2014 (11) TMI 873 - AT - Service Tax

Valuation of service - Whether the value of free supply of cement, steel etc. is required to be added to the gross amount charged in providing the commercial or industrial construction taxable service to compute the assessable value for the purpose of service tax - Held that - Following decision of Bhayana Builders (P) Ltd. vs. CST, Delhi reported in 2013 (9) TMI 294 - CESTAT NEW DELHI (LB) - Decided in favour of assessee.

Summary

Issues Involved:
Whether the value of free supply of materials should be included in the assessable value for service tax calculation.

Analysis:
The judgment by the Appellate Tribunal CESTAT MUMBAI, delivered by S S Kang, addressed the issue of including the value of free supply materials in the assessable value for service tax calculation. The adjudicating authority had confirmed demands and imposed penalties on the appellants for not considering the free supply material provided by the service recipient in determining the assessable value for service tax. However, the Tribunal referred to the decision of the Larger Bench in the case of Bhayana Builders (P) Ltd. vs. CST, Delhi, which clarified that the value of goods and materials supplied free of cost by the service recipient should not be included in the taxable value or the gross amount charged for service tax purposes. This ruling was based on the interpretation of Section 67 of the Finance Act, 1994, and relevant notifications.

In this context, the main issue before the Tribunal was whether the value of free supply of cement, steel, etc., should be added to the gross amount charged when providing commercial or industrial construction taxable services for computing the assessable value for service tax. The Tribunal, relying on the precedent set by the Larger Bench, ruled in favor of the assessee. Consequently, the impugned orders confirming demands and penalties were set aside, and the appeals of the assessee were allowed.

Furthermore, the Revenue had also filed appeals seeking enhancement of penalties. However, since the appeals filed by the assessee were allowed, the Tribunal dismissed the Revenue's appeals for enhancement of penalties as they were deemed infructuous. This comprehensive judgment provides clarity on the treatment of free supply materials in the calculation of assessable value for service tax, aligning with the interpretation established by the Larger Bench of the Tribunal in a previous case.