TMI Blog2018 (12) TMI 875X X X X Extracts X X X X X X X X Extracts X X X X ..... tomers to the service provider on FOC basis is not includable in the taxable value of the service - demand set aside. Levy of equal penalty - Held that:- The appellants are big players in the field of construction. They cannot claim themselves to be at par with common man with average intelligence as claimed - appellant have not made any case to show the absence of mala fide intention - penalty imposed is restricted to 25% i.e. ₹ 8,19,008/-. Appeal allowed in part. - ST/801/2012-DB - Final Order No. 21911/2018 - Dated:- 17-12-2018 - SHRI S.S GARG, JUDICIAL MEMBER And SHRI P. ANJANI KUMAR, TECHNICAL MEMBER S/Shri Shailendra Sukhailendra and Abhishek Agarwal, CAs For the Appellant Dr. J. Harish, Dy. Commissioner (AR) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appellant submitted that they have taken up the construction of M/s. Keppel Purvankara for the clients and availed the benefit of service tax Notification No.1/2006-ST dated 1.3.2006; audit was conducted for the periods April 2006 August 2007 and September 2007 to March 2010. As regards the supply of ready-mix concrete to SAP Lab, the appellants accepted the audit point and have discharged the liability along with interest before issuance of show-cause notice. He submitted that learned Commissioner has confirmed the service tax on the includability of items supplied free of cost giving the following observations. Section 67 of the Finance Act provides that value of any taxable service shall be gross amount charged by the service provi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... interest well before the issuance of show-cause notice. There was no mala fide intention on the part of the appellant to evade the said tax and therefore, imposition of penalty was not warranted. Further, in terms of Section 80 of the Finance Act, as it existed during the relevant period, no penalty can be levied if the assessee proves that there was a reasonable cause for non-payment of service tax. Reasonable cause has been defined to be reasonably said to be a cause which prevents a man of average intelligence and ordinary prudence acting under normal circumstances, without negligence or inaction or want of bona fides as held in Azadi Bachao Andolan vs. UOI: 2001 (116) Taxmann 249/252-ITR 47. He submitted that no penalty be levied ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... service tax becomes payable but the amount charged has to be necessarily a consideration for the service provided which is taxable under the Act. By using the words for such service provided the Act has provided for a nexus between the amount charged and the service provided. Therefore, any amount charged which has no nexus with the taxable service and is not a consideration for the service provided does not become part of the value which is taxable under Section 67. The cost of free supply goods provided by the service recipient to the service provider is neither an amount charged by the service provider nor can it be regarded as a consideration for the service provided by the service provider. In fact, it has no nexus whatsoever with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is charged (and it could not be) by the service provider in respect of goods or materials which are supplied by the service recipient. It also makes it clear that valuation of gross amount has a causal connection with the amount that is charged by the service provider as that becomes the element of taxable service . Thirdly, even when the explanation was added vide notification dated March 1, 2005, it only explained that the gross amount charged shall include the value of goods and materials supplied or provided or used by the provider of construction service. Thus, though it took care of the value of goods and materials supplied by the service provider/assessee by including value of such goods and materials for the purpose of arriving at ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the field of construction. They cannot claim themselves to be at par with common man with average intelligence as claimed. Therefore, we find that they have not made any case to show the absence of mala fide intention. We find that they are liable to pay penalty equal to duty sought to be avoided/evaded. However, we find that learned Commissioner has given an option to pay 25% of the penalty if duty along with interest is paid within 30 days of receipt of the order. The appellants having paid service tax before the issuance of show-cause notice are well within their right to exercise the option given the learned Commissioner. Therefore, we restrict the penalty imposed on this count to 25% i.e. ₹ 8,19,008/-. 5. In view of the above, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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