2018 (11) TMI 1390 - AT - Service Tax

Valuation - Industrial or Commercial Construction/ Work Contract Service - Management Maintenance and Repair Service - inclusion of value of free supply material provided by the service recipient in assessable value - Held that - This issue has been finally settled by the Larger Bench in the case of Bhayana Builder 2013 (9) TMI 294 - CESTAT NEW DELHI (LB) and which was upheld by Hon ble Supreme Court in the case of Bhayana Builder Pvt. Ltd 2018 (2) TMI 1325 - SUPREME COURT OF INDIA , where it was held that the material supplied free of cost by service recipient need not to be included in the gross value of service of Industrial or Construction Service/Work Contract Service. The Ld. Adjudicating Authority had no occasion to deal with this judgment. Therefore, the matter needs to be re-considered by the adjudicating authority in the light of the judgment in the case of Bhayana Builder - appeal allowed by way of remand.

Summary

Issues:
Demand of Service Tax on Industrial and Commercial construction /Work Contract Service and Management Maintenance and Repair Service for the period 2007-2008 to 2012-2013, inclusion of value of free supply material in gross value for Service Tax calculation, imposition of penalty, appropriating the amount paid by the appellant, and miscellaneous penalties.

Analysis:
The judgment addressed the appeal against the confirmation of a Service Tax demand and penalties imposed on the appellant for services provided between 2007-2008 to 2012-2013. The appellant contested the inclusion of the value of free supply material by the service recipient in the gross value for Service Tax calculation. The appellant relied on a Larger Bench judgment in the case of Bhayana Builder, which held that free supply material need not be included in the gross value. This judgment was upheld by the Hon'ble Supreme Court. The appellant argued that the penalty was unjustified as it pertained to an interpretation of the law. The Revenue, represented by the Additional Commissioner, supported the findings of the impugned order.

The Tribunal considered the crucial issue of whether the value of free supply material should be included in the gross value for Service Tax calculation. Referring to the Larger Bench judgment in the Bhayana Builder case, which was upheld by the Hon'ble Supreme Court, the Tribunal concluded that this issue needed reconsideration by the adjudicating authority. The Tribunal noted that the Ld. Adjudicating Authority had not addressed this judgment, necessitating a fresh consideration in light of the legal precedent established.

As a result, the Tribunal set aside the impugned order and remanded the matter to the adjudicating authority for a fresh decision. The adjudicating authority was directed to re-quantify the Service Tax liability considering the settled legal position regarding the inclusion of free supply material in the gross value. All other issues were left open, and the appeal was disposed of through remand to the adjudicating authority. The judgment was pronounced in open court on 26.11.2018.