Service tax valuation on abated construction service favours computation on the reduced taxable base before treating amounts as cum-tax.

For service tax on commercial and industrial construction service, where the invoice did not separately disclose tax, the assessable value was to be computed on the abated portion of the billed amount rather than by first treating the entire project value as cum-tax and then applying abatement. The accepted approach was to split the abated value between service component and tax component, as this better reflected the tax computation method on the reduced taxable base. On that basis, the appellant's method was accepted for pre-deposit purposes and waiver of pre-deposit with stay of recovery was granted pending disposal.

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Issues: Whether, for service tax on commercial and industrial construction service where the invoice did not separately show service tax, the amount should first be treated as cum-tax and then abatement applied, or whether abatement should be applied first and the balance treated as cum-tax value.

Analysis: The dispute concerned the method of arriving at the assessable value for service tax. The amount was payable only on the abated value of 33% of the billed amount, and splitting that abated portion between value and tax was considered the proper approach. Applying abatement after treating the entire project value as cum-tax was found to be less appropriate. The method adopted by the appellant was held to be consistent with the way tax is computed on the abated value.

Conclusion: The appellant's method was accepted for the purpose of pre-deposit, and waiver of pre-deposit with stay of recovery was granted.

Final Conclusion: The appeals were allowed at the interim stage by granting relief against pre-deposit and recovery pending disposal.

Ratio Decidendi: Where service tax is payable on an abated portion of the billed amount, the tax computation should proceed on the abated value rather than by first treating the entire amount as cum-tax and then applying abatement.

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