TMI Blog2013 (9) TMI 294X X X X Extracts X X X X X X X X Extracts X X X X ..... one s own ends; the right of power of using. The word use therefore has multiple connotation and bears different meanings depending upon the context. The word used is therefore per se ambiguous or obscure. Since in its preambular context, the expression gross amount charged (as our analysis has concluded) means an amount charged on the service recipient, received by the provider and accruing to the benefit of the later in relation to the taxable service provided and the Explanation seeks to define gross amount charged, an expression occruing in the preamble, by employing three words to contextualise the definition supplied, provided, used, we are satisfied that application of the noscitur principle could be gainfully employed to identify the legal meaning of the word used from several grammatical/ literal meanings of the said word, by employing the associational context. It is true, as contended by Revenue, that even if one of the literal meanings of the expression used, namely free supplies used is considered as the legal meaning as well, construction service providers may not be handicapped as they may seek benefits under Notification No. 12/2003-ST. In our view however t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der dated 05.04.2013 in ST/629/2008, a Division Bench of this Tribunal, noticing a conflict between decisions of two Division Benches; (a) in Cemex Engineers vs. CST, Cochin (Tri. Bang.) and (b) in Jaihind Projects Ltd. vs. CST, Ahmedabad (Tri. Ahmd.) referred, for the consideration of a Larger Bench the issue: (i) Whether the value of goods/ material supplied or provided free by a service recipient and used for providing the taxable service of construction of commercial or industrial complex, must be included in computation of the gross amount (charged by the service provider), for valuation of the taxable service, under Section 67 of the Finance Act, 1994 (the Act). We notice at the hearing of these appeals however, that the issue specifically is: whether the value of the material supplied by the recipient of the taxable service free of cost (hereinafter, for convenience referred to as free supplies ) should also be included, for availing the benefits under Notification No. 15/2004-ST, dated 10.09.2004 as amended by Notification No. 4/2005-ST dated 01.03.2005. The later Notification added an xplanation to Notification No. 15/2004-ST. 2. For the purposes of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which is not ascertainable, be the amount as may be determined in the prescribed manner. (2) Where the gross amount charged by a service provider, for the service provided or to be provided is inclusive of service tax payable, the value of such taxable service shall be such amount as, with the addition of tax payable, is equal to the gross amount charged. (3) The gross amount charged for the taxable service shall include any amount received towards the taxable service before, during or after provision of such service. (4) Subject to the provisions of sub-sections (1), (2) and (3), the value shall be determined in such manner as may be prescribed. Explanation. For the purposes of this section, (a) consideration includes any amount that is payable for the taxable services provided or to be provided; [(b) * * * ] (c) gross amount charged includes payment by cheque, credit card, deduction from account and any form of payment by issue of credit notes or debit notes and [book adjustment, and any amount credited or debited, as the case may be, to any account, whether called Suspense account or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gent in respect of service provided by him; (v) the rail fare collected by rail travel agent in respect of service provided by him; (vi) the cost of parts or other material, if any, sold to the customer during the course of providing maintenance or repair service; (vii) the cost of parts or other material, if any, sold to the customer during the course of providing erection, commissioning or installation service; and (viii) interest on loans. Explanation 2.- Where the gross amount charged by a service provider is inclusive of service tax payable, the value of taxable service shall be such amount as with the addition of tax payable, is equal to the gross amount charged. Explanation 3.- For the removal of doubts, it is hereby declared that the gross amount charged for the taxable service shall include any amount received towards the taxable service before, during or after provision of such service. (i) in a case where the provision of service is for a consideration in money, be the gross amount charged by the service provider for such service provided or to be provided by him; (ii) in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in respect of taxable service provided by a commercial concern to any person in relation to construction service. This Notification reads: In exercise of the powers conferred by sub-section (1) of section 93 of the Finance Act, 1994 (32 of 1994), the Central Government, being satisfied that it is necessary in the public interest so to do, hereby exempts the taxable service provided by a commercial concern to any person, in relation to construction service, from so much of the service tax leviable thereon under section 66 of the said Act, as is in excess of the service tax calculated on a value which is equivalent to thirty-three per cent. of the gross amount charged from any person by such