TMI BlogDecision on Works Contract Service in case of M/s. Bhayana Builders (P) Ltd.X X X X Extracts X X X X X X X X Extracts X X X X ..... Decision on Works Contract Service in case of M/s. Bhayana Builders (P) Ltd. - By: - Ganeshan Kalyani - Service Tax - Dated:- 11-2-2016 - - Works contract service is a complex subject for discussion whether it may be for valuation of service in the contract price or for computing value added tax in the consideration. This complication manifolds while determining whether free supplies should form part of gross amount or not when there is free supplies from service receiver to service provider. The CESTAT, New Delhi in case of M/s. Bhayana Builders (P) Ltd. and Others Vs. CST, Delhi [ 2013 (9) TMI 294 - CESTAT NEW DELHI (LB) ] and others have dealt with whether value of goods/material supplied or provided free by a service recipient ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and used for providing taxable service of construction of commercial or industrial complex must be included in computation of gross amount for valuation of taxable service under section 67 of the Act and that whether value of material supplied by recipient of taxable service free of cost (free supplies) should also be included for availing benefits under Notification No. 15/2004-ST, dated 10.09.2004 as amended by Notification No. 4/2005-ST dated 01.03.2005 ? As per section 67 of Act which deal with valuation of taxable services defines that any consideration whether monetary or otherwise should have flown or should flow from service recipient to service provider and should accrue to benefit of later. The value of free supplies ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by services recipient to service provider does not constitute a non-monetary consideration nor does it form part of gross amount charged for services provided. In fact, section 67 of Act , as currently structured does not; require inclusion of free supplies in gross value charged, for computation of value of taxable services. The Hon ble CESTAT held that Goods and materials, supplied/provided/used by service provider for incorporation in construction, which belong to provider and for which service recipient is charged towards value of such supply/provision/use and corresponding value whereof was received by service provider, to accrue to his benefit, whether independently specified as attributable to specific material/goods incorpora ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted or otherwise, would alone constitute gross amount charged. Value of goods and materials supplied free of cost by a service recipient to provider of taxable construction service, being neither monetary or non-monetary consideration paid by or flowing from service recipient, accruing to benefit of service provider, would be outside taxable value or gross amount charged, within meaning in section 67 of Act . And, mere enlargement of contours of gross amount charged in a condition incorporated in an exemption Notification would not amount to bringing to tax net a value which is not taxable under section 67 of Act . And therefore free s Therefore the value of free supplies by service recipient to service provider do not comprise g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ross amount charged under Notification No. 15/2004-ST, including Explanation thereto as introduced by Notification No. 4/2005-ST. Though this judgment is favorable to assessees but the fact is litigation cannot be ruled out. (The above article is authored by Ganeshan Kalyani and he can be reached via email on gganeshan.k@gmail.com ) - Reply By KASTURI SETHI as = Sh.Ganeshan Kalyani Ji, Your observation is absolutely correct. The issue is prone to litigation. The department has filed Civil Appeal against the Larger Bench decision of CESTAT, New Delhi with the Supreme Court and Hon'ble Supreme Court has admitted it on 15.1.15 as reported [Commissioner v. ATR Constructions Pvt. Ltd. - 2015 (39) S.T.R. J30 (S.C. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... )] Being valuation issue C.A. filed direct with the Apex Court. Valuation (Service Tax) - Construction of Commercial/Industrial Complex service - Value of free supplies made by service recipient whether includible in gross amount charged by service provider? The Supreme Court Bench comprising Hon ble Mr. Justice Anil R. Dave and Hon ble Mr. Justice R.K. Agrawal on 27-1-2015 after condoning the delay admitted the Civil Appeal No. 7370 of 2014 with C.A. No. D 10620 of 2014, C.A. Nos. 8148-8149 of 2014, C.A. No. 10027 of 2014, C.A. No. 45 of 2015, C.A. No. D 40851 of 2014 and C.A. No. 1400 of 2015 (D. No. 41292 of 2014). C.A. No. 7370 of 2014 filed by Commissioner of Central Excise, Ghaziabad against the CESTAT Final Order No. S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... T/A/50989/2014-CU(DB), dated 10-3-2014 as reported in 2014 (35) S.T.R. 92 (Tri. Del.) (ATR Constructions Pvt. Ltd. v. Commissioner) . C.A. Nos. 1335-1358 of 2015 (C.A.D. No. 10620 of 2014 filed by Commissioner of Service Tax against CESTAT interim Order Nos. ST/394-417/2013-Cus.(DB), dated 6-9-2013 as reported in 2013 (32) S.T.R. 49 (Tri.-LB.) [ Bhayana Builders (P) Ltd. v. Commissioner] . While admitting the appeals, the Supreme Court passed the following order : Delay condoned. Admit. Tag with C.A. Diary No. 14475 of 2014. Pleadings may be completed in the meantime. The Appellate Tribunal in its impugned order had followed the Larger Bench decision in Bhayana Builders case [2013 (32) S.T. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... R. 49 (Tri.-LB.)] and held that the value of goods/materials supplied free by the service recipient for providing services was not includible in the gross amount charged by the service provider under Section 67 of the Finance Act, 1994 read with Notification No. 1/2006-S.T. Dated: 12-2-2016 Reply By Ganeshan Kalyani as = Thanks for sharing the development in the relevant case. Thanks for liking my article. Thanks. Dated: 12-2-2016 Reply By Ganeshan Kalyani as = Sir, I guess the verdict is yet to be pronounced in the M/s. Bhayana Builders case on issue whether free issue of material. Thanks. Dated: 5-4-2016 Reply By Ramesh Ramsinghaney as = Dear Sirs Will you kindly help me understand the current status of Bhayana Builders ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Case in th Supreme Court. Further, if you can send copy of the CESTAT order in favour of Bhayan Builders it will be a great help Best Regards Ramesh Ramsinghaney Chandigarh Dated: 7-1-2017 - Scholarly articles for knowledge sharing authors experts professionals Tax Management India - taxmanagementindia - taxmanagement - taxmanagementindia.com - TMI - TaxTMI - TMITax ..... X X X X Extracts X X X X X X X X Extracts X X X X
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