By Puloma Dalal, Jayesh Gogri, Mandar Telang Chartered Accountants
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Service Tax- Service portion in works contract –liable to service tax prior to 01-06-2007- abatement cannot be denied merely because value of free supplies are not included in the gross value of services.
Facts:
Assessee received work order for the work of Engineering Procurement & Construction of Civil Structural and Architectural Work of Main Power Plant wherein the steel required for construction was supplied to it free of cost by service receiver and remaining material such as cement, sand aggregates, bricks, etc. and equipment, tools, spares, etc. were procured by the assessee and used in the said construction work. Department demanded service tax on full value and denied abatement of 67 % on the ground that value of free supplies was not included in the value of services. The assessee contended that activities were not liable to tax prior to 01-06-2007 and that if services are taxable then, the benefit of abatement cannot be denied.
Held:
It was held that the classification of service has to be determined as per definition of the taxable service applicable for the relevant period and merely because the classification changes with the introduction of a taxable service under which an existing service gets more specifically covered, it no way means that the said service was not taxable during the period prior thereto. However, as regards entitlement of abatement, relying upon the law laid down by Bhayana Builders (P.) Ltd. vs. CST [2013] 38 taxmann.com 221 (New Delhi – CESTAT), it was held, the denial of abatement on the grounds of non-inclusion of free supplies in the gross amount is unsustainable in law.