commercial concern for providing the said taxable service : Provided that this exemption shall not apply in such cases where - (i) the credit of duty paid on inputs or capital goods has been taken under the provisions of the Cenvat Credit Rules, 2004; or (ii) the commercial concern has availed the benefit under the notification of the Government of India, in the Ministry of Finance, (Department of Revenue) No. 12/2003-Service Tax, dated the 20th June, 2003 [G.S.R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ervice for providing such service. The Notification also incorporated a proviso (applicable to all taxable services covered by the Notification) which specified that the exemption notification would not apply where: (a) cenvat credit of duty on inputs and capital goods or cenvat credit of service tax on input services, used for providing such taxable service, has been taken under the provisions of the Cenvat Credit Rules, 2004; or (b) the service provider had availed benefits of Notification No. 12/2003-ST dated 20.06.2003. F. By Notification No. 18/2005-ST dated 07.06.2005, exemption of 67% of the service tax leviable in respect of construction of complex service was granted subject to the conditions specified. Under the proviso to this Notification apart from excluding benefits of exemption where cenvat credit is availed or where the service provider has availed benefits under Notification No. 12/2003-ST, benefit of the exemption was also excluded where the taxable services provided is only completion and finishing services in relation to residential complex, specified in Section 65(30a) (b) of the Act. An explanation to the Notification clarified that the gros ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an abatement of 67% has been provided in case of composite contracts where the gross amount charged includes the value of material cost. (refer Notification No. 15/2004-S.T., dated 10-9-2004). This would, however, be optional subject to the condition that no credit of input goods, capital goods and no benefit (under Notification No. 12/2003-S.T.) of exemption towards cost of goods are availed . (ii) Our attention is also invited to a Board circular dated 16-02-2006. This circular purports to clarify the scope of construction of complexes - a taxable service specified in Section 65(30a) read with Section 65 (105) (zzzh) of the Act. To the extent relevant and material for the purposes of this reference, para 8 of this circular clarifies that in the construction business, different practices and financial arrangements concerning promoters, developers and builders, land owners, contractors and buyers exist; these practices influence the taxable value under the construction of complex services; and therefore in all such situations, the taxable value under section 67 shall be the gross amount charged by the service provider (builder in this case) for such services provided or t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cial or industrial construction) service to State instrumentalities like ONGC, GAIL, IOCL etc. apart from providing services of sand blasting, coating and painting of pipelines to another recipient Essar Projects Limited. Under the agreements with recipients, the appellant was required to supply various materials such as cement, steel, cables valves, etc. The pipes were however, provided by the service recipient. The appellant availed the benefit of Notification No. 15/2004-ST and remitted service tax on 33% of the gross amount charged from the service recipient. Revenue, on the basis of the explanation to Notification No. 15/2004-ST (introduced by Notification No. 4/2005-ST) alleged that the appellant must have included the value of the free supply of material (pipes) provided by the service recipient, to avail the benefits of Notification No. 15/2004-ST. Having suffered an adverse adjudication order the appeal was preferred to this Tribunal. The Tribunal held that even under Section 67 of the Act read with Rule 3 of the Service Tax (Determination of Value) Rules, 2006, the pipes being an essential component and essentially required for providing the pipeline service (though suppl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 1. of the pre-amended provision specified various components that are included in the value of a taxable service; such as the aggregate commission or brokerage charged by a broker on the sale/purchase of securities; the commission received by the travel agent from the airline; the reimbursement received by the authorized service station from the manufacturer for carrying out any service of any motor car, light motor vehicle or two wheeled motor vehicle manufactured by such manufacturer; etc. Explanation 1. also enumerated components which are to be excluded from the value of taxable service, such as an initial deposit made by the subscriber while applying for telephone a connection; or pager or facsimile; the cost of unexposed photography film or unrecorded magnetic tape; the cost of parts or accessories or consumables such as lubricants and coolants, if any sold to the customer during the course of service or repair of motor cars; air fare or rail fare collected by an air/ rail the travel agent in respect of service provided; the cost of parts or other materials, if any sold to the customer during the course of providing maintenance or repair services, etc. (ii) After t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble services and intends to define what constitutes the value received by