Free supply of construction material excluded from gross amount charged for service tax valuation under the notification.

For valuation under Notification No. 15/2004-S.T., free construction material supplied by the recipient is not included in the "gross amount charged" for service tax computation. Following the Delhi HC's view on the same question, the Tribunal accepted that such free supply does not form part of the taxable value for determining eligibility under the notification. On that basis, the demand and penalties did not justify insistence on pre-deposit at the stay stage, and waiver of pre-deposit was granted.

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Issues: Whether, for the purpose of Notification No. 15/2004-S.T. dated 10-Sep-2004, the value of construction material supplied free by the recipient was required to be included in the gross amount charged for determining service tax liability.

Analysis: The dispute turned on the meaning of "gross amount charged" under the notification. The Tribunal followed the view taken by the Delhi High Court on the same question and accepted that free supply of material by the recipient was not to be added to the taxable value for determining eligibility under the notification. On that basis, the demand and penalties did not justify insistence on pre-deposit at the stay stage.

Conclusion: The issue was decided in favour of the assessee, and waiver of pre-deposit was granted.

Ratio Decidendi: For valuation under the notification, free supply of materials by the recipient is not includible in the gross amount charged.

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