2015 (1) TMI 225 - AT - Service Tax

Tribunal: Service Tax on Construction Service to be Calculated on Abated Value, Pre-deposit Waiver Granted

SRC PROJECTS PVT. LTD. Versus COMMISSIONER OF CENTRAL EXCISE, SALEM

The Tribunal ruled in favor of the appellants regarding the calculation of Service Tax on 'Commercial and Industrial Construction Service'. It determined ... Waiver of pre deposit - Commercial and Industrial Construction Service - Benefit of Notification No. 1/2006 - separate Service Tax component in the invoices issued to the customers not raised - Held that:- Service Tax is payable only on the abated value of 33% of the billed amount. So splitting 33% of the billed amount to value and tax appears to be proper rather than splitting the entire value of the project including value of materials into consideration for service and tax and then giving abatement. Further, assessees who pay tax first applies abatement, arrive at 33% of value and calculate Service Tax on it. The method adopted by appellant will result in a bill consistent with this approach. Therefore, we grant waiver of pre-deposit of dues for admission of appeals and stay its collection during the pendency of the appeals - Stay granted. Issues Involved:Calculation of Service Tax on 'Commercial and Industrial Construction Service' provided by the applicants, treatment of value in invoices, dispute on the method of calculation between Revenue and appellant.Analysis:1. Treatment of Value in Invoices:The applicants, providing 'Commercial and Industrial Construction Service', did not raise a separate Service Tax component in their invoices. The dispute between the Revenue and the appellant revolves around whether the value should be treated as cum-tax value or if abatement should be granted first. The Revenue argues for granting cum-tax benefit first and then allowing abatement, while the appellant contends that abatement should be granted first, treating the remaining part as cum-tax value.2. Calculation of Service Tax:The Tribunal considered the arguments from both sides and emphasized that Service Tax is payable only on the abated value of 33% of the billed amount. The Tribunal found it appropriate to split 33% of the billed amount into value and tax components rather than considering the entire project value, including material costs, for taxation purposes. The Tribunal highlighted that assessees typically apply abatement after paying tax, arriving at 33% of the value for calculating Service Tax. The method advocated by the appellant aligns with this standard approach, resulting in a consistent billing process.3. Judicial Decision:In light of the above analysis, the Tribunal granted a waiver of pre-deposit of dues for the admission of appeals and stayed the collection of dues during the pendency of the appeals. This decision was made to ensure fairness and adherence to the proper method of calculating Service Tax on the 'Commercial and Industrial Construction Service' provided by the applicants. The judgment was dictated and pronounced in open court, clarifying the Tribunal's stance on the issue at hand.