No provision for inclusion of value of scrap as additional consideration

1. Briefly, the appellant are registered under the category of “Commer­cial and Industrial Construction Service”. A show cause notice was issued to them on two accounts, namely, (i) that they had received goods and material like steel, cement, etc., free of cost from their customers, which were used by them and their value was not included in the asses sable value. Service tax of Rs. 4,61,04,93 was demanded on this basis, (ii) that they had sold scrap amounting to Rs. 17.10 lacs which was generated during the course of providing taxable ser­vice. The sale of such scrap being an additional consideration received in relation to providing taxable service was to be added to the taxable value as per Service Tax (Determination of Value) Rules, 2006 and the noticee was required to pay service tax of Rs. 1,76,130.

2. Heard the parties and perused the records.

3.1 On the first issue, examination of records shows that the adjudicat­ing authority has confirmed demand of service tax liability, interest thereof and imposed penalties on the appellant under the category of “Commercial and In­dustrial Construction Service”. The adjudicating authority has held that the ap­pellant is liable to pay service tax on an amount which represents the free supply of cement, steel, etc., by the service recipient to the appellant. We agree with the learned Counsel’s submission that the issue is no more res Integra as the judgment of Larger Bench of this Tribunal in the case of Bhayana Builders (P) Ltd. v. CCE 2013 (32) S.T.R. 49 (Tri.-LB) is directly applicable to the issue and is in favor of the assessee. Accordingly, respectfully following the said decision of the Larger Bench, we hold that the impugned order is unsustainable and liable to set aside.

3.2 On the second issue, the demand is sought to be justified as addi­tional consideration for service provided in terms of Service Tax (Determination of Value) Rules, 2006. We find that sale of scrap, whose nature is not defined in show cause notice, cannot be said to be consideration for the taxable services provided or to be provided. There is no provision in Service Tax Rules for inclu­sion of value of scrap as an additional consideration; only the amounts received towards taxable services are leviable to service tax. The case of M/s. Jay Engineer­ing Works Ltd. Vs. C.C.E., Hyderabad 1997 (93) E.L.T. 492 relied on by the Commis­sioner pertains to Central Excise and the Commissioner has clearly erred in con­cluding that its ratio decidendi is applicable to the instant issue. In the absence of any legal provision to include value of sale of scrap in the asses sable value for service tax purposes, the same is liable to be set aside.