Tribunal rules service tax cannot be imposed on free goods in commercial construction services

The Tribunal set aside the Order-in-Original, ruling in favor of the appellant in a case concerning the non-inclusion of the value of free goods supplied by customers for service tax liability calculation under commercial construction services. Citing relevant case laws, including Bhayana Builders (P) Ltd, the Tribunal held that service tax cannot be imposed on such free goods. The decision provided consequential relief to the appellant, emphasizing the established legal position on this issue.

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Issues involved:
Non-inclusion of value of free supply of goods by customers for rendering output services under commercial construction services; contesting show cause notice on merits and limitation; applicability of service tax liability on free goods supplied; interpretation of relevant case laws.

Analysis:

1. Non-inclusion of value of free goods for service tax liability calculation:
The appeal was against an Order-in-Original regarding the non-inclusion of the value of goods supplied free of cost by the appellant's customers for the calculation of service tax liability under commercial construction services. The appellant contested the show cause notice on both merits and limitation grounds. The adjudicating authority confirmed the demands and imposed penalties. However, the Tribunal noted that the issue had already been decided by a Larger Bench in the case of Bhayana Builders (P) Ltd, which held that service tax liability cannot be demanded on the value of goods supplied free of cost by customers. Consequently, the impugned order was set aside in favor of the appellant.

2. Applicability of relevant case laws:
The appellant's Chartered Accountant cited the judgment in Bhayana Builders (P) Ltd case, which was followed by the Tribunal in subsequent cases like Commissioner of Central Excise & Customs v. B M Constructions and M B Chitale Constructions v. Commissioner of Central Excise. These cases supported the appellant's position that service tax liability cannot be imposed on the value of goods supplied free of cost. The Tribunal, after perusing the records, found merit in the appellant's argument based on these precedents and ruled in favor of the appellant, allowing the appeal with consequential relief.

In conclusion, the Tribunal's decision in this case clarified the non-inclusion of the value of free goods supplied by customers for service tax liability calculation under commercial construction services. The judgment relied on established case laws to support the appellant's position and set aside the impugned order, providing relief to the appellant.

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