Whether value of diesel provided by service recipient free of cost for running machines for mining activity includible in taxable value?

PJ/Case Law/2013-14/1957

Case:- DHOLU CONSTRUCTION AND PROJECTS LTD. VERSUS COMMR. OF C. EX., JAIPUR-II

Citation:-2013(32) S.T.R. 245 (Tri.-Del.)

Brief Facts:-Demand stands confirmed against the applicant on the ground that while providing mining services, they have procured the diesel from the service recipient, which stand used by them for running of machinery used further for the purpose of mining and, as such, value of the same has to be added in the assessable value of the service.

Appellant Contentions:-The assessee places reliance on the decision given by the Bombay High Court in the case of Inox Air Products Ltd. v. CCE, Nagpur reported in 2012-TIOL-510-HC-MUM-S.T. = 2012 (28) S.T.R. 570 (Bom.) in support of their contention that the value of diesel provided by service recipient free of cost should not be added in the taxable value of service.

Respondent Contentions:-Learned DR rebutted the reliance placed by the assessee on the case of Inox Air Products Ltd. Vs. CCE, Nagpur and submitted that the services involved in that case were different being maintenance and repair services and the free supply items were electricity whereas the services involved in the present case is mining service and the free supply material is diesel. He placed reliance on the Bangalore Tribunal’s decision in the case of VPR Mining Infrastructure Pvt. Ltd. v. CCE, Hyderabad reported in 2011 (23) S.T.R. 279 (Tri.-Bang.).

Reasoning of Judgment:-After hearing both the sides we find that the issue prima facie stand covered by the Hon’ble Bombay High Court decision in the case of Inox Air Products Ltd. v. CCE, Nagpur reported in 2012-TIOL-510-HC-MUM-S.T. = 2012 (28) S.T.R. 570 (Bom.) = 2012 (286) E.L.T. 26 (Bom.). However learned DR submits that the services involved in that case were different being maintenance and repair services and the free supply items were electricity whereas the services involved in the present case is mining service and the free supply material is diesel. We do not appreciate the above differentiation projected by the learned DR in as much as it is the ratio of law, which has to be followed and not the goods supplied or the services undertaken are relevant.
Apart from above, we also note that the Hon'ble Delhi High Court in respect of construction services has granted stays in respect of identical issues of inclusion of free supplied items by the service recipient, in the assessable value of the services provided by the assessees. Reference in this regard is made to Hon'ble Delhi High Court order in the case of Cycle Line Infra tech Pvt. Ltd. dated 19-2-2012.
Inasmuch as issue is prima facie covered in favour of the assessee, we find no justification in directing to deposit them any part of the demand and penalty. We dispense with the condition of pre-deposit during pendency of the appeal and allow the stay petition.
At this stage, learned DR submits that his reliance on the Tribunal Bangalore decision in the case of VPR Mining Infrastructure Pvt. Ltd. v. CCE, Hyderabad reported in 2011 (23) S.T.R. 279 (Tri.-Bang.) may be noted. We find that apart from the fact that the said decision is a stay order, whereas Bombay High Court's decision is a final order, we also note that the said decision of Bangalore Bench is prior to Delhi High Court's decision, which was issued in February 2012 and as such Bangalore Bench did not have the occasion to consider the said decision of Delhi and Bombay High Court.
In view of the above findings, the stay application stands allowed.

Decision:- Stay Application allowed.

Comment:-The crux of this case is that in view of the Bombay High Court decision in favour of the assessee on the issue under consideration, stay application was allowed. It is also worth mentioning here that recently, larger bench of the Tribunal in the case of Bhayana Builders has also considered the issue and has held in favour of the assessee that the value of free material supplied by the service recipient is not includible in the taxable value of service.

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PJ/Case Law/2013-14/1957

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