Supply of goods outside service tax levy: receipts for stone ballast and stone dust were held not taxable.

Receipts shown by supply orders and State VAT records to relate to supply of stone ballast and stone dust were treated as transactions in goods, placing them outside the service tax levy. The remaining receipts were regarded as exempt road-construction receipts, so only the supply-of-material component was in dispute. On that basis, the demand of service tax on the four supply-of-material transactions was set aside, and the related interest and penalty failed to the same extent.

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Issues: Whether the demand of service tax, interest and penalty could be sustained on four receipts relating to supply of materials, and whether those receipts were exempt or outside the scope of service tax.

Analysis: The appellant produced supply orders and VAT assessment material showing that the disputed receipts were for supply of stone ballast and stone dust. The receipts were found to be directly relatable to supply of goods and had been assessed by the State VAT authorities. On that basis, they were held to fall outside the levy of service tax. The remaining receipts were treated as exempt road-construction receipts, and the disputed supply-of-material component alone was held not liable to service tax.

Conclusion: The demand raised on the four supply-of-material transactions was set aside, along with the related interest and penalty to that extent, and relief was granted in favour of the assessee.

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