CEMEX ENGINEERS Vs. COMMISSIONER OF SERVICE TAX, COCHIN

JUDGEMENT

(1.) IN terms of the impugned order, the appellant is required to pre -deposit a sum of Rs. 63,27,645/ - as Service Tax short -paid and various penalties under Sections 76 and 77 of the Finance Act, 1994. The appellant is providing taxable service under the category of Commercial and Industrial Construction and also Construction of Residential Complex. The appellant is entitled for an abatement of 67% of the gross amount charged by them. The department proceeded against the appellants in view of the explanation to Notification No. 15/2004 -S.T. Revenues contention is that in terms of the said explanation, the value of materials supplied by the clients to the service provider should also be taken into account while calculating the gross receipts.

(2.) THE learned Counsel vehemently argued that such an approach of adding the value of materials supplied by the client is totally contrary to the judicial decisions. He pointed out to the Honble Madras High Courts order in the case of L and T Ltd. v. UOI - 2007 (7) S.T.R. 123 (Mad.) wherein a similar issue cropped up and High Court has stayed the issue. Again our attention was invited to the decision of Brij Bhushan Lal Parduman Kumar v. CIT - 1978 (115) ITR 524 (SC) wherein it is held that for calculating the profit in respect of works contract, the materials supplied by the Government or the client should not be included. Further reliance was placed on the decision of the Honble High Court of Madras in the case of CIT v. K.S. Guruswami Gounder and K.S. Krishnaraju - 1973 (92) ITR 90 (Mad.), wherein it has held that the cost of materials supplied to the contract by the Government for the purpose of construction on their behalf undertaken by him cannot be included in the receipts for the purpose of computing the income of the contract. It was also urged that the appellants had already registered under the Kerala Sales Tax and they are paying Sales Tax under works contract. In terms of the decision in the case of UOI v. Bharat Sanchar Nigam Limited - 2006 (2) S.T.R. 161 (S.C.) when the assessee pays Sales Tax on the same value, then Service Tax cannot be levied.

(3.) THE learned JCDR stuck to the contention of the revenue. She said that so long as the materials are used by the service provider, its value has to be included in terms of the explanation to the said Notification.