TMI Blog2016 (10) TMI 1248X X X X Extracts X X X X X X X X Extracts X X X X ..... service recipient to the construction contractor of the service provider, the value of such goods shall be excluded from the gross amount in terms of explanation to Item No. 7 of the Notification 1 of 2006. Petition allowed - decided in favor of petitioner. - W.P. (C) 3048/2008 - - - Dated:- 17-10-2016 - MR S. RAVINDRA BHAT AND MS. DEEPA SHARMA, JJ. For The Petitioner : Mr. Manoj K. Singh, Advocate alongwith Mr. Vijaya Singh, Advocate For The Respondents : None ORDER The issue for consideration is whether the explanation to Item No. 7 in Notification no. 1 of 2006, issued by the respondent i.e. the sales tax department is enforceable in law in so far as it directs the inclusion of the value of free supplies used by a contractor in construction activity. Construction activity was included as a taxable service with its introduction of Section 65 (105) (zzq). Section 66 of the Finance Act, 1994 (the enactment having imposed the service tax levying in the first instance) alludes to rules and notifications issued from time to time as providing mechanism for the enforcement of the levy, its collection etc. In furtherance of its statutory mandate, the resp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... person to any other person in relation to commercial or industrial construction service. In the case of Advertising Club Vs. Central Board of Excise and customs 2001 (131) ELT 35 (Mad) it was held that tax is levied on service provided to a client by advertising agency in relation to advertisement and is not a tax on advertisement. So also the tax in the case at hand is on the services provided in relation to commercial or industrial construction i.e. the act of construction and the levy is, thus not a tax on constructed property. The petitioners rely upon the Division Bench ruling of this court in Intercontinental Consultants Technorats (P.) Ltd vs. Union of India, (2013) 19 GSTR 462 (DEL) and a larger bench ruling of the Customs Excise and Service Tax Appellate Tribunal (CESTAT) reported as Bhayana Builders (P) Ltd. vs. Commissioner of Service Tax, Delhi (2014) 69 VST 18 (CESTAT-New Delhi) . This court has in Intercontinental Consultants (supra), held as invalid the provisions of Rule 5(1) of the Service Tax Rules 2006 as then passed. The conclusions of the court were that the concept of taxable service in the context of taxable turnover would include the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd the charging provisions and cannot be upheld. It is no answer to say that under sub-section (4) of Section 94 of the Act, every rule framed by the Central Government shall be laid before each House of Parliament and that the House has the power to modify the rule. As pointed out by the Supreme Court in Hukam Chand v. Union of India, AIR 1972 SC 2427: - The fact that the rules framed under the Act have to be laid before each House of Parliament would not confer validity on a rule if it is made not in conformity with Section 40 of the Act. Thus Section 94 (4) does not add any greater force to the Rules than what they ordinarily have as species of subordinate legislation. In Bhayana Builder (supra), the Tribunal was seized of the question which this court is called upon to consider in the present case i.e. whether the value of goods supplied by the principle to a contractor under the agreement, the value of free goods can be included in service tax turnover. The CESTAT noticed in Intercontinental Consultants and thereof in its ratio held as follows:- ( vi) In Intercontinental Consultants and Technocrats Pvt. Ltd. v. Union of India [2013] 59 VST 487 (D ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce provided for levy of tax; and within its legislative competence, is an aspect that is speculative for 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. Learned counsel placed reliance on the judgment in Gannon Dunkerley Co. v. State of Rajasthan [1993] 88 STC 204 (SC); [1993] 1 SCC 364 and State of Andhra Pradesh v. Larsen Toubro Ltd. [2008] 17 VST 1 (SC); [2008] 9 SCC 191, to buttress this contention. ( v ..... X X X X Extracts X X X X X X X X Extracts X X X X
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