The CESTAT held that service tax cannot be levied on the value ...

Service tax applies only to services, not goods, in works contracts; no penalties imposed due to full compliance.

January 7, 2025

Case Laws     Service Tax     AT

The CESTAT held that service tax cannot be levied on the value of goods sold during execution of a works contract. The taxable value is the value of services rendered, determined as per Section 67 of the Finance Act, 1994 read with Rule 2A of the Service Tax (Determination of Value) Rules, 2006. The Department failed to identify the nature of services and discharge its onus before confirming the demand. Out of the total consideration, the amount pertaining to sale of goods was excluded from the taxable value. Service tax was payable only on 40% of the remaining amount as per the specified percentage. As no tax remained unpaid, no penalty u/ss 78 or 77(2) was imposable. The appeal was allowed.

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