2016 (12) TMI 729 - AT - Service Tax

Commercial and Industrial Construction Service - demand - received goods and material like steel, cement etc. free of cost from their customers, which were used by them and their value was not included in the assessable value - Held that - the issue is no more res integra as the judgment of Larger Bench of this Tribunal in the case of Bhayana Builders (P) Ltd vs. CCE 2013 (9) TMI 294 - CESTAT NEW DELHI (LB) is directly applicable to the issue and is in favour of the assessee, where it was held that The value of goods and materials supplied free of cost by a service recipient to the provider of the taxable construction service, being neither monetary or non-monetary consideration paid by or flowing from the service recipient, accruing to the benefit of service provider, would be outside the taxable value or the gross amount charged, within the meaning of the later expression in Section 67 of the Finance Act, 1994. Accordingly, respectfully following the said decision of the Larger Bench, we hold that the impugned order is unsustainable and liable to set aside. Sale of scrap amounting to ₹ 17.10 lacs which was generated during the course of providing taxable service - whether demand of service tax on such sale justified? - Held that - We find that sale of scrap, whose nature is not defined in show cause notice, cannot be said to be consideration for the taxable services provided or to be provided. There is no provision in Service Tax Rules for inclusion of value of scrap as an additional consideration; only the amounts received towards taxable services are leviable to service tax. The case of M/s Jay Engineering Works Ltd. vs. C.C.E, Hyderabad 1996 (12) TMI 206 - CEGAT, MADRAS relied on by the Commissioner pertains to Central Excise and the Commissioner has clearly erred in concluding that its ratio decidendi is applicable to the instant issue. In the absence of any legal provision to include value of sale of scrap in the assessable value for service tax purposes, the same is liable to be set aside. Demand set aside - appeal allowed - decided in favor of assessee.

Summary

Issues involved:
1. Service tax liability on goods received free of cost
2. Taxability of sale of scrap as additional consideration

Analysis:

Issue 1: Service tax liability on goods received free of cost
The appellant, registered under "Commercial and Industrial Construction Service," was issued a show cause notice for not including the value of goods like steel and cement received free of cost from customers in the assessable value. The demand for service tax was made based on this omission. The adjudicating authority confirmed the demand, interest, and penalties. However, the tribunal referred to the judgment in the case of Bhayana Builders (P) Ltd vs. CCE and held that the issue was settled. The tribunal agreed with the appellant's counsel that the judgment favored the assessee, leading to the conclusion that the impugned order was unsustainable and set aside.

Issue 2: Taxability of sale of scrap as additional consideration
Regarding the sale of scrap generated during the provision of taxable services, the demand was justified as additional consideration under the Service Tax (Determination of Value) Rules, 2006. However, the tribunal found that the nature of the scrap was not defined in the show cause notice, and there was no provision in the Service Tax Rules for including the value of scrap as additional consideration. The tribunal highlighted that only amounts received for taxable services are subject to service tax. The Commissioner's reliance on a case related to Central Excise was deemed erroneous, and in the absence of a legal provision to include the value of scrap in the assessable value for service tax purposes, the demand was set aside.

In conclusion, the tribunal set aside the impugned order passed by the commissioner, and the appeal was allowed.

This detailed analysis of the judgment provides a comprehensive understanding of the issues involved and the tribunal's reasoning behind setting aside the commissioner's order.