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PJ/Case Laws/2012-13/1459

Whether abatement under Notification No. 15/2004 provides for inclusions of the value of materials supplied free of cost in the assessable value?

Case:-M/S NEW CONSOLIDATED CONSTRUCTION CO LTD V/S COMMISSIONER OF SERVICE TAX, MUMBAI
 
Citation:- 2013-TIOL-283-CESTAT-MUM

Brief Facts: - The appeal and stay application was filed against the Order-in-Original No.47/ST/SB/2011-12 dated 31.7.2012 passed by the Commissioner of Service Tax, Mumbai wherein a demand of Rs.1,82,09,723/- has been confirmed against he appellant along with interest and penalties by denying the benefit of abatement under Notification No. 15/2004-ST dated 10.09.2004 as amended and Notification No. 1/2006-ST dated 1.3.2006.

Appellant’s Contention: - The appellant contended that the very same issue came before the Hon'ble High Court of Madras in the case of Larsen & Toubro Ltd., Chennai in Writ Petition No. 12691/2007 decided on 5.4.2007 reported in = (2007-TIOL-176-HC-MAD-ST) and an interim stay has been granted. The Hon'ble High Court was of the view that the explanation would be only prospective in the context of Notification No. 1/2006 dated 1.3.2006 which succeeded the Notification No. 15/2004. Following the said decision, the Hon'ble High Court of Delhi in the case of Era Infra Engineering Ltd. reported in = (2008-TIOL-386-HC-DEL-ST) took the same view and directed that while the adjudicating authority shall be at liberty to proceed with adjudication proceedings but they will not include for the purposes of determining the taxable service the supply of free material to the petitioner and to this extent the Explanation appearing against Serial No. 7 in the table given in the Notification dated 1.3.2006 will not be applied to their detriment. He further submits that in view of the prima facie view taken by two High Courts, the Tribunal is bound to follow these decisions at the interim stage.

Respondent’s Contention: - The respondent reiterated the findings of the adjudicating authority.  
 
Reasoning of Judgment: - The Hon’ble Tribunal held that in the case of Larsen & Toubro Ltd. (supra) and Era Infra Engineering Ltd. (supra), the same issue came up for consideration before the Hon'ble High Courts of Madras and Delhi and both the High Courts took a prima facie view that "insistence of inclusion of value of goods supplied and provided free by the client of an assessee cannot be included for the purposes of calculating taxable service." Respectfully following these decisions, they grant waiver of pre-deposit of the dues adjudged against the appellant and stay recovery thereof during pendency of the appeal.
 
Decision: - Stay granted.

Comment:-In view of the decisions given by the two High Courts, it was held that value of goods supplied free of cost by client cannot be included in the assessable value.

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