TaxTMI 
TaxTMI 
2009 (3) TMI 423
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....ential complexes for the period from 1-10-2005 to 31-3-2006. Show-cause notice dated 17-4-2007 was issued to the appellant on the ground that the cost of materials supplied was excluded for purpose of payment of Service Tax and the relevant Notifications viz., No. 15/2004-ST, dated 10-9-2004 and No. 18/2005-ST, dated 7-6-2005 do not provide such exclusions. The Original Authority passed the impugned order confirming the proposals in the show-cause notice. Penalties were imposed under sections 76 and 77 of the Finance Act, 1994. Interest demanded under section 75 of the Finance Act, 1994. The appellants are highly aggrieved over the impugned order. The following grounds were urged : (i) The appellant had wrongly paid Service Tax under the category of 'construction of residential complex' and 'commercial or industrial construction service'. The appellant is a works contractor and is liable to Sales Tax under the Kerala General Sales Tax Act, 1957 or Kerala Value Added Tax Act under 'works contract' read with relevant entries in the 7th Schedule to the Indian Constitution. The appellant is assessed to Sales Tax/VAT as deemed sale/works contract as per article 366(29A) of the Consti....
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....ELT 3 (SC). (vii) When the levy of Service Tax was not applicable prior to 1-6-2007, the question of valuation does not arise. (viii) Reliance was placed on the decision of the Madras High Court in the Larsen & Tourbo Ltd. v. Union of India [2007] 11 STT 27 wherein it was held that on a reading of explanation to Sl. No. 7 of Notification No. 1/2006-ST equivalent to present Notification in this appeal, the revenue was not correct in insisting on adding the value of goods and materials supplied by the customer. As the High Court has interpreted the explanation below the Notification in the above manner, a contrary order is untenable. (ix) The addition of value of the materials supplied by the customer has no legal basis and contrary to the valuation mechanism provided in section 67 of the Act. (x) Referring to the explanation under Notification No. 15/2004-ST, dated 1-3-2005, it was submitted that the said explanation does not call for inclusion of value of materials supplied free of charge by the customer, who is not the provider of construction service but the recipient of construction service. The Notification only requires addition of all goods or materials used, prov....
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....d tax services by including the cost of such service in the value of goods. (xvi) In the light of the earlier submissions, the levy of Service Tax on services involved in the execution of works contract was made liable for Service Tax only with effect from 1-6-2007, therefore, they were not liable for payment of Service Tax prior to 1-6-2007. However, the revenue has collected the Service Tax without the authority of law and the amount collected by the Government cannot be retained in terms of Constitutional mandate in article 265. The following citations were relied on : * Shiv Shanker Dal Mills v. State of Haryana AIR 1980 SC 1937. * Aluminium Corpn. of India Ltd. v. Union of India 1978 (2) ELT J 452 (SC) * Sandvik Asia Ltd. v. CIT 2006 (196) ELT 257 (SC). (xvii) In view of the above submissions, the penalty is not sustainable. No reasons have been adduced for imposing penalties under sections 76 and 77. The learned respondent has ignored the provisions of section 80 of the Act, as per which no penalties under sections 76 and 77 shall be imposed on the assessee for any failure, if the assessee proves that there was reasonable and sufficient cause for the said failu....
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....ugh it is only a stay order, the Hon'ble High Court has interpreted the Explanation to mean that the value of the goods supplied and provided by the client cannot be included for calculating the Service Tax. Further, insisting on including the cost of materials supplied by the service receiver will be contrary to section 67 of the Finance Act, according to which, the value of the taxable services shall be the gross amount charged by the service provider for such service. The cost of materials supplied by the service receiver would not be covered in terms of section 67. Moreover the said section provides for exclusion of cost of materials in respect of certain services. Another important legal contention taken by the appellant is that they had been registered under 'Works Contract' provisions for purposes of sales tax. They have produced the certification of registration. It is also stated that the works contract came into service tax net only with effect from 1-6-2007. The definition of works contract introduced from 1-6-2007 is as follows : Works Contract Service Levied from : 1-6-2007 Taxable Service : Services involved in execution of works contract Asses....