IMPORTANT POINTS
Value of goods/materials supplied by service recipient cannot be subjected to service tax.
On death of a party during litigation, case against him abates.

JUDGMENT :

A.K. Sikri, J.

1. Delay condoned in Diary No. 42349 of 2016.

2. The respondents herein are engaged in the business of construction and, in the process, providing the services known as 'Commercial or Industrial Construction Service'. This service is exigible to service tax as per the provisions of Section 65(105) (zzq) of the Finance Act, 1994 (hereinafter referred to as the 'Act'). The assessees accept that they are