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2023 (8) TMI 250 - AT - Service TaxClassification of services - to be classified under Commercial or Industrial Construction Service or not - service of construction of a new building or a civil structure or a part there of as it turnkey project of construction during the period from 21.06.2007 to 31.07.2009 - inclusion of value of free supplied material or provided by a client/ service receiver in the value of taxable service or not. Commercial or Industrial Construction Service for the period 21.07.2007 to 31.07.2009 - HELD THAT - With effect from 01.06.2007, a particular nature of the construction service was brought under works contract service for which certain conditions are required such as execution of project with material and the assessee paid VAT under works contract. During hearing, on the direction of this bench the appellant have submitted sample copies of the purchase order issued by the service recipient M/s. Torrent Pharmaceuticals Ltd. - From the purchase orders in clause 8 (b) it clearly reveals that the construction service was provided by the appellant along with material. The appellant has submitted VAT return to claim that they have discharged the VAT on the works contract service. From the VAT return it is clear that the appellant have discharged the VAT on their works contract service. Therefore, both criteria that the execution of the work with material and on such construction service the appellant have discharged the VAT is satisfied, this clarifies that the service is Works contract Service. The appellant have admittedly paid the service tax on the works contract service for the relevant period of this case, therefore in our considered view, the construction service provided by the appellant is correctly classifiable under works contract service. Hence, the demand under Commercial or Industrial Construction Service is not sustainable. Whether the cost of material supplied free by the service recipient is includible in the gross value of works contract service? - HELD THAT - The issue is no longer res- integra as the same has been decided by the Hon ble Supreme Court in the case of COMMISSIONER OF SERVICE TAX ETC. VERSUS M/S. BHAYANA BUILDERS (P) LTD. ETC. 2018 (2) TMI 1325 - SUPREME COURT held that The value of the goods/materials cannot be added for the purpose of aforesaid notification dated September 10, 2004, as amended by notification dated March 01, 2005 - this second issue also stands settled in favour of the appellant. The demand in the present case is not sustainable. Hence, the impugned order is set aside. Appeal is allowed.
Issues:
1. Classification of construction service under Commercial or Industrial Construction Service or Works Contract Service from 21.06.2007 to 31.07.2009. 2. Inclusion of value of free supplied material by client/service receiver in taxable service. Issue 1 - Classification of Construction Service: The appellant argued that post 01.06.2007, Works Contract Service became effective, leading to a change in classification for long-term contracts. They relied on CBEC Board Circular No. 128/10/2010-ST and a Tribunal decision. The appellant contended that they paid VAT under Works Contract Service, considering it a deemed sale. The Tribunal found that the construction service provided by the appellant was correctly classifiable under Works Contract Service due to the execution of work with material and payment of VAT, thus rejecting the demand under Commercial or Industrial Construction Service. Issue 2 - Inclusion of Value of Free Supplied Material: Regarding the inclusion of free supplied material in the gross value of works contract service, the Tribunal referred to a Supreme Court judgment and a previous Tribunal decision in the appellant's favor. They concluded that the value of free supplied material need not be added in the gross value of service, settling the issue in favor of the appellant. The demand was deemed unsustainable, and the impugned order was set aside, allowing the appeal. Separate Judgment: No separate judgment was delivered by the judges in this case.
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