the service provider as consideration from the service recipient for the service provided. Implicit in this legislative architecture is the concept that any consideration whether monetary or otherwise should have flown or should flow from the service recipient to the service provider and should accrue to the benefit of the later. Free supplies , incorporated into construction (cement or steel for instance), even on an extravagant inference, would not constitute a non-monetary consideration remitted by the service recipient to the service provider for providing a service, particularly since no part of the goods and materials so supplied accrues to or is retained by the service provider. Wherever a monetary consideration is charged for providing the taxable service and no non-monetary consideration forms part of the agreement between the parties, it is clause (i) that applies and the value of the taxable service would in such case be the gross amount charged by the service provider and paid by the service recipient. (vi) In Intercontinental Consultants and Technocrats Pvt. Ltd. Vs. Union of India , t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or the nonce and outside the purview of either the substantive appeals or the issue referred to us. In this view of the matter it is not necessary to consider the contention on behalf of the assessees that an interpretation that Section 67 of the Act enables or mandates inclusion of the value of goods and materials incorporated into construction services (whether provided by the service provider or as a free supplies by the service recipient) would render the legislative provision unconstitutional, since value of the goods incorporated being sale of goods would be liable to sales tax, an area within the legislative competence of State, the value of goods sold would thus be beyond the legislative competence of Parliament for levy of tax on such sale; consequently could not also constitute the value of taxable services. Ld. Counsel placed reliance on the judgment in M/s Gannon Dunkerley and Co. and Others vs. State of Rajasthan and Others ; and State of Andhra Pradesh and Others vs. Larsen Toubro Limited and Others , to buttress this contention. (viii) Since Section 67 of the Act, as currently structured does not, in our view require inclusion of free supplies in the gross ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... her. Rejecting this contention the Court held that levy in this country has the status of a constitutional concept and the point of collection is located where the statute declares it will be and the legislature is free to adopt any standard for determining the value. Further, in Union of India vs. Nitdip Textile Processors Pvt. Ltd. the Court ruled that advantages or disadvantages to individual assessees are accidental, inevitable and inherent in every taxing Statute. The relevant observations are: Advantages or disadvantages to individual assessees are accidental and inevitable and are inherent in every taxing Statute as it has to draw a line somewhere and some cases necessarily fall on the other side of the line. The point is illustrated by two decisions of this Court. In Khandige Sham Bhat vs. Agricultural Income tax Officer, Kasaragod and Anr. (AIR 1963 SC 591). Tranvancore Cochin Agricultural Income Tax Act was extended to Malabar area on November 01, 1956 after formation of the State of Kerala. Prior to that date, there was no agricultural income tax in that area. The challenge under Article 14 was that the income of the petitioner was from areca nut and pepper ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction 3 and not with Section 3-F of the 1948 Act. Section 3 inter alia provides that every dealer shall for each assessment year pay a tax at the rates provided under Section 3-A, Section 3-D or Section 3-H on his turnover of sales or purchases or both, as the case may be. which shall be determined in such manner as may be prescribed. Section 3-F provides for tax on transfer of right to use any goods or goods involved in execution of works contract. The definition of sale in Section 2(h) is in two parts. The first part covers the normal sale and the second part covers deemed sales. In the present case, we are concerned with sale of auto components to the buyer. It is a normal sale. The aggregate amount for which these auto parts/components are sold constitutes the turnover relating to such sales within the meaning of turnover in Section 2(i). Therefore, it is on such turnover that liability of tax under Section 3 of the 1948 Act has to be determined. Therefore, sales-tax or trade-tax under the 1948 Act is leviable on sale, whether actual or deemed, and for every sale there has to be a consideration. On the other hand, excise duty is a levy on a taxable event of manufacture and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... T Legislation, as providing generic guidance for identifying consideration which is liable to be taxed. This GSTR also explains the concept, of when non-monetary consideration would be taxable for levy of tax. In the area of non-monetary consideration, GSTR emphasises that the definition of a taxable supply requires, among other things that a supply is made for consideration. Thus, there must be a supply; a payment; and the necessary nexus between the supply and the payment. Thus, where one party makes monetary payment to another, something of economic value is provided to the other. Para 90 GSTR sets out illustrations, of circumstances where the recipient