Custom, Excise & Service Tax Tribunal
Gannon Dunkerly &Amp; Co.Ltd vs Coms C Ex, Cus &Amp; Service Tax - Bbsr-Ii on 29 October, 2018
IN THE CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL,
EASTERN ZONAL BENCH: KOLKATA
S.T.Appeal No.3/08
(Arising out of Order-in-Original No.CCE/BBSR II/S.Tax/No.17-
Commissioner/2007 dated 29.11.2007 passed by the Commissioner of
Central Excise, Cus. & Service Tax, BBSR II)
M/s Gannon Dunkerley & Co.Ltd.
Applicant (s)/Appellant (s)
Vs.
CCEx., Cus. & S.Tax, BBSR II
Respondent (s)
Appearance:
Shri B. N. Chattopadhyay, Consultant for the Appellant (s) Shri S. S. Chattapadhyay, Supdt. (AR) for the Revenue CORAM:
HON'BLE SHRI P.K.CHOUDHARY, MEMBER (JUDICIAL) HON'BLE SHRI V. PADMANABHAN, MEMBER (TECHNICAL) Date of Hearing : 29.10.2018 Date of Decision : 29.10.2018 ORDER NO. FO/A/76833/2018 Per Bench :
The present appeal challenges the Order-in-Original No. CCE/BBSR II/S.Tax/No.17-Commissioner/2007 dated 29.11.2007.
2. The appellant is working as a contractor for undertaking industrial construction job. During the period of dispute i.e. from September, 2004 to April, 2006, the appellant executed certain contracts for M/s Hindulco Industries Ltd., Hirakud (Power Project). For execution of contracts, M/s Hindulco Industries Ltd. supplied certain materials free of cost, such as, cement, rods etc, which were to be 2 S.T.Appeal No.3/08 used by the appellant in the construction works. Such free supply of materials were done as per the terms and conditions between the two parties. For payment of service tax during the disputed period, the appellant claimed the benefit of the exemption under Notification No.15/2004-ST dated 10.09.2004, which was subsequently amended by Notification No.04/05-ST dated 01.03.2005. This Notification was further superseded by Notification No.01/06-ST dated 01.03.2006 without any material change in the wordings. These Notifications granted the benefit of abatement to the extent of 67% of the gross amount charged by the service provider from the recipient of service. Vide Notification No.04/05-ST ibid, an "Explanation" was inserted in the original Notification to the effect that : "gross amount charged shall include the value of goods and materials supplied or provided or used by the provider of the construction service for providing such service." After scrutiny of records of the appellants, Revenue was of the view that the value of materials supplied free of cost, should also be included in the gross amount charged since such materials have been used in the provision of service. Accordingly, Revenue proceeded to work out the differential service tax payable by the appellants by including cost of free supply materials and then extending the abatement to the extent of 67%. But before issuance of relevant show-cause notice dated 05.03.2007, the appellant came forward to pay the differential service tax as worked out on the above lines ; along with applicable interest for the delayed payment under Section 75 of the Finance Act, 1994. While passing the impugned order, the Adjudicating Authority not only upheld the demand of service tax along 3 S.T.Appeal No.3/08 with interest, but also proceeded to impose penalties under Section 76,77 & 78 of the Finance Act, 1994.
3. In the present appeal, the appellant has challenged the imposition of penalty in spite of the service tax being paid along with interest even prior to issue of show-cause notice.
4. In this connection, we have heard Shri B.N.Chattopadhyay, ld.Consultant for the appellant as well as Shri S.S.Chattopapadhyay, ld.D.R. for the Revenue.
5. The ld.Consultant for the appellant submitted that the service tax demanded in the show-cause notice along with interest, has already been paid by the appellant and the same has not been disputed. But he emphatically submitted that the penalty imposed was not justified and further that no interest would be payable by the appellant since the present issue on merit has been decided in their favour by the Hon'ble Apex Court in the case of Commissioner of Service Tax Vs. Bhayana Builders Pvt. Ltd. : 2018 (10) G.S.T.L. 118 (S.C.).
6. The ld.D.R. for the Revenue, has justified the impugned order.
7. After hearing both sides and on perusal of records, we note that the crux of the dispute is whether the value of free supply materials received from the service receiver is required to be added to the gross amount received by the appellant for computing service tax liability. The Notification No.15/04-ST ibid as amended, has granted the benefit of abatement to the extent of 67% of the gross amount charged for providing services. Revenue was of the view that such amount is to be determined by including the value of free supplied materials. But we 4 S.T.Appeal No.3/08 find that the present issue came before the Larger Bench of the Tribunal in the case of Bhayana Builders Pvt. Ltd. Vs. Commissioner of Service Tax, Delhi reported in 2013 (32) S.T.R. 49 (Tri.-LB). The Larger Bench decided that the gross amount charged cannot include the value of free supplied materials provided by the receiver of the service. Similar views have been expressed by the Hon'ble Supreme Court in the case of Commissioner of Service Tax Vs. Bhayana Builders Pvt. Ltd. (supra). In this case, the Hon'ble Supreme Court has observed as under :
"16. In fact, 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 fact that it is an inclusive definition and may not be exhaustive also does not lead to the conclusion that the contract value can be ignored and the value of free supply goods can be added over and above the contract value to arrive at the value of taxable services. 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."5 S.T.Appeal No.3/08
8. By applying the ratio of the decision of the Hon'ble Supreme Court, we come to the conclusion that there is no justification for including the value of free supplied materials while determining the gross amount charged for the purpose of benefit of Notification No.15/04-ST ibid as amended. Consequently, there is no justification for the demand of service tax.
9. In the present appeal, it is not in dispute that the entire differential amount of service tax confirmed by the adjudicating authority has been paid by the appellant along with applicable interest even before the issue of show-cause notice. But the same has not been challenged in the present appeal. As per the decision of the Hon'ble Apex Court, no such differential service tax is payable. However, in the present appeal, only levy of interest as well as penalties have been challenged.
10. In the result, the impugned order is modified and the demand of interest as well as penalties imposed under various Sections of the Finance Act, 1994, are set aside. Service tax paid before issuance of show-cause notice is not challenged by the appellant and hence, the payment of the same is upheld.
11. Appeal is allowed.
(Dictated and pronounced in the open court.)
Sd/ Sd/
(P.K.Choudhary) (V.Padmanabhan)
Member (Judicial) Member (Technical)
mm