2018 (10) TMI 403 – CESTAT CHENNAI – TMI – Valuation – completion and finishing services/construction services – inclusion of materials consumed in the course of providing the service in assessable value – benefit of abatement under N/N. 1/2006-ST dated 1.3.2006 denied – it is alleged that the appellants bifurcated the value of purchase order into charges for materials and labour charges and they paid service tax only on the labour charges – demand of service tax on the value of materials under the category of commercial or industrial construction service (finished services) – demand under the head Works contract services – Scope of SCN.
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Demand for the period prior to 1.6.2007 – Held that:- The works contract has come into effect only after 1.6.2007 – The decision in the case of Larsen & Toubro Ltd. [2015 (8) TMI 749 – SUPREME COURT] would apply to the period prior to 1.6.2007 wherein it was held that levy under works contract service prior to 1.6.2007 cannot sustain – demand do
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atachalam, Advocate For the Respondent : Shri B. Balamurugan, AC (AR) ORDER PER BENCH Brief facts are that based on intelligence that the appellants are not paying appropriate service tax on construction activities, the SIR Group of Service Tax Commissionerate, Chennai initiated investigation and collected relevant records from the appellant. It was noticed that they provided completion and finishing services which are classifiable under commercial or industrial construction service with effect from 16.6.2005. Further, it was noticed that they split the gross value of services into material cost and labour charges by issuing separate bills and paid service tax only on labour charges. It appeared that the labour charges works out to approximately 33% of the total value and the assessee has availed abatement as provided under Notification No.1/2006-ST dated 1.3.2006. According to department, the materials are consumed in the course of providing the service and therefore appellants are no
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he labour charges alone. Service tax was demanded on the materials under the category of Commercial and Industrial Construction Service (Finishing Service) by denying exemption under the Notification No.15/2004ST dt.10.09.2004 as amended by Notification No.1/2006 ST dt.10.9.2004. 2.3 The appellants submitted in their reply that they are not availing exemption under Notification No.15/2004ST dt.10.09.2004 as amended by Notification No.1/2006 ST dt.10.9.2004 but only under Notification No.12/2003 – ST dated 20.06.2003. After seeing the reply filed by the appellants the learned Commissioner recorded findings on the applicability of Notification No.12/2003 – ST dated 20.06.2003 in the impugned order which is beyond the scope of show cause notice. The learned Commissioner classified the appellants‟ activities under Works Contract Service and demanded service tax from 16.06.2005 to 31.07.2008 though Works Contract Service was introduced only from 01.06.2007. Therefore the entire order
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s on which tax is leviable under VAT or CST. As per Rule 2A of Service Tax Determination of Value Rules, 2006 Value of works contract service determined shall be equivalent to the gross amount charged for the works contract less the value of transfer of property in goods involved in the execution of the said works contract . 2.6 The materials sold during the provision of Service need not be included with the value of taxable service. In this case, it is admitted by the learned Commissioner by classifying the service under Works Contract‟ that the activity of appellants involves transfer of property of goods while providing their service, for the reasons mentioned in the earlier paras as they could not be called as consumables. In this case the appellants have shown the material value and the service charges separately. 2.7 The exemption contained in the said Notification No.12/2003 dt.20.6.2003 is available to all services. Further when the appellants avail the said Notification
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terials in the prescribed returns. Only after 2007 new format of ST3 return is prescribed. In the new format also there is no provision for showing value of materials sold. Only in case of abatement claimed under notifications, the abatement value claimed is to be shown in the ST3 returns. In this case the appellants herein have not claimed any abatement or exemption from the value of taxable service provided by them. The appellants have not included the value of the material as the said materials used could has no relevance to the Service provided and the value of taxable service arrived therein. 2.10 He relied upon the decision in the case of Safety Retreading Co. (P) Ltd. Vs. Commissioner of Central Excise, Salem – 2017 (48) STR 97 (SC) and also the decision of the Tribunal vide Final Order No. 42489/2017 dated 31.10.2017 in the case of Admec Logistics Ltd. Vs. Commissioner of Central Excise, Tirunelveli. 3. The ld. AR Shri B. Balamurugan supported the findings in the impugned order
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irmed the demand classifying the activity under the category of works contract from 16.6.2005 to 31.3.2008. Needless to say that the works contract has come into effect only after 1.6.2007. The decision in the case of Larsen & Toubro Ltd. as reported in 2015 (39) STR 913 (SC) would apply to the period prior to 1.6.2007 wherein it was held that levy under works contract service prior to 1.6.2007 cannot sustain. For the period after 1.6.2007, it is seen that though the show cause notice raises the demand under commercial or industrial construction service, the Commissioner has confirmed the demand under works contract service. The Commissioner has thus travelled beyond the show cause notice and the demand after 1.6.2007, for this reason alone, cannot sustain. The Tribunal in the case of Real Value Promoters and Ors. vide Final Order No. 42436 to 42438/2018 dated 18.9.2018 had occasion to analyse the issue and has held that the demand under commercial or industrial construction servic
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