2023 (7) TMI 257 - AT - Service Tax

Valuation of services - commercial or industrial construction service - abatement of 67% under the notification dated 1.3.2006 - inclusion of value of free of cost items in the gross value for availing abatement - extended period of limitation. Whether the value of free of cost items can be included in the gross value for availing abatement? - HELD THAT - This issue has been settled by the Supreme Court in COMMISSIONER OF SERVICE TAX ETC. VERSUS M/S. BHAYANA BUILDERS (P) LTD. ETC. 2018 (2) TMI 1325 - SUPREME COURT , which decision affirmed the decision of the Larger Bench of the Tribunal in M/S BHAYANA BUILDERS (P) LTD. OTHERS VERSUS CST, DELHI OTHERS. 2013 (9) TMI 294 - CESTAT NEW DELHI (LB) where it was held that sub-section (4) of Section 67 states that the value shall be determined in such manner as may be prescribed, however, it is subject to the provisions of sub-sections (1), (2) and (3). Moreover, no such manner is prescribed which includes the value of free goods/material supplied by the service recipient for determination of the gross value. Thus, the value of materials provided free of cost by customers to the appellant cannot form part of the taxable services rendered by the appellant as neither any price was charged by the appellant for such items, nor any monetary benefit accrued to the appellant from such supplies against provision of the service. The free of cost material cannot, therefore, be included in the gross value for claiming abatement. The denial of the abatement under the notification dated 01.03.2006, cannot be sustained. Whether abatement under the notification dated 01.03.2006 is extendible on subsequent reversal of credit? - HELD THAT - The appellant had reversed CENVAT credit amounting to Rs. 13,82,845 which was taken in the ST-3 returns during the relevant period. Such reversal of credit would be equivalent to non-availment of credit. Hence, abatement under the notification dated 01.03.2006 could not have been denied to the appellant and the demand is liable to be set aside. In this connection reliance can be placed on the judgement of the Supreme Court in CHANDRAPUR MAGNET WIRES (P) LTD. VERSUS COLLECTOR OF C. EXCISE, NAGPUR 1995 (12) TMI 72 - SUPREME COURT , wherein it was held that credit reversed is equivalent to non-availment of credit. In this view of the matter it would not be necessary to examine the contention raised by the learned counsel for the appellant that the extended period of limitation could not have been invoked in the facts and circumstances of the case. The impugned order dated 19.01.2015 passed by the Commissioner cannot be sustained and is set aside - Appeal allowed.

Summary

Issues involved:
The issues involved in the judgment are:
1. Whether the value of free of cost items can be included in the gross value for availing abatement under the notification dated 01.03.2006.
2. Whether abatement under the notification dated 01.03.2006 is extendible on subsequent reversal of credit.

Issue 1:
The first issue for consideration was whether the value of free of cost items could be included in the gross value for availing abatement. The appellant was engaged in providing "commercial or industrial construction" service and was discharging service tax liability on 33% of the value declared. The demand was made to pay differential service tax on 67% value due to not including the value of free materials in the gross amount. The Commissioner confirmed the demand citing that the value of free materials should be included for service tax calculation and that CENVAT credit and abatement could not be availed simultaneously. However, the appellant argued that the value of free materials should not be included for availing abatement, referencing a Supreme Court decision. The Tribunal agreed with the appellant, stating that free materials provided by customers should not be included in the gross value for claiming abatement, thus setting aside the denial of abatement under the notification.

Issue 2:
The second issue involved whether abatement under the notification dated 01.03.2006 could be extended on the subsequent reversal of credit. The appellant had reversed CENVAT credit taken during the relevant period, which was considered equivalent to non-availment of credit. Citing a Supreme Court judgment, it was held that credit reversal equates to non-availment of credit, and therefore, abatement under the notification could not have been denied. Consequently, the demand was set aside based on the reversal of credit, rendering the question of the extended period of limitation unnecessary for examination.

Conclusion:
The Tribunal ruled in favor of the appellant on both issues, setting aside the Commissioner's order dated 19.01.2015. The judgment emphasized that the value of free materials should not be included in the gross value for availing abatement and that abatement could be extended on the subsequent reversal of credit. As a result, the appeal was allowed, and the impugned order was not sustained.