2017 (11) TMI 1404 - AT - Service Tax

Valuation - construction services - exclusion of the value of the free supply materials - composite contracts - Held that - On examining the scope of Section 67 as well as the said explanation of the N/N. 15/2004-ST., the Tribunal in the case of Bhayana Builders (P) Ltd. 2013 (9) TMI 294 - CESTAT NEW DELHI (LB) concluded that the items supplied free of costs by the recipient of service cannot be considered for addition in the value to arrive at the value for tax purposes - subject to verification of quantification of free supplied materials, based on the documents to be submitted by the appellant/assessee, such exclusion is to be considered and allowed. Penalties - Held that - since the issue involved was with reference to multiple contracts of different nature, the case was examined and detailed order was passed by the Original Authority, accepting some of the contention of the appellant and rejecting the others - this is a fit case for waiver of penalty by invoking Section 80 - penalties set aside. Personal use of the building by the recipient of service - Held that - similar set of facts decided in the case of KHURANA ENGINEERING LTD. Versus COMMR. OF C. EX., AHMEDABAD 2010 (11) TMI 81 - CESTAT, AHMEDABAD , where it was held that service provided by the appellant is to be treated as service provided to Govt. of India directly and end use of the residential complex by Govt. of India is covered by the definition Personal Use in the explanation to definition of residential complex service. Eligibility of the appellant /assessee for composition scheme - Held that - It is clear that the facts of the present case with reference to each one of the taxable contract are to be verified regarding the period involved as well as the facts of payment of concessional duty in respect of the whole of the contract etc - matter requires remand. Appeal allowed by way of remand.

Summary

Issues:
1. Appellant's request for waiver of penalty on the paid service tax.
2. Exclusion of the value of free supply materials from gross taxable value.
3. Applicability of tax liability on construction activities for CPWD.
4. Extension of Composition Scheme to works contract service.
5. Eligibility of the appellant for Composition Scheme.

Analysis:

1. The appellant requested a waiver of penalty on the service tax paid before the show cause notice was issued. The Tribunal found that since the tax liability was discharged prior to the notice, penalties were set aside invoking Section 80. The case involved multiple contracts, leading to a detailed examination by the Original Authority, which accepted some contentions and rejected others. The Tribunal deemed it fit to waive the penalties imposed on the appellant.

2. The appellant contested the inclusion of the value of free supply materials in the gross taxable value for works contract service. Relying on a Tribunal decision, the appellant argued that such materials should be excluded. The Tribunal examined the decision and held that free supplied materials should be excluded from the taxable value, subject to verification based on documents submitted by the appellant.

3. The issue of tax liability on construction activities for CPWD was raised by the Revenue. The Original Authority found the appellant liable for tax on construction for CPWD, citing a clarification from the Board. However, the Tribunal referred to a similar case and concluded that tax liability does not apply when the building is for the personal use of the recipient, aligning with the facts of the present case.

4. The Revenue raised concerns about the extension of the Composition Scheme to works contract service. The Original Authority had extended the scheme without the appellant exercising the required option under Rule 3. The Tribunal noted conflicting arguments but emphasized the need for verification of facts related to each taxable contract to determine the eligibility of the appellant for the Composition Scheme.

5. Regarding the appellant's eligibility for the Composition Scheme, the Tribunal emphasized the importance of verifying the period involved, payment of concessional duty, and compliance with Rule 3. The decision highlighted the need for factual verification based on documents provided by the appellant. The Tribunal directed the Original Authority to conduct this verification along with the exclusion of free supply materials from the taxable value.

In conclusion, the Tribunal granted relief to the appellant by waiving penalties and directing factual verification on specific issues, while also providing guidance on the exclusion of free supply materials and the eligibility for the Composition Scheme.