2015 (6) TMI 378 - AT - Service Tax

Benefit of abatement of 67% of the tax liability (towards the value of the goods incorporated), under. Notification No. 1/2006-S.T., dated 1-3-2006 - Whether the value of free supplies made by the recipient of commercial or industrial construction service require to be disclosed as part of the gross consideration received for rendition of taxable construction services, to be entitled to the benefits of Notification No. 1/2006-ST - Held that - This issue stand settled by the decision of Larger Bench of this Tribunal in Bhayana Builders (P) Ltd. v. CST 2013 (9) TMI 294 - CESTAT NEW DELHI (LB) - Impugned order cannot be sustained and is accordingly quashed. The appeal is allowed - Decided in favour of assessee.

Summary

Issues:
1. Confirmation of Service Tax demand and penalties under Sections 76 and 77 of the Finance Act, 1994.
2. Interpretation of Notification No. 1/2006-S.T. regarding abatement of tax liability.
3. Disclosure of value of free supplies by the recipient for availing benefits under the notification.

Confirmation of Service Tax Demand and Penalties:
The appellant, a company engaged in service rendition and construction works, appealed against an adjudication order confirming a Service Tax demand of Rs. 1,55,14,759, along with penalties under Sections 76 and 77 of the Finance Act, 1994. The impugned order also directed the recovery of interest. A corrigendum was later issued modifying the quantum of penalty imposed under Section 76 of the Act. The appellant challenged this order before the Appellate Tribunal CESTAT NEW DELHI.

Interpretation of Notification No. 1/2006-S.T.:
The appellant, in an agreement with M/s. National Thermal Power Corporation Ltd. (NTPC) for civil works, claimed the benefit of abatement of 67% of the tax liability under Notification No. 1/2006-S.T., dated 1-3-2006, for incorporating goods supplied by NTPC in the execution of works. The dispute arose when Revenue contended that the appellant needed to disclose the value of free supplies by the service recipient to avail benefits under the notification. This disclosure of value of free supplies formed the basis of the assessed demand for Service Tax, interest, and penalties.

Disclosure of Value of Free Supplies:
The pivotal issue revolved around whether the value of free supplies made by the recipient needed to be disclosed as part of the gross consideration received for taxable construction services to qualify for benefits under Notification No. 1/2006-S.T. This issue was settled by the decision of a Larger Bench of the Tribunal in Bhayana Builders (P) Ltd. v. CST [2013] 42 GST 76 (New Delhi- Cestat). The Tribunal held that the value of free supplies by the recipient did not need to be disclosed for availing benefits under the notification. Consequently, the impugned order confirming the Service Tax demand and penalties could not be sustained and was quashed. The appeal was allowed without costs.

This detailed analysis of the legal judgment before the Appellate Tribunal CESTAT NEW DELHI highlights the issues related to the confirmation of Service Tax demand, interpretation of Notification No. 1/2006-S.T., and the disclosure of free supplies' value for availing benefits under the notification. The Tribunal's decision clarified the disclosure requirements and upheld the appellant's position, ultimately leading to the quashing of the impugned order.