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Learn MoreFacts:
The appellant entered into two contracts with its customer on 24-08-2007. One of the contracts was for supply of equipment and materials (supply contract) and the other one was for the construction/erection/ installation of the plant (construction contract). In addition, the customer also procured imported equipment and materials which were also supplied to the appellant. The department contended that as per Rule 3(1) of the Works Contract (the Composition Scheme for payment of Service Tax) Rules 2007 gross amount for the purpose of payment of Service Tax should include the value of the cost of free supplied material and accordingly service tax demand was issued on the value of free supplied material.
Held:
The Tribunal relying on the clarification issued by the CBEC Circular No. 150/1/2012-ST dated 08-02-2012 held that Rule 3(1) of the Works Contract Rules, 2007 was applicable to contracts entered after 07-07-2009 and not to ongoing contracts and accordingly held that service tax would not be applicable on the value of the free supplied material.