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2019 (10) TMI 960 - AT - Service TaxValuation - Business Auxiliary services - inclusion of value of such pre-fixed quantum of LNG identified towards “allowed loss and consumption” - inclusion of such value in the assessable value on the ground that such “free of cost” supplies of LNG by the customers should have formed part of the “consideration” received by the Appellant and should be included in the taxable value for payment of service tax. Whether the value of LNG received by the Appellant free of cost is required to be included in the taxable value for the payment of service tax under the head “Business Auxiliary Service”? HELD THAT:- The Supreme Court in COMMISSIONER OF SERVICE TAX ETC. VERSUS M/S. BHAYANA BUILDERS (P) LTD. ETC. [2018 (2) TMI 1325 - SUPREME COURT] examined whether the value of goods/materials supplied or provided “free of cost” by a service recipient and used for providing taxable service is to be included in computation of the gross amount charged by the customer for valuation of taxable service and in this context, both the unamended and the amended provisions of section 67 of the Act, were examined and held that service tax is payable on the gross amount charged which would be the amount billed by the service provider to the service receiver. In view of the aforesaid decision of the Supreme Court in Bhayana Builders, “free of cost” LNG supplied by the customers to the Appellant cannot be included in the value of taxable service - The Principal Commissioner, however, distinguished the aforesaid decision of the Supreme Court by making reference to the observation made by the Larger Bench of Tribunal in M/S BHAYANA BUILDERS (P) LTD. & OTHERS VERSUS CST, DELHI & OTHERS. [2013 (9) TMI 294 - CESTAT NEW DELHI (LB)] that the material supplied “free of cost” was not retained by builder but in the present case the quantity of LNG was retained by Appellant. The learned Authorized Representative of the Department has also emphasized that in this view of the matter, the Appellant would not be justified in placing reliance upon the decision of the Supreme Court in Bhayana Builders. It is not possible to accept the contention of the Department. In the first instance the Department had challenged the decision of the Larger Bench of the Tribunal before the Supreme Court and decision of the Supreme Court in Bhayana Builders does not make any reference to retention or non retention of the material supplied “free of cost”. It also needs to be noted that certain percentage of LNG is lost during regasification process, as is clear from the clause dealing with “allowed loss and consumption”. In any view of the matter, this was not the sole reason given by the Larger Bench as there are specific findings recorded by the Larger Bench in the other paragraphs of the order. Thus, the “allowed loss and consumption” will not form part of the “consideration” for the purpose of levy of service tax - the Commissioner was not justified in confirming the demand of service tax on the value of pre-determined quantum of LNG identified by the parties towards “allowed loss and consumption” since such “free of cost” supplies of LNG by the customers cannot form part of the “consideration” received by the Appellant. The value of such LNG cannot, therefore, be included in the taxable value for payment of service tax. Demand alongwith interest and penalty set aside - appeal allowed - decided in favor of appellant.
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