also however, there is no separate working of service tax on the said element. The Adjudicating Authority need to re-quantify the service tax if any arises after allowing the abatement in respect of services of Erection, Commissioning or Installation - the impugned order is set-aside - Appeal allowed by way of remand.

Summary

Issues Involved:
1. Mis-declaration of service classification.
2. Inclusion of the value of materials supplied by clients in the gross value for service tax payment.

Summary:

Mis-declaration of Service Classification:
The appellant was accused of mis-declaring their service under "Construction Service" instead of "Erection, Installation and Commissioning." However, it was noted that the abatement of 67% is available for both categories, rendering the misclassification without revenue implications. The appellant had been paying service tax under a bona fide belief that the abatement notifications applied to them, negating any suppression of facts. Thus, the demand for the extended period was barred by limitation, supported by precedents such as Central Warehousing Corporation vs. Commr. of S.T., Ahmedabad and Cosmic Dye Chemical vs. Collector of Central Excise, Bombay.

Inclusion of Value of Materials Supplied by Clients:
The main charge was that the appellant did not include the value of materials supplied by their clients in the gross value of the service, violating the conditions of exemption notifications (Nos. 19/2003-ST, 15/2004-ST, and 1/2006-ST). However, this issue was deemed no longer res-integra. Citing the judgment in Bhayana Builders (P) Limited, it was established that for availing abatement under these notifications, the value of materials provided by the service recipient should not be included in the gross value for service tax purposes. The Tribunal upheld this position, supported by the Supreme Court's decision, emphasizing that only the value charged by the service provider to the service recipient is considered the gross value under Section 67 of the Finance Act, 1994.

Conclusion:
The Tribunal found that the department's charge failed based on the settled legal position that the value of materials supplied by the service recipient cannot be included in the gross value of the service. The misclassification of service did not have revenue implications due to the available abatements. The case was remanded to the Adjudicating Authority to re-quantify the service tax, if any, after allowing the abatement for services of Erection, Commissioning, or Installation. The impugned order was set aside, and the appeal was allowed in these terms.