Tribunal rules free construction materials not taxable in service tax liability

The Tribunal allowed the appeal, holding that the cost of free supply of materials for providing 'Commercial or Industrial Construction Services' should not be included in the service tax liability. The Tribunal relied on the judgment of the Larger Bench and concluded that the value of free supplies need not be included for discharging service tax, aligning with the law established by the Larger Bench. The impugned order was set aside, and the appeal was allowed in favor of the appellant based on authoritative judicial pronouncements and precedents.

---

---

Issues involved:
Inclusion of cost of free supply of materials for rendering 'Commercial or Industrial Construction Services' under service tax liability.

Analysis:
The appeal was against Order-in-Appeal No. NGP/EXCUS/000/APP/147/14-15 dated 17/10/2014. The main issue was the inclusion of the cost of free supply of materials for providing 'Commercial or Industrial Construction Services'. The appellant relied on the judgment of the Larger Bench in the case of Bhayana Builders (P) Ltd. to support their case. The appellant argued that the first appellate authority wrongly interpreted the provisions of Section 67 post amendment on 18-04-2006. The departmental representative contended that the appellant had availed the benefit of Notification No. 1/2006-ST, making the Bhayana Builders (P) Ltd. judgment inapplicable.

Upon reviewing the submissions and records, the Tribunal found that the arguments of the departmental representative and the findings of the first appellate authority did not align with the law established by the Larger Bench. The Larger Bench had analyzed the pre and post-amended provisions of Section 67 of the Finance Act, 1994, specifically the substitution of the section from 18-04-2006. The Tribunal concurred with the Larger Bench's conclusion that the value of free supplies need not be included for discharging service tax. The Tribunal also highlighted the Larger Bench's ruling that the value of goods and materials supplied free of cost should be excluded from the taxable value or the gross amount charged under Section 67 of the Finance Act, 1994. This principle was further upheld in the case of Hindustan Steel Works Construction Ltd.

Based on the authoritative judicial pronouncements and precedents, the Tribunal held that the impugned order was unsustainable and set it aside, allowing the appeal in favor of the appellant. The operative order was pronounced in court, concluding the judgment.

---