Construction-service abatement and works-contract classification required reconsideration where free supplies were included in gross amount charged.

Construction-service abatement under the relevant notifications had to be computed on the gross amount charged, and the free supply of cement and steel by clients did not justify denial of the prescribed 67% abatement. The Tribunal also noted that a newly raised plea that the contracts were works contracts, coupled with the assessee's sales tax and VAT treatment, required fresh examination because it could affect the taxable classification under commercial or industrial construction service and construction of complex service. The impugned order was set aside and the matter remanded for reconsideration.

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Issues: (i) Whether the appellant was entitled to 67% abatement while computing service tax under the relevant construction-service notifications, even when cement and steel were supplied free of cost by clients; (ii) Whether the matter required remand for fresh consideration of the plea that the contracts were works contracts and of the assessee's tax treatment under sales tax and VAT.

Issue (i): Whether the appellant was entitled to 67% abatement while computing service tax under the relevant construction-service notifications, even when cement and steel were supplied free of cost by clients.

Analysis: The notifications governing commercial or industrial construction service and construction of complex service granted abatement on the gross amount charged, and the explanation to the later notification made it clear that the gross amount charged would include the value of goods and materials supplied or provided for the service. On that basis, even where cement and steel were supplied free of cost, the tax computation had to proceed after extending the prescribed abatement, and the denial of the benefit without proper consideration was unsustainable.

Conclusion: The appellant's claim for consideration of the 67% abatement was accepted.

Issue (ii): Whether the matter required remand for fresh consideration of the plea that the contracts were works contracts and of the assessee's tax treatment under sales tax and VAT.

Analysis: The plea that the contracts were works contracts was raised for the first time before the Tribunal, and the record indicated that the appellant was registered under the State sales tax and VAT laws. If the contracts had suffered sales tax and VAT, their classification as commercial or industrial construction service or construction of complex service required reconsideration. In the interest of justice and to ensure observance of natural justice, the matter was sent back for a fresh decision by the adjudicating authority.

Conclusion: The impugned order was set aside and the matter was remanded for fresh adjudication.

Final Conclusion: The assessee obtained a partial substantive relief on the abatement issue, and the dispute was returned to the adjudicating authority for reconsideration of the taxable classification and related liability.

Ratio Decidendi: Where construction-service notifications provide abatement on the gross amount charged, free supply of materials does not justify denial of the abatement without proper application of the notification, and a newly raised works-contract plea may warrant remand for fresh consideration.

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