when abatement is claimed, it should be from value inclusive of all materials used for providing service: CESTAT

THE applicant is engaged in construction of commercial and residential complexes. While executing such projects, applicant was receiving steel and cement from their customers. The applicant was receiving only the value of services undertaken by them. They claimed abatement under notification 15/04-ST and 1/06-ST and paid service tax on 33% of consideration received. Revenue was of the view that such abatement is available only if value of the entire materials
used is included in the gross amount. Based on such argument, two show cause notices were issued for the periods 16/6/05 to 31/3/08 and 1/4/09 to 31/3/10. On adjudication, amounts of Rs.4,56,466/- and Rs.5,59,897/- are confirmed respectively in respect of the said SCNs along with interest and penalties.

The counsel for applicant submits that material given by their customers cannot, form part of the value of consideration received by the applicants. He submits that this issue was before the Hon. Madras High Court in the case of L&T Ltd. Vs UOI - 2007-TIOL-176-HC-MAD-ST wherein the Hon'ble Madras High Court prima facie took a view that value of materials supplied by the service recipient cannot be added in the total taxable value and on this count granted waiver of pre-deposit.

The Tribunal observed,

Since the matter has been considered by the Tribunal in two appeals and this Tribunal has taken a view that when abatement is claimed, it should be from value inclusive of all the materials used for providing the service. In the case of invoking extended period, we prima facie accept the contention of the counsel of the applicant. Considering the various aspects, we find it proper to call for a reasonable pre-deposit at this stage.