of a supply may provide or make a thing available to the supplier for use in making the supply and states that the thing (made available for use) does not necessarily forms the consideration. Thus, where A agrees to supply services to B at a specified rate per hour at B s premises and B agrees to allow A use of its computer facilities, stationery and safety equipment to perform the services and also agrees to transport A to B s location and to provide accommodation and boarding during the period of A s performance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 203-ST, towards cost of goods; (iv) In case of works contract under a scheme there under the option of discharging the service liability at a very low rate on the gross amount of the works contract is provided, without deduction of the value of goods or any abatement; (v) The Explanation to Notification No. 15/2004-ST (added by Notification No. 4/2005-ST) enjoins that where an assessee opts for benefits of abatement of 67%, he must include the value of all the goods incorporated for the purpose of the contract, without availing cenvat credit of inputs or capital goods or the benefits of exclusion of the goods sold; (vi) The word used in the Explanation clearly means that irrespective of the source of supplies, if some material or goods were used in the construction service, the value of such goods must also be included, for availing abatement benefits under Notification No. 15/2004-ST; (vii) Even under Section 67 of the Act the value of goods whether supplied or provided by the provider or used for providing the taxable service though as free supplies by the recipient, constitute the gross amount charged for providing the taxable service; ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... N. M. Goel Co. (supra) the facts were that though iron, steel and cement were supplied by PWD to the assessee these supplies were not free of cost but were to be deducted from the bills payable by PWD to the assessee. There was thus a sale of these materials by PWD to the assessee and the ownership of these materials passed to the assessee, though these materials were later incorporated in the construction for the benefit of PWD. In case of free supplies, which is the issue before us, the agreements between the parties do not provide for recovering the cost of the free supplies by the service recipient from the service providers i.e. recoveries from the consideration agreed between the parties, to be paid to the service provider. C. Revenue places reliance on the judgment of the Supreme Court in Bharat Sanchar Nigam Limited vs. Union of India and the decision of this Tribunal in Naresh Kumar Co. Pvt. Ltd. vs. Commr. of Service Tax, Kolkata to contend that where there is a nexus between the expenses incurred and the service provided, the value of such expenditure should also be included in the value of the service. These judgments, in our considered view do not assist ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... service. The expression gross amount charged (defined in the Explanation) occurs in the preamble to Notification No.15/2004-ST, whereby exemption is provided (in respect of the taxable service provided by a commercial concern to any person in relation to construction service), to the extent of 67% of the service tax leviable under section 66 of the Act, as is in excess of the service tax calculated on the gross amount charged by the service provider from the service recipient for providing the taxable service. (ii) On a literal construction of the expression used in the Explanation , considered in isolation, it is perhaps legitimate to infer that gross amount charged include the value of goods and materials supplied or the value of goods and materials provided or the value of goods and materials used by the provider of construction service, for providing the said service. On the literal construction of the expression used , in the case goods and materials used (in the construction) for providing the service, the gross amount charged would include value of goods and materials used, irrespective of whether goods and materials belong to or are procured by the service p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on does not commend acceptance. The several exemption Notifications including 12/2003-ST; 15/2004-ST, 04/2005-ST, 18/2005-ST, 19/2005-ST and 01/2006-ST, are exemptions provided in exercise of powers under section 93 (1) of the Act, a provision which authorizes grant of exemption, generally or subject to conditions as may be specified, from the whole or any part of service tax leviable on a taxable service. In incorporating conditions for grant of exemption, the Government is therefore at liberty to define, for example, what components should comprise the gross value charged for providing a taxable service. Mere enlargement of the contours of gross amount charged in a condition incorporated in an exemption Notification would not amount to bringing to the tax net a value which is not taxable under Section 67 of the Act. Such a condition would normally indicate that the specified exemption is granted subject to a condition which requires a wider incorporation into the value of the taxable service, for the limited purpose of computing the extent of exemption. A condition expanding the scope of gross taxable value for the limited purpose of granting exemption would therefore only me ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... used in the Explanation to Notification