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2023 (8) TMI 940 - AT - Service TaxErection and installation service - Works Contract Service - Process amounting to manufacture or not - value of materials to be excluded from the value for computation of duty or not - since the service tax is not shown separately in the invoice the consideration received should be treated as inclusive of duty - penalty. The activity performed by the appellant amounts to manufacture or not - fabrication of building material and erection of factory shed - HELD THAT - The activity of skill and labour provided by the appellant is a service covered by the definition of erection, commissioning of structures as per section I05(39a)(i). The appellant has also not referred to any judgment where activities of a similar nature were held to be the manufacture of a factory shed. In fact, the appellant s plea was that their activities are of repair which is far removed from their claim of manufacture of goods. The value of materials should be excluded from the value for computation of duty, or not - HELD THAT - A larger bench of the Tribunal in Bhayana Builders (P) Limited vs CST, Delhi 2013 (9) TMI 294 - CESTAT NEW DELHI (LB) , had taken up the reference of a similar matter relating to free supplies of goods received during construction activities for consideration, holding that The value of goods and materials supplied free of cost by a service recipient to the provider of the taxable construction service, being neither monetary or non-monetary consideration paid by or flowing from the service recipient, accruing to the benefit of service provider, would be outside the taxable value or the gross amount charged, within the meaning of the later expression in Section 67 of the Finance Act, 1994. The judgment was affirmed by the Supreme Court. Although a reference to the judgment and its applicability have not been canvassed here, it is felt that deciding the matter raised without examining the judgement would not help in developing good law, especially when judicial discipline requires us to follow the ratio of the Larger Bench. Thus it is held that the value of goods and materials supplied free of cost by M/s Bannari Amman Sugars Ltd are to be excluded from the value of the taxable service for computation of duty. Since the service tax is not shown separately in the invoice the consideration received should be treated as inclusive of duty - HELD THAT - A similar matter pertaining to Central Excise duty was examined by the Apex Court in the case of Commissioner of Central Excise, Delhi vs. Maruti Udyog Ltd 2002 (2) TMI 101 - SUPREME COURT and Collector vs. Shri Chakra Tyres Ltd. 2002 (2) TMI 1312 - SC ORDER it was held that the total consideration received by the manufacturer be treated as cum-duty. The said consideration has to be apportioned between the assessable value and the excise duty leviable - Review petition filed against the said order also came to be dismissed MARUTI UDYOG 2004 (12) TMI 669 - SC ORDER . Whether the issue is purely interpretative in nature and is not a fit case for imposition of penalty? - HELD THAT - The appellant has not cited any judgment or circular during the relevant time which would show that there was a difference of opinion in the taxability of the service and help reach a conclusion that the issues involved were purely interpretative in nature, hence we are not able to accept their plea - the appellant had failed to pay the service tax and also have failed to report provision of service in their periodical returns. Hence the fact that these activities were suppressed from the department with intention to evade payment of tax has substance - the imposition of penalty or issue of Show Cause Notice invoking the extended period of time limit upheld. The matter is remanded back to the lower authority to determine the value of the taxable service afresh allowing cum-tax benefit and by not including the value of goods and materials supplied free of cost by M/s. Bannari Amman Sugars Ltd. Penalty may thereafter be imposed suitably as per law. The impugned order is partially set aside.
Issues Involved:
a) Whether the activity performed by the appellant amounts to manufacture. b) Whether the value of materials should be excluded from the value for computation of duty. c) Whether the consideration received should be treated as inclusive of duty since the service tax is not shown separately in the invoice. d) Whether the issue is purely interpretative in nature and is not a fit case for imposition of penalty. Summary: a) Whether the activity performed by the appellant amounts to manufacture: The Tribunal found that the appellant's activity did not amount to manufacture but rather fell under the category of "erection, commissioning or installation" as per Section 65(39a) of the Finance Act, 1994. The activity involved fabrication and erection of structures using prefabricated items, which did not result in the creation of a new commodity known in the market. The Tribunal noted that the appellant's claim of performing only repairs was not substantiated by the documents provided. b) Whether the value of materials should be excluded from the value for computation of duty: The Tribunal held that the value of goods and materials supplied free of cost by M/s Bannari Amman Sugars Ltd should be excluded from the value of the taxable service for computation of duty. This decision was based on the precedent set by the Larger Bench in Bhayana Builders (P) Limited vs CST, Delhi, which was affirmed by the Supreme Court. The Tribunal emphasized the importance of judicial discipline in following the ratio of the Larger Bench. c) Whether the consideration received should be treated as inclusive of duty since the service tax is not shown separately in the invoice: The Tribunal agreed with the appellant's plea that the total consideration received should be treated as inclusive of service tax. This decision was supported by precedents such as Commissioner of Central Excise, Delhi vs. Maruti Udyog Ltd and Commissioner of CE & Customs, Patna v. Advantage Media Consultant. The Tribunal held that the tax liability should be calculated by treating the total consideration received as the value of taxable service plus service tax payable. d) Whether the issue is purely interpretative in nature and is not a fit case for imposition of penalty: The Tribunal did not accept the appellant's plea that the issue was purely interpretative in nature and not a fit case for imposition of penalty. The Tribunal found that the appellant had failed to pay the service tax and report the provision of service in their periodical returns, indicating an intention to evade payment of tax. Therefore, the Tribunal upheld the imposition of penalty and the issuance of the Show Cause Notice invoking the extended period of time limit. Conclusion: The Tribunal remanded the matter back to the lower authority to determine the value of the taxable service afresh, allowing cum-tax benefit and excluding the value of goods and materials supplied free of cost by M/s Bannari Amman Sugars Ltd. Penalty may thereafter be imposed suitably as per law. The impugned order was partially set aside and modified accordingly. The appeal was disposed of on these terms.
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