Tribunal overturns service tax on free supplies, rules in favor of appellant

The Tribunal set aside the order confirming service tax liability, interest, and penalties on the appellant for receiving free cement and steel during contract execution. Relying on a precedent, the Tribunal ruled in favor of the appellant, holding that the demand for service tax on the value of the free supplies was unsustainable. The appeal was allowed, granting any necessary consequential relief.

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Issues:
Demand of service tax liability on the value of the free supply of cement and steel to the appellant while executing the contract.

Analysis:
The appeal was directed against Order-in-Original No. 1/ST/2010 passed by the Commissioner of Central Excise, Kolhapur. After hearing both sides and perusing the records, it was noted that the adjudicating authority confirmed the demand of service tax liability, interest, and penalties on the appellant under the category of "Commercial and Industrial Construction Service." The issue revolved around the liability to pay service tax on the free supply of cement and steel by the service recipient to the appellant during the contract execution. Both parties agreed that the key issue was the demand of service tax liability on the value of the free supply of cement and steel. It was acknowledged that a Larger Bench decision in the case of Bhayana Builders (P) Ltd. v. CCE had already settled this issue in favor of the assessee. Consequently, following the precedent, the Tribunal held that the impugned order was unsustainable and set it aside, allowing the appeal with any consequential relief.

Conclusion:
The Tribunal's decision was based on the interpretation of the demand of service tax liability on the value of the free supply of cement and steel during contract execution. By relying on the precedent set by the Larger Bench in a similar case, the Tribunal found in favor of the appellant, setting aside the impugned order and allowing the appeal with any necessary consequential relief.

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