2017 (7) TMI 946 - AT - Service Tax

Valuation - abatement in the value of taxable service - N/N. 1/2006-ST dated 01.03.2006 - Held that - the assessee-Appellants have reversed the entire disputed input service credit which acted as a bar for their claim of abatement under Notification No.01/2006-ST. We also note that such reversal, even later, will satisfy the condition of the Notification - It is also held in various decisions of the Tribunal that subsequent reversal of credit will remove the bar in availing such exemptions. Valuation - inclusion of free supplied material by the recipient of service in the valuation of taxable service - Held that - similar issue decided in the case of Bhayana Builders Pvt. Ltd. 2013 (9) TMI 294 - CESTAT NEW DELHI (LB) wherein the Larger Bench of the Tribunal held that the items supplied free of cost by the recipient of service have no relevance to consider the gross valuation of the taxable service for the purpose of N/N. 01/2006-ST. Appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Eligibility for abatement in the value of taxable service under Notification No.1/2006-ST.
2. Inclusion of free supplied material in the valuation of taxable service.

Analysis:
1. The appeal was filed against an order confirming a Service Tax demand and penalties imposed by the Commissioner of Central Excise, Jaipur. The dispute revolved around the eligibility of the assessee for abatement under Notification No.1/2006-ST and the inclusion of free supplied material in the valuation of taxable service. The Revenue contended that the assessee was not eligible for the abatement and had underpaid Service Tax by not considering the free supplied raw material in the valuation.

2. The counsel for the assessee argued that the issue of non-inclusion of free supplied items in the gross value for availing abatement had been settled by the Tribunal in previous cases. They also stated that they had reversed the entire credit of Service Tax demand on input services along with interest, fulfilling the conditions of the Notification. The Revenue reiterated the findings of the original authority.

3. The Tribunal, after hearing both sides and examining the records, agreed with the assessee's arguments. They referenced the case law of Bhayana Builders Pvt. Ltd., where it was held that items supplied free of cost do not impact the gross valuation for the abatement purpose. The Tribunal noted that the assessee had reversed the disputed input service credit, removing the bar for claiming abatement under the Notification. They cited various decisions supporting the view that subsequent reversal of credit satisfies the condition for availing exemptions.

4. Referring to the case of M/s Old World Hospitality Limited Vs CST, New Delhi, the Tribunal emphasized that the reversal of availed credit along with interest rendered the assessee eligible for the abated rate of duty. They cited legal precedents to support their decision, ultimately setting aside the impugned order and allowing the appeal. The Tribunal concluded that the impugned order was not sustainable in light of the settled legal position.

In conclusion, the Tribunal ruled in favor of the assessee, holding that they were eligible for abatement under Notification No.1/2006-ST and that the inclusion of free supplied material in the valuation of taxable service was not required. The appeal was allowed, and the impugned order was set aside based on the established legal principles and precedents cited during the proceedings.