Abatement under service tax notifications cannot be denied by adding free supplies from the service recipient in construction contracts.

For commercial or industrial construction service, the abatement under the relevant service tax notifications was available without adding the value of free supplies made by the service recipient. Relying on the Larger Bench ruling in Bhayana Builders, the Tribunal noted that such free-of-cost goods supplied for incorporation into the construction were not required to be disclosed or included for denying the abatement benefit. On that interpretation, the confirmation of service tax, interest, and penalties could not be sustained, and the issue was decided in favour of the assessee.

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Issues: Whether the value of free supplies made by the service recipient was required to be included for denying abatement under the relevant service tax notifications in respect of commercial or industrial construction service.

Analysis: The appeals were covered by the Larger Bench decision in Bhayana Builders, which interpreted the abatement notifications and held that the benefit of abatement was available without requiring disclosure or inclusion of the value of goods supplied free of cost by the service recipient for incorporation into the construction. In view of that authoritative interpretation, the basis on which service tax, interest, and penalties had been confirmed could not be sustained.

Conclusion: The issue was decided in favour of the assessee.

Ratio Decidendi: For purposes of the abatement notifications applicable to commercial or industrial construction service, the value of goods supplied free of cost by the service recipient is not required to be added for denying the abatement benefit.

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