2021 (9) TMI 1173 - AT - Service Tax

Valuation - inclusion of cost of free supply diesel made by M/s. ONGC in the value of taxable service for running the drilling vessel - HELD THAT - The issue is squarely covered in the case of Vantage International Management Company vs. CCGST, Mumbai East 2021 (2) TMI 564 - CESTAT MUMBAI where it was held that Since, M/s. ONGC was not required to make payment of fuel to the appellant, its value cannot be added to the taxable value both under the un-amended and amended provisions of Section 67 ibid. Appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Confirmation of demand for service tax on fuel supplied in respect of "Mining Service"
2. Imposition of interest and penalty under the Finance Act, 1994
3. Dropping of demand in respect of supply of tangible goods

Analysis:

Issue 1:
The Commissioner confirmed the demand for Service Tax on fuel supplied in relation to "Mining Service" under Section 73(2) of the Finance Act, 1994. The assessee was providing taxable services, including supply of tangible goods services, mining service, business support service, banking and financial service, repair and maintenance service. Show cause notices were issued regarding non-inclusion of the value of free diesel supplied for providing services. The impugned order upheld the demand, interest, and penalty.

Issue 2:
The Commissioner ordered the recovery of interest on the confirmed service tax demand and imposed a penalty on the assessee under Section 76 of the Finance Act, 1994. The demand was determined at ?33,54,84,537, and interest was to be levied as per Section 73B. A penalty of ?3,00,00,000 was imposed on the assessee. The legal basis for the interest and penalty was the non-payment of service tax on the fuel supplied for mining services.

Issue 3:
The Commissioner dropped the demand in respect of the supply of tangible goods, resulting in no liability of interest or penalty against the dropped amount. Show cause notices from different periods were issued concerning the non-payment of service tax on tangible goods services. The order clarified the dropping of the demand and the consequential absence of interest or penalty liability.

The Tribunal analyzed the impugned order and relevant submissions. Referring to a previous decision, the Tribunal highlighted that the value of free diesel supplied by the recipient should not be included in the taxable value of services provided. The judgment emphasized the statutory provisions and definitions under Section 67 of the Finance Act, 1994. It was established that the cost of free supply goods provided by the recipient should not be considered in the taxable value, as it was not charged by the service provider and had no nexus with the taxable services provided. Consequently, the Tribunal found no legal basis for the distinction made by the Commissioner in confirming the demand related to free supply of diesel for mining services.

In conclusion, the Tribunal dismissed the appeal filed by Revenue and allowed the appeal filed by the assessee, setting aside the impugned order. The decision was pronounced in the open court, providing clarity on the legal interpretation of the relevant provisions and upholding the principles established in previous judgments.