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Case Law on Commercial or Industrial Construction Service
COMMISSIONER OF SERVICE TAX Vs M/s BHAYANA BUILDERS (P) LTD
Service Tax – Valuation – Commercial or industrial construction service - whether the value of goods or material supplied or provided free of cost by a service recipient is includible in computation of gross amount for valuation of the taxable service and for availing the benefits under Notification No. 15/2004-ST dated September 10, 2004 as amended by Notification No. 4/2005-ST dated March 01, 2005 – revenue contends that the value of goods/materials supplied free is a form of payment and, therefore, should be added in computation of gross amount - correctness of CESTAT Larger Bench order – Section 67 of Finance Act, 1994
HELD – The Explanation (c) to Section 67 which makes the ‘gross amount charges’ inclusive of certain other payments would make it clear that the purpose is to include other modes of payments, in whatever form received - Therefore, the words ‘in any form of payment’ are by means of issue of credit notes or debit notes and book adjustment. With the supply of free goods/materials by the service recipient, no case is made out that any credit notes or debit notes were issued or any book adjustments were made. Likewise, the words, ‘any amount credited or debited, as the case may be’ would not include the value of the goods supplied free as no amount was credited or debited in any account - the definition of “gross amount charged” given in Explanation (c) to Section 67 only provides for the modes of the payment or book adjustments by which the consideration can be discharged by the service recipient to the service provider.
It does not expand the meaning of the term “gross amount charged” to enable the Department to ignore the contract value or the amount actually charged by the service provider to the service recipient for the service rendered - The value of taxable services cannot be dependent on the value of goods supplied free of cost by the service recipient. The service recipient can use any quality of goods and the value of such goods can vary significantly. Such a value, has no bearing on the value of services provided by the service recipient. Thus, on first principle itself, a value which is not part of the contract between the service provider and the service recipient has no relevance in the determination of the value of taxable services provided by the service provider - the service tax is to be levied in respect of ‘taxable services’ and for the purpose of arriving at 33% of the gross amount charged, unless value of some goods / materials is specifically included by the Legislature, that cannot be added – the Court is in agreement with the view taken by the Full Bench of CESTAT in the impugned judgment - the Revenue appeals are dismissed