No.15/2004-ST is the problematic. It is preceded by two other expressions supply and provided , the three expressions interspersed by the disjunctive or . The expression used would bear a particular meaning on its literal construction but becomes plurilisignative in the society of the two other expressions. This potential for multiple meanings of the expression used , has triggered the forensic effort of assessees counsel, inviting us to apply the noscitur principle. This principle is part of linguistic cannons of construction which govern elaboration of the meaning of individual words and phrases by drawing certain inferences. Noscitur is the genius of a family of principles embedded in well-known latin maxims. The general principle of construction is that an Act or other legislative instrument is to be read as a whole, so that the enactment within it is not treated as standing alone but is interpreted in its context, as part of the instrument. The noscitur principle posits that a statutory term is recognised by its associated words i.e. in an associational context, whereby the word or phrase is not construed as if stood alone bu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y under Notification No.25/84-CE. A proviso to the said Notification excluded the benefit of concessional rate of duty under the said Notification to enumerated categories of paper. These were: cigarette tissue, glassine paper, grease proof paper, coated paper (including waxed paper). The assessee was manufacturing art paper and chromo paper. These two types of papers admittedly fall under the category of printing and writing paper as also under the description of coated paper . Since these two types were coated papers , Revenue concluded that they were not entitled to the concessional rate of duty under the Notification. Allowing the appeal of the assessee, the Supreme Court applied the noscitur principle to conclude that the expression coated paper must be considered as analogous to other types of papers which are excluded the benefit of concessional rate of duty and so construed, the exclusion would be applicable only to coated paper used for industrial purposes and not to coated varieties of printing and writing paper. Analyses and application by the Supreme Court of the noscitur principle provides guidance on the application of the principle. We quote: .... ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f a concession to a group proceeds on the basis of some aspect or feature common to all items in the group. If such a principle can be conceived of which would rationalise the inclusion of all the items, it would be quite reasonable and proper to give effect to a construction of the notification as will accord with that principle. It is this which the appellant has attempted to do and we are inclined to think that the ratiocination of the exceptions suggested, far from being artificial or far-fetched, is a plausible and likely one that the Government could have had in mind and that it should be accepted. The maxim of noscitur a sociis has been described by Diplock, J. as a treacherous one unless one knows the societas to which the socii belong (vide : Letang v. Coopex, 1965-1 Q.B. 232). The learned Solicitor General also warns that one should not be carried away by labels and Latin maxims when the word to be interpreted is clear and has a wide meaning. We entirely agree that these maxims and precedents are not to be mechanically applied; they are of assistance only in so far as they furnish guidance by compendiously summing up principles based on rules of common sen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ry . Entry 16 of Schedule A of the Punjab General Sales Tax Act, 1948 during the relevant period read cosmetics, perfumery and toilet goods, excluding tooth paste, tooth powder, kumkum and soaps . The said entry was bifurcated into entries 16 and 16A by a subsequent Notification No. 289/79. The issue was whether Dhoop and Aggarbatti were covered under perfumery in entry No.16 (prior to its bifurcation, since the transaction was entered into before the entry was bifurcated). Allowing the assessee s appeal, Supreme Court applied the noscitur principle to hold that perfumery , in the context in which the word is used has no application to Dhoop and Aggarbatti . The Supreme Court explained: 9.Entries in the Schedules of Sales tax and Excise statutes list some articles separately and some articles are grouped together. When they are grouped together, each word in the Entry draws colour from the other words therein. This is the principle of noscitur a sociis. 10.We are in no doubt whatever that the word perfumery in the said Entry No. 16 draws colour from the words `cosmetics and `toilet goods therein and that, so read, the word `perfumery in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on could not be construed as expanding the scope of gross amount charged in the preamble to the Notification, is the contention. (xiv) The appellants placed reliance for the above proposition on Bihta Cooperative Development Cane Marketing Union Ltd. vs. Bank of Bihar Others . The core issue in Bihta was whether Explanation (1) to Section 48(1) of the Bihar and Orissa Cooperative Societies Act, 1935 ousts the jurisdiction of the Civil Court in respect of disputes other than those covered by Clauses (a) to (e) of Section 48(1). Allowing the appeal, the Supreme Court observed that the word non-member was not found in the Explanation to the Section before the 1948 amendment of the Act; that Clause (e) was added to Section 48 (1) by the 1948 amendment; that by the addition of Clause (e), a dispute between the financing bank authorised under the provisions of Section 16(1) and a person who is not a member of a registered society could also be referred to the Registrar; and that Explanation (1) cannot be considered as enlarging the scope of the main Section 48(1), so as to make all kinds of disputes between a registered society and a non-member cognisable by the Registrar a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The principle in Bihta Co-operative was applied again in M/s Oblum Electrical Industries Pvt. Ltd. Hyderabad vs. Collector of Customs, Bombay . In this case the issue was whether customs duty exemption could be claimed on imported crystal beams. Explanation (viii) to Notification No. 116/88-Cus dated 30.03.1988 as defined materials as meaning goods which are raw material, components, intermediate products or consumables used in the manufacture of the resultant products and their packings or mandatory spares to be exported in the resultant products. Imported crystal beams were actually used in kilns for manufacture of porcelain insulators. Allowing the assessee s appeal, the Court observed that in trying to explain the language used in an exemption Notification, one must keep in mind (a) the object and purpose of the exemption; and (b) the nature of the actual process involved in the manufacture of the commodity in relation to which exemption is granted. The principle and its application to interpretation of the relevant part of the Explanation, is set out in paras 12 and 13 of the judgment, which read: 12. It is true that in Clause (viii) of the Explanation to the N ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nible in the Act is against such a conclusion. It must be borne in mind that the legislative intent is presumed to run uniformly through the entire conspectus of provisions pertaining to each head of income. No doubt there is a qualitative difference between the charging provision and a computation provision. And ordinarily the operation of the charging provision cannot be affected by the construction of a particular computation provision. But the question here is whether it is possible to apply the computation provision at all if a certain interpretation is pressed on the charging provision. That pertains to the fundamental integrality of the statutory scheme provided for each head . The Supreme Court also observed that none of the provisions pertaining to the head Capital gains suggest that they include an asset in the acquisition of which no cost at all can be conceived. (xvii) Ld. Counsel also refers to the observations in Govind Saran Ganga Saran vs. Commissioner of Sales Tax . The observation of the Court to which our attention is drawn are set out in paragraph 6 where the Court explain the components which enter into the concept of a tax. The Court p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f exemption under the said Notification would nugatory. (xix) Shri Mittal, for the assessees would rely on the judgment in Associated Cement Companies Ltd. vs. State of Bihar and Others . The issue was whether the assessee was entitled to avail reduction of sales tax liability to the extent of entry tax paid, though it was granted exemption from sales tax on additional/ incremental production. The exemption Notification provided for reduction of the liability of an importer of cement to sales tax on sale of such cement, to the extent of entry tax paid by him. The assessee imported cement by paying the tax but was granted exemption from Sales Tax Act on the additional / incremental production of cement, under a scheme. In these circumstances, allowing the assessee s appeal, the Supreme Court observed that the question of exemption arises only when there is a liability and that exigibility to tax is not the same as the liability to pay tax; that the former depends on the charge created by the Statute, the latter on computation in accordance with the provisions of the Statute and the Rules framed there under if any; and that liability to pay tax and the actual payment of tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... supplies used is considered as the legal meaning as well, construction service providers may not be handicapped as they may seek benefits under Notification No. 12/2003-ST. In our view however the fact that the assessee have an alternative recourse to avoiding the rigour cannot be the criterion for interpreting the Explanation. This contention by Revenue proceeds on a fallacious comprehension of Notification No. 12/2003-ST. The benefits under this Notification are only in respect of the value of goods and materials sold by a service provider to the recipient of a taxable service. In the case of free supplies by the recipient there is no sale or transfer of title in the goods and materials in favour of the service provider, at any point of time. Therefore when free supplied goods and materials are incorporated into the construction would be no sale by the provider to the recipient either. Notification No. 12/2003-ST would therefore be inapplicable. 13. In any event, provisions of the Explanation must be interpreted and the true meaning of the problematic expressions therein ascertained, independent of a cost - benefit analysis. 14. Board Circular dated 16.02.2006 (a circular ..... X X X X Extracts X X X X X X X X Extracts X X X X
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