Exclusion of free supply materials from service tax assessment upheld by Tribunal.

The Tribunal held that the value of free supply materials provided by the service recipient should not be included in the assessable value for service tax under Works Contract service. The decision followed the interpretation of "gross amount charged" under Section 67 of the Finance Act, 1994, and the Supreme Court ruling in CCE vs. Bhayana Builders (P) Limited. The Tribunal allowed the appeal, setting aside the order-in-original and concluding that consideration not received by the service provider should not be part of the taxable value for service tax purposes.

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Issues Involved:
1. Inclusion of free supply materials in the assessable value for service tax under Works Contract service.
2. Interpretation of "gross amount charged" under Section 67 of the Finance Act, 1994.
3. Applicability of the Supreme Court decision in CCE vs. Bhayana Builders (P) Limited.

Summary:

1. Inclusion of Free Supply Materials:
The department contended that the appellant did not include the value of free supply materials like steel pipes and valves in the assessable value for service tax under the Works Contract service. The show cause notice demanded Rs. 61,06,366/- in service tax, along with interest and penalties, for the financial years 2010-11 and 2011-12, based on Notification No. 23/2009-ST dated 07.07.2009.

2. Interpretation of "Gross Amount Charged":
The appellant argued that the term "gross amount charged" should be interpreted per Section 67 of the Finance Act, 1994, which includes only the value of services and goods supplied by the service provider. They cited the Supreme Court decision in CCE vs. Bhayana Builders (P) Limited, which held that the value of free supply materials provided by the service recipient should not be included in the gross amount charged for service tax purposes.

3. Applicability of Supreme Court Decision:
The Tribunal referenced the Supreme Court's ruling in CCE vs. Bhayana Builders (P) Limited, which clarified that the "gross amount charged" does not include the value of free supply materials provided by the service recipient. The Tribunal also noted that this precedent has been consistently followed in various other cases.

Decision:
The Tribunal concluded that the consideration not received by the service provider should not form part of the taxable value under Section 67 for service tax purposes. It set aside the impugned order-in-original and allowed the appeal, following the Supreme Court's decision in CCE vs. Bhayana Builders (P) Limited.

Conclusion:
The appeal was allowed, and the impugned order was set aside, affirming that the value of free supply materials provided by the service recipient should not be included in the assessable value for service tax under the Works Contract service.

(Pronounced in the open court on 11.09.2023)

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