Land Value Exclusion in Works Contract Service: CESTAT allows Cross-Objection of Taxpayer [Read Order]

In a significant ruling, the Customs, Excise & Service Tax Appellate Tribunal ( CESTAT ), Ahmedabad Bench held that the value of land is not includible in the gross amount charged for works contract services, while determining the service tax liability.

The CESTAT set aside a service tax demand of Rs. 3,36,748/- while allowing a cross-objection filed by Shree Siddhi Infrabuild Pvt Ltd against the Commissioner of CGST & Central Excise.

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The CESTAT set aside the service tax demand along with interest and penalty, holding that the demand was barred by limitation and the value of land was not includible in the taxable value of works contract services.

The CESTAT clarified that service tax demand on the value of land in works contract services is not sustainable, either on merit or on the ground of limitation, as the assessee had disclosed all relevant details in their ST-3 return.

The Appellant,Commissioner of CGST & Central Excise was represented by Sunita Menon.

The appellant's counsel, reiterated the findings of the impugned order, which upheld the demand of service tax amounting to Rs. 3,36,748/-, interest, and penalty.

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Nandesh Barani,counsel representing the respondent,Shree Siddhi Infrabuild Pvt Ltd, argued that the value of land cannot be included for the purpose of calculating the value of the service portion in the execution of a works contract, as per Rule 2A(i) of the Service Tax (Determination of Value) Rules, 2006.

 He also argued that the demand is not sustainable on the ground of limitation, as there is no evidence of fraud or collusion, and the show cause notice was issued beyond the period of 18 months from the relevant date.

 The respondent also filed a cross-objection, challenging the demand of Rs. 3,36,748/- upheld by the Commissioner (Appeals) and corresponding penalty and interest.

The cross-objection was filed on the ground that the value of land is not includible in the taxable value of works contract services, and that the demand is time-barred.

The two-member Bench of CESTAT, Chennai comprising Ramesh Nair, Judicial Member and Raju, Technical Member observed that that the issue involved the interpretation of valuation for works contract service, and the appellant had been paying service tax on declaring all details in their return.

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The Tribunal, relying on Section 73(i) of the Finance Act, 1994, and the judgment of S.R. Gupta & Sons Vs. CCE [2012], observed that the show cause notice was issued beyond the period of 18 months from the relevant date, rendering the demand time-barred. While dismissing the Revenue's appeal, as well as allowing the cross-objection filed by Shree Siddhi Infrabuild Pvt Ltd the Bench further elucidated that the value of land is not includible in the taxable value of works contract services, as per Rule 2A(i) of the Service Tax (Determination of Value) Rules, 2006.

To Read the full text of the Order CLICK HERE

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