By Puloma Dalal, Jayesh Gogri, Chartered Accountants
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Free supplied materials includible in the valuation of taxable services vide Circular No. 80/10/2004- ST dated 17-09-2004 read with Notification No. 15/2004-ST dated 10-09-2004.
Facts:
The appellant did not include the value of free supplied materials in the gross amount of taxable services and claimed abatement under commercial or industrial construction vide Notification No. 15/2004-ST dated 10-09-2004. The appellant further did not pay service tax on advances received and also availed the benefit of CENVAT credit.
The department contended that in view of the said notification read with Circular No. 80/10/2004-ST dated 17-09-2004, tax was to be levied on value addition and thus free supplies would be included in the valuation of taxable services. Further, service tax on advance received should also have been paid and CENVAT disallowed.
Held:
The Hon. Tribunal dismissing the appeal in totality held as below:
• The adjudicating authority rightly decided the issue against the appellant with respect to free supplied materials following the taxation of incremental value principle and thus, liable to tax.
• The consideration received before, during and after providing taxable services is leviable to service tax and thus, advance was also liable to tax.
• Since there was no taxability, admissibility of CENVAT credit did not arise.
• Section 73 of the Finance Act, 1994 was rightly invoked since the appellants did not claim abatement in accordance with law.
