Taxable value of works contract excludes value of goods sold; service tax only on service portion.

The CESTAT ruled that service tax cannot be imposed on the value of goods sold during a works contract, only on the service portion. According to Section 67 of the Finance Act, 1994, and Rule 2A of the Service Tax (Determination of Value) Rules, 2006, the taxable value is limited to services rendered. The Department failed to identify the services, and the sale of goods was excluded from the taxable value. Service tax was applicable on only 40% of the remaining amount. As no tax was unpaid, no penalties under Sections 78 or 77(2) were imposed. The appeal was allowed. .....

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