Exemption of value of goods and material sold by service provider to the recipient of service in case of Works Contract.

PJ/Case Law/2014-15/2172

Case:- M/s S K ENGINEERING WORKS Vs COMMISSIONER OF CENTRAL EXCISE AND SERVICE TAX AND ANOTHER

Citation:- 2014-TIOL-602-HC-ALL-ST

Brief facts:- Work contract of petitioner included service as well as supply of material. Notification 12/2003-ST dated 20.06.2003 (w.e.f 01.07.2003) provided that value of goods and material sold by service provider to the recipient of service shall be exempted from service tax liable under Section 66 of the Finance Act, 1994. The Assessing Authority while passing impugned order had completely ignored aforesaid notification for the reasons best known to him though he must be well aware of the said notification issued by Central Government.

Appellant’s contentions:-

Respondent’s contentions:- Sri R.C. Shukla, Advocate stated that though time was granted to respondents to file counter affidavit on 17.02.2014 but the same had not been filed but he was ready to argue the matter without any counter affidavit.

Reasons of judgment:- It was evident from record that the work contract of petitioner included service as well as supply of material. The Central Government had issued notification dated 20.06.2003 provided that value of goods and material sold by service provider to the recipient of service shall be exempted from service tax liable under Section 66 of the Finance Act, 1994 but admittedly the Assessing Authority while passing impugned order had completely ignored aforesaid notification for the reasons best known to him though he must be well aware of the said notification issued by Central Government.
Moreover, it was also evident from record that similar matters had been considered in appeal by Appellate Authority and it had found that assessment orders dealing with similar kind of work contract were illegal and service tax on the quantum of material supplied had been directed to be deducted. One of such order was on record, i.e., dated 12.12.2013 passed by Commissioner of (Appeals), Customs, Central Excise & Service Tax 38, M.G. Marg, Civil Lines, Allahabad in F.No. 116/ST/APPL/ALLD/ 2012 and others connected matters. Apparently the aforesaid Government notification had not been noticed and even otherwise Hon’ble judge did not find that the view taken by Assessing Authority in respect of work contract was justified. In his view the matter should be re-examined by respondent no. 2.
In the result, the writ petition was allowed. The impugned orders dated 06.11.2012 and 13.12.2013 were hereby quashed. The matter was remanded to respondent no. 2 to pass a fresh order in the light of notification dated 20.06.2003 as also the appellate order dated 12.12.2003 passed in F.No . 116/ST/APPL/ALLD/2012, within a period of two months from the date of production of a certified copy of this order before him.

Decision:- Writ petition allowed, matter remanded back.

Comment:- The analogy drawn from the case is that value of goods and material sold by service provider to the recipient of service shall be exempted from service tax liable under Section 66 of the Finance Act, 1994 as per Notification 12/2003-ST dated 20.06.2003 (w.e.f 01.07.2003)

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PJ/Case Law/2014-15/2172

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