2023 (1) TMI 250 - AT - Service Tax

Valuation - mining services - inclusion of diesel and explosives were supplied free of cost, consumed during the mining process, in the assessable value - HELD THAT:- This precise issue came up for consideration before the Supreme Court in Bhayana Builders [2018 (2) TMI 1325 - SUPREME COURT] as the issue before the Supreme Court was also whether the value of goods/material supplied or provided free of cost by a service recipient and used for providing the taxable service of construction or industrial complex is to be included in the computation of gross amount for valuation of the taxable service under section 67 of the Finance Act. The Supreme Court observed that a plain reading of the expression “the gross amount charged by the service provider for such service provided or to be provided by him‟ would lead to the conclusion that the value of goods/material that is provided by the service recipient free of charge is not to be included while arriving at the “gross amount‟ for the reason that no price is charged by the assessee/ service provider from the service recipient in respect of such goods/materials.

It needs to be noticed that the appellant had also placed the decision of the larger bench of the Tribunal in Bhayana Builders [2013 (9) TMI 294 - CESTAT NEW DELHI (LB)] before the Commissioner, which decision, was affirmed by the Supreme Court. The larger bench of the Tribunal had concluded that the value of goods and materials supplied free of cost by a service recipient to the provider of the taxable construction service, being neither monetary or non-monetary consideration, would be outside the taxable value of the “gross amount charged” within the meaning of section 67 of the Finance Act - the decision of the larger bench of the Tribunal in Bhayana Builders and the decision of the Supreme Court in Bhayana Builders are clearly applicable to the facts of the present case inasmuch as the charge in the show cause notice is that the cost of material supplied free of cost should be included in the gross value of the taxable service provided by the appellant.

The Commissioner was not justified in distinguishing the decision of the Larger Bench of the Tribunal in Bhayana Builders for the reason that it related to a different construction service and not mining service. The Commissioner should have followed the law laid down by the Supreme Court.

Appeal allowed.