2018 (9) TMI 654 - AT - Service Tax

Tribunal denies exemption due to failure to include material costs in service charges

The Tribunal upheld the department's decision, ruling that the appellant was not entitled to the exemption under Notification No. 1/2006-ST for Erection, ... Benefit of N/N. 19/2003-ST as amended and 01/2006-ST - denial of benefit on the ground that they have contravened the condition of notification inasmuch as they have availed CENVAT credit on some inputs and also the value of some consumables was not included in the gross value of the service - Held that:- The submission of the Ld. Counsel that they have included the value of goods is apparently false and incorrect on the face of the records - the appellant have raised the bill for their installation charges @ of ₹ 54 per meter. However as per the purchase order, the value of material purchase, Roofing sheet and other material was not included, therefore, they have clearly violated the condition of Notification 1/2006-ST - On violation of this condition itself, the Notification No. 1/2006-ST is not admissible to the appellant. The appellant is really not entitle for the exemption N/N. 1/2006-ST. - appeal dismissed - decided against appellant. Issues:1. Entitlement to exemption notification No. 19/2003-ST and 01/2006-ST for Erection, Commission, and Installation Services.2. Availment of CENVAT credit on inputs.3. Inclusion of the value of consumables in the gross value of the service.Entitlement to Exemption Notification:The appellant, engaged in providing Erection, Commission, and Installation Services, claimed exemption under notification No. 19/2003-ST and 01/2006-ST. The department contended that the appellant was not entitled to this exemption as they had contravened the notification's conditions by availing CENVAT credit on some inputs and not including the value of certain consumables in the gross value of the service. The Original Authority dropped the proposed demand of service tax, but the commissioner, in a revision under section 84 of the Finance Act, set aside the Original Order and confirmed the demand, leading to the present appeal.Availment of CENVAT Credit:The appellant's counsel argued that although they initially availed CENVAT credit on consumables used for the services, they reversed the credit by making a cash payment before the Show Cause Notice (SCN). They contended that they charged their clients for the entire services, including materials used, and did not receive any additional consideration beyond the billed amount. Therefore, they claimed compliance with the notification's conditions and sought the benefit of the exemption. The counsel relied on judgments of the Hon'ble Supreme Court to support their argument.Inclusion of Consumables' Value:On the other hand, the Revenue representative reiterated the findings of the impugned order, stating that the appellant's availing and utilization of CENVAT credit, even if subsequently reversed, did not comply with the notification's conditions. They argued that the appellant failed to include the value of goods, as evidenced by the purchase order and bill, thereby violating the notification's requirements. The representative cited relevant judgments to support their position.Judgment Analysis:After considering both sides' submissions and reviewing the records, the Tribunal found that the appellant had indeed violated the conditions of the exemption notifications. The Tribunal observed that the appellant's claim of including the value of goods in the service was false, as evidenced by the purchase order and bill. The appellant's bill for installation charges did not include the value of materials purchased, such as roofing sheets, thereby violating the conditions of Notification 1/2006-ST. Consequently, the Tribunal upheld the impugned order, ruling that the appellant was not entitled to the exemption under Notification No. 1/2006-ST. The appeal was dismissed based on this finding.This detailed analysis of the judgment highlights the issues of entitlement to exemption notifications, the availment of CENVAT credit, and the inclusion of consumables' value in the gross service value, providing a comprehensive understanding of the legal reasoning and decision-making process involved in the case.