CESTAT AHMEDABAD: Free Supply Material Cost Excluded from Gross Value for Exemption

The Appellate Tribunal CESTAT AHMEDABAD ruled that the cost of free supply material by the service recipient should not be included in the gross value of service for availing the Exemption Notification No.15/2004-ST. Citing the Supreme Court judgment in Commissioner of Service Tax Vs. Bhayana Builder Pvt. Ltd., the Tribunal held that the value of free supply material does not need to be included in the gross value for the purpose of the notification. Consequently, the appellant was entitled to the abatement provided in the notification, leading to the appeal being allowed in favor of the appellant.

---

---

Issues:
Interpretation of Exemption Notification No.15/2004-ST - Inclusion of cost of free supply material in gross value of service for Commercial or Industrial Construction Services.

Analysis:

The judgment by the Appellate Tribunal CESTAT AHMEDABAD, delivered by Mr. Ramesh Nair and Mr. Raju, addressed the issue of whether the cost of free supply material by the service recipient should be included in the gross value of service for availing the Exemption Notification No.15/2004-ST dated 10.09.2004, as per the explanation inserted via notification No.4/2005-ST. The appellant, represented by Shri. S. Bissa, argued that the Larger Bench of the Tribunal had previously decided this issue in the case of Bhayana Builders Pvt. Ltd, a judgment upheld by the Hon'ble Supreme Court in Commissioner of Service Tax Vs. Bhayana Builder Pvt. Ltd. The appellant claimed entitlement to the exemption based on this precedent and cited various cases in support of their position.

The respondent, represented by Shri. S.N. Gohil, reiterated the findings of the impugned order. After considering the arguments from both sides and examining the records, the Tribunal concluded that the issue was no longer Res-Integra due to the Supreme Court judgment in the case of Bhayana Builder. The Tribunal held that, according to the Supreme Court's ruling, the value of free supply material by the service recipient of Commercial or Industrial Construction Service does not need to be included in the gross value for the purpose of Notification No. 15/2004-ST. Consequently, the appellant was deemed entitled to the abatement provided in the Notification.

Therefore, the Tribunal found the demand to be unsustainable, set aside the impugned order, and allowed the appeal in favor of the appellant. The judgment provided clarity on the interpretation of the exemption notification and established the non-inclusion of the cost of free supply material in the gross value of service for Commercial or Industrial Construction Services, aligning with the precedent set by the Supreme Court in the Bhayana Builder case.

---