ORDER
1. Allowed, subject to all just exceptions.
CM stands disposed of.
WP (C) No. 3048/2008
Rule D.B.
CM No. 5864/2008(Stay)
The challenge in the writ petition is to the Explanationn to Seriall No. 7 in the Notification being General Exemption No. 10 dated 1st March, 2006.
2. According to the Petitioner, for the purposes of levying Service tax the Respondents can only include the service element provided for in the contract that the Petitioner enters into with other parties, in this case the other contracting party being NTPC. It is the case of the Petitioner that materials that are supplied free of cost by NTPC to the Petitioner for the purposes of completing the contract cannot be included in the gross amount charged by the Petitioner for the purposes of determining the Service tax payable.
3. In the Explanationn to Seriall No. 7 in the aforesaid Notification it is mentioned as follows:
Explanation - The gross amount charged shall include the value of goods and materials supplied or provided or used by the provider of the construction service for providing such service.
4. According to the Petitioner, the 'gross amount charged' has been defined in Section 67(3) of the Finance Act, 1994 as follows:
gross amount charged' includes payment by cheque, credit card, deduction from account and any form of payment by issue of credit notes or debit notes and book adjustment.
5. It is submitted that any material that is supplied by NTPC free of charge cannot be included in the 'gross amount charged' as defined above. thereforee, it cannot be included in the taxable service which is provided for in Section 67 of the Finance Act, 1994.
A show cause notice has been issued to the Petitioner on 13th June, 2007 proposing to include the free supply of material as a part of the gross amount charged for the purposes of levying Service tax. The Petitioner has filed a reply to the show cause notice on 24th September, 2007 and we are told that the matter has not yet been adjudicated.
6. Prima facie it appears to us that the Respondents cannot include in the gross amount charged any material that is supplied free of charge by NTPC or by any other party in respect of a contract of service.
Our attention has been drawn to an order passed by the Madras High Court in Larsen and Toubro Ltd. v. Union of India Writ Petition No. 12691/2007 2007 (7) S.T.R. 123 (pages 37 to 39 of the paper book) wherein the Madras High Court has come to the prima facie view that insistence on value of goods supplied and provided free by the client of an assessed cannot be included for the purposes of calculating taxable service.
7. In view of the facts that we have narrated above as well as the interim order passed by the Madras High Court, we are of the opinion that while the adjudication proceedings may go on and be concluded by the Respondents, they will not include for the purposes of determining the taxable service the supply of free material to the Petitioner and to this extent the Explanationn appearing against Seriall No. 7 in the table given in the Notification dated 1st March, 2006 will not be applied to the detriment of the Petitioner.
8. Needless to say, this order will be subject to final orders in the writ petition.
The application is disposed of in terms of the above.