By TIOL News Service

MUMBAI, NOV 04, 2016: THE appellant is registered under the category of "Commercial and Industrial Construction Service".

They were issued a SCN alleging –

(i) that they had received goods and material like steel, cement etc. free of cost from their customers, which were used by them and their value was not included in the assessable value;

(ii) that they had sold scrap amounting to Rs.17.10lacs which was generated during the course of providing taxable service. The sale of such scrap being an additional consideration received in relation to providing taxable service was to be added to the taxable value as per Service Tax (Determination of Value) Rules, 2006 and the noticee was required to pay service tax of Rs.1,76,130/-.

The ST demand was confirmed by the CCE, Nagpur and, therefore, the appellant is before the CESTAT.

After considering the submissions made by both sides, the Bench inter alia observed thus –

+ On the first ground (that the appellant is liable to pay service tax on amount which represents the free supply of cement, steel etc. by the service recipient), the issue is no more res integra as the judgment of Larger Bench in the case of Bhayana Builders (P) Ltd vs. CCE - 2013-TIOL-1331-CESTAT-DEL-LB is directly applicable to the issue and is in favour of the assessee; following the said decision of the Larger Bench, the impugned order is unsustainable and liable to set aside.

+ On the second issue, the demand is sought to be justified as additional consideration for service provided in terms of Service Tax (Determination of Value) Rules, 2006. We find that sale of scrap, whose nature is not defined in show cause notice, cannot be said to be consideration for the taxable services provided or to be provided. There is no provision in Service Tax Rules for inclusion of value of scrap as an additional consideration; only the amounts received towards taxable services are leviable to service tax.

The impugned order was set aside and the appeal was allowed.

(See 2016-TIOL-3140-CESTAT-MUM)