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2023 (10) TMI 1164 - AT - Service TaxNon imposition of penalty under Section 76 of the Finance Act, 1994 - Non-inclusion of value of materials received free of cost from the service recipient and used in providing construction of residential complex and civil structures, in the assessable value - demand of differential duty - HELD THAT - The issue has been settled by the decision of 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 , wherein it has been held that value of goods/materials supplied free of cost by the recipient used for providing taxable service are not includable in the assessable value for the purpose of payment of service tax. It is observed that the decision of Hon ble Supreme Court is squarely applicable in this case. Relying on the above said decision of the Hon ble Supreme court, it is held that the demand of service tax along with interest and penalty confirmed in the impugned order are not sustainable. Since the demand of service tax is not sustainable, the demand of penalty under Section 76 does not arise. Accordingly, there is no merit in the department s appeal. Appeal of Revenue dismissed.
Issues involved:
The case involves the question of whether the cost of free supply materials received by the Appellant and used in providing construction services is includable in the assessable value for the purpose of payment of service tax. Issue 1: Applicability of abatement notification: The Appellant contended that they availed abatement under Notification No. 15/04-ST and subsequent amendments, paying service tax accordingly. The department argued that the value of materials supplied free of cost should have been included in the assessable value for service tax calculation. Issue 2: Retrospective effect of circular and notifications: The Appellant argued that they paid service tax in good faith, believing the free supply materials' value was not includable. They challenged the retrospective effect of Circular No. DOE No.334/13/2009-TRU issued by the Board, stating it cannot apply to the relevant period. Issue 3: Inclusion of free supply materials in assessable value: The Appellant relied on a Supreme Court decision stating that goods/materials supplied free of cost by the recipient of service are not includable in the assessable value for service tax payment. They argued that the demands confirmed in the impugned order were not sustainable. The Tribunal noted that the Appellant received free supply materials from the service recipient and did not include their value in the assessable value for service tax calculation. Citing a Supreme Court decision, the Tribunal held that the value of free supply materials is not to be included in the assessable value. The Tribunal found the demands of service tax, interest, and penalty confirmed in the impugned order were not sustainable. Consequently, the penalty under Section 76 did not arise, and the department's appeal was deemed meritless. Therefore, the impugned order was set aside, allowing the appeal filed by the Appellant and rejecting the department's appeal. *(The judgment was pronounced in the open court on 23rd June 2023.)*
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