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2023 (8) TMI 797 - AT - Service TaxNon-payment of Service tax - non-inclusion of service tax in respect of the advance received from M/s Areans and M/s A.K.M (MBD) - non-inclusion value of free supply material while calculating the tax liability - HELD THAT - It is not in dispute in the impugned case that the contracts entered into by the appellants involve material as well as service component. As such, the service rendered by the appellants is taxable only from 01.06.2007. Moreover, in view of the decision in COMMISSIONER OF SERVICE TAX ETC. VERSUS M/S. BHAYANA BUILDERS (P) LTD. ETC. 2018 (2) TMI 1325 - SUPREME COURT , the value of free supply items cannot be included in the assessable value for the purpose of calculation of service tax. Merits apart, it is found that the show-cause notice and thus, the impugned order are not sustainable on the question of limitation. It is not disputed that repeated show-cause notices have been issued to the appellants on the very same issue and on the basis of very same objections raised by the Audit. It is not permissible in view of the Hon ble Supreme Court judgment in the case of NIZAM SUGAR FACTORY VERSUS COLLECTOR OF CENTRAL EXCISE, AP 2006 (4) TMI 127 - SUPREME COURT . It was followed in a number of decisions by the Hon ble High Courts and the Tribunal. The impugned order is not sustainable and is liable to be set aside - Appeal allowed.
Issues:
The issues involved in the judgment are the non-inclusion of service tax in advance received, non-inclusion of free supply material in tax liability calculation, evasion of service tax, violation of provisions of Finance Act and Service Tax Rules, issuance of multiple show-cause notices, applicability of extended period for invoking liability, and sustainability of the impugned order. Non-Inclusion of Service Tax in Advance Received: The Department alleged that the appellants did not include service tax in advance received from certain entities, leading to an evasion of service tax amounting to Rs.4,38,20,680. The show-cause notice was issued covering the period from June 2006 to March 2008. The Commissioner confirmed the service tax liability along with penalties under various sections of the Finance Act, 1994. The appellants contended that they had entered into indivisible composite contracts and should be taxed only from 01.06.2007 onwards as per a Supreme Court judgment. They argued that the Department incorrectly demanded duty under a different category and that the value of freely supplied items should not be included in the assessable value for service tax calculation. Multiple Show-Cause Notices and Extended Period: The appellants highlighted that a total of seven show-cause notices were issued by the Department based on audit objections, with some notices covering overlapping periods. They argued that they had already settled six notices under a specific scheme and that the Department could not invoke the extended period for the subsequent notices. The Authorized Representative for the Department disagreed, citing legal precedents to support the invocation of the extended period based on the Department's knowledge of the company's affairs. Judgment and Decision: Upon reviewing the case records, the Tribunal found that the contracts entered into by the appellants involved both material and service components, making the service taxable only from 01.06.2007 onwards. The Tribunal also noted that the inclusion of free supply items in the assessable value for service tax calculation was not permissible based on legal decisions. Critically, the Tribunal held that the repeated issuance of show-cause notices on the same issue by the Department was impermissible, citing a Supreme Court judgment and subsequent decisions by High Courts and Tribunals. Consequently, the Tribunal concluded that the impugned order was not sustainable and set it aside, thereby allowing the appeal.
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