2011 (3) TMI 183 - AT - Service Tax

Tribunal orders partial waiver of service tax dues to VPR Mining Pvt. Ltd. with Rs. 10,00,00,000 deposit

The Tribunal denied complete waiver of service tax dues for the period 18.4.2006 to 6.2009 to M/s VPR Mining Infrastructure Pvt. Ltd. They were ordered to ... Valuation of taxable services - consideration (monetary and non-monetary) - Service Tax (Determination of Value) Rules, 2006 - Rule 3 - abatement/exemption under Notification No. 1/2006 and Notification No. 15/2004 - exemption under Notification No. 12/2003-ST (value of goods sold by service provider) - pre-deposit and interim stay - exercise of Tribunal's discretionValuation of taxable services - consideration (monetary and non-monetary) - Service Tax (Determination of Value) Rules, 2006 - Rule 3 - Whether value of diesel, explosives and other materials supplied free by the service recipient is includible in the taxable value of 'site formation, clearance and excavation' service. - HELD THAT: - The Tribunal held that section 67(1) and Rule 3 of the STR require inclusion of non-monetary consideration in the taxable value. Receipt of free supply materials by a service provider is analogous to receipt of free inputs by a manufacturer and constitutes additional consideration for valuation purposes. Rule 3 requires that where consideration is not wholly monetary the equivalent money value be determined (or the gross amount charged be taken), and the Explanation to the abatement notifications further indicates that 'gross amount charged' includes value of goods and materials supplied or used. Reliance on earlier decisions excluding such value was considered, but post-amendment to section 67 (w.e.f. 18.4.2006) and consistent Tribunal and High Court authorities (including Jaihind Projects Ltd.) support inclusion of the money value of free-supplied materials in the taxable value. [Paras 7]Value of diesel, explosives and similar materials supplied free by the service recipient is includible in the taxable value of the service.Exemption under Notification No. 12/2003-ST (value of goods sold by service provider) - abatement/exemption under Notification No. 1/2006 and Notification No. 15/2004 - Whether the assessee was entitled to the exemption under Notification No. 12/2003-ST in respect of those materials. - HELD THAT: - The Tribunal observed that Notification No. 12/2003-ST exempts value of goods and materials sold by the service provider to the recipient and is subject to documentary proof of such sale. The assessee did not demonstrate that it sold the free-supplied items to the recipient; consequently the conditions of Notification No. 12/2003-ST were not satisfied. The Tribunal also noted that the Explanation in the construction-service abatement notification clarifies that 'gross amount charged' includes value of goods and materials supplied or used, reinforcing that mere provision of materials by recipient does not qualify for abatement under Notification No. 12/2003-ST. [Paras 8]Assessee is not entitled to the exemption under Notification No. 12/2003-ST in respect of the materials supplied free by the service recipient.Cum-tax treatment of bonus payments - Cenvat credit and quantification issues - Whether the claims made by the assessee in relation to bonus amounts, deduction of penalties recovered by SCCL, and Cenvat credits were correctly disallowed by the Commissioner. - HELD THAT: - The Tribunal observed that the merits of the contentions concerning bonus amounts, alleged prior payment of service tax debited to Cenvat, and the effect of penalties recovered by SCCL on net bonus require factual and documentary examination which was not undertaken by the Commissioner. These matters were not finally adjudicated in the stay application and require consideration on merits during appeal. [Paras 9]Claims relating to bonus amounts, cum-tax computation and Cenvat adjustments are not finally decided and must be examined on merits by the adjudicating authority/Tribunal.Pre-deposit and interim stay - exercise of Tribunal's discretion - Whether pre-deposit may be waived and stay of recovery granted pending disposal of the appeals. - HELD THAT: - Applying principles governing dispensation of pre-deposit (prima facie case, balance of convenience, irreparable loss and protection of revenue), the Tribunal found that the assessee had not made out a strong case for full waiver for the period covering post-amendment valuation (18.4.2006 to 6.2009). In the exercise of discretion and having regard to precedents emphasizing safeguards for revenue, the Tribunal directed a conditional partial deposit within a time frame and provided that on compliance there would be waiver of the balance pre-deposit and stay of recovery pending disposal of appeals. [Paras 10, 11]Assessee directed to deposit the specified amount within six weeks; on such deposit, balance of pre-deposit waived and recovery stayed pending appeal.Final Conclusion: The Tribunal held that non-monetary supplies (diesel, explosives, etc.) provided free by the service recipient are includible in the taxable value of the service post-amendment to section 67 and under STR Rule 3; Notification No. 12/2003-ST does not apply because the materials were not sold by the service provider; bonus- and Cenvat-related claims require factual adjudication and remain open for determination; accordingly the assessee was directed to make a conditional partial deposit for the period 18.4.2006 to 6.2009, upon which the balance pre-deposit was waived and recovery stayed pending disposal of the appeals. Issues Involved:1. Waiver of pre-deposit and stay of recovery of service tax dues.2. Inclusion of the value of materials (diesel and explosives) supplied free of cost in the taxable value.3. Applicability of Notification No. 12/2003-ST regarding exemption from service tax on the value of goods and materials.4. Inclusion of bonus amounts received in the taxable value.5. Invocation of the extended period for raising the demand.6. Consideration of undue hardship and safeguarding revenue interests in granting stay.Detailed Analysis:1. Waiver of Pre-deposit and Stay of Recovery:The appellants, M/s VPR Mining Infrastructure Pvt. Ltd., sought waiver of pre-deposit and stay of recovery of service tax dues confirmed against them. The Tribunal considered the applications, case records, and submissions from both sides to decide whether the appellants had made a strong case for complete waiver of dues.2. Inclusion of the Value of Materials Supplied Free of Cost:The appellants argued that the value of materials (diesel and explosives) supplied free of cost by the service recipient, SCCL, should not be included in the taxable value. They relied on Notification No. 12/2003-ST, which exempts the value of goods and materials sold by the service provider from service tax. The Tribunal noted that the Commissioner had rightly relied on Section 67 of the Finance Act and the Service Tax (Determination of Value) Rules, 2006, which provide for the inclusion of both monetary and non-monetary consideration in the taxable value. The Tribunal observed that free supply items constitute additional consideration received by the service provider and should be included in the taxable value.3. Applicability of Notification No. 12/2003-ST:The appellants claimed exemption under Notification No. 12/2003-ST, arguing that the value of materials supplied free of cost should not be included in the taxable value. The Tribunal noted that the exemption is subject to the condition that such materials are sold by the service provider to the recipient of the service. As the appellants did not sell the materials to SCCL, they did not qualify for the exemption under the said Notification.4. Inclusion of Bonus Amounts Received:The appellants contested the inclusion of bonus amounts received from SCCL in the taxable value. They argued that they had paid service tax on the bonus amounts and that the Commissioner had ignored penalties recovered by SCCL. The Tribunal noted that the merits of these submissions needed to be examined and that the appellants had not substantiated their claims before the Commissioner.5. Invocation of the Extended Period:The appellants argued that there was no suppression on their part justifying the invocation of the extended period for raising the demand. The Tribunal noted that the Commissioner had invoked the extended period based on the facts and circumstances of the case.6. Consideration of Undue Hardship and Safeguarding Revenue Interests:The Tribunal referred to the judgment of the High Court of Andhra Pradesh in the case of CCE, Guntur v. Sri Chaitanya Educational Committee, which laid down principles for considering applications for stay or dispensing with pre-deposit. The Tribunal noted that it must consider prima facie case, balance of convenience, and irreparable loss, and impose conditions to safeguard revenue interests.Conclusion:The Tribunal concluded that the appellants had not made a strong case for complete waiver of dues for the period 18.4.2006 to 6.2009. It ordered the appellants to deposit Rs. 10,00,00,000 within six weeks and report compliance. Upon compliance, the Tribunal granted waiver of the balance dues and stay of recovery pending the decision in the appeals.