2023 (10) TMI 60 - AT - Service Tax

Valuation of service tax - non-inclusion of value of free supply of materials, in the gross amount, for arriving at the taxable turnover for payment of service tax - HELD THAT - Admittedly the free supply, in the facts of the present case, of reinforcement and structural steel, was not part of the gross value of the contract, as agreed between the parties. In the facts of this case are covered in favour of the Appellant assessee by the ruling of the Apex Court in COMMISSIONER OF SERVICE TAX ETC. VERSUS M/S. BHAYANA BUILDERS (P) LTD. ETC. 2018 (2) TMI 1325 - SUPREME COURT , where it was held that the value of free supply of materials cannot be added to the gross value of the composite contract/works contract for calculation of service tax, whether the free supplies to construction service provider is outside the taxable value or gross amount charged, within the meaning of expression in Section 67 of the Finance Act. The impugned order set aside - appeal allowed.

Summary

Issues Involved:
The issue involved is whether the Appellant assessee is liable to service tax for non-inclusion of value of free supply of materials in the gross amount for arriving at the taxable turnover for payment of service tax.

Comprehensive Details of the Judgment:

Issue 1: Liability for Service Tax on Non-Inclusion of Value of Free Supply of Materials
The Appellant entered into a contract for providing certain works where the principal supplied materials free of cost. The revenue contended that the Appellant should pay service tax on the whole amount received without abatement, as the value of free materials was not included in the gross value for abatement calculation. The Show Cause Notice alleged contravention of provisions and short payment of service tax, invoking extended limitation period.

Issue 2: Adjudication and Appeal
The show cause notice was contested, and the Commissioner confirmed the demand based on a previous Tribunal ruling. The Appellant appealed, arguing that the free supply of materials was not part of the gross value as per the agreement between the parties. Reference was made to a Larger Bench ruling that held free supply of materials cannot be added to the gross value for service tax calculation.

Judgment and Conclusion
The Tribunal found that the free supply of materials was not part of the gross value of the contract as per the agreement. Citing the ruling of the Larger Bench and the affirmation by the Supreme Court, the Tribunal ruled in favor of the Appellant. The impugned order was set aside, and the Appellant was entitled to consequential benefits in accordance with the law.

(Order dictated and pronounced in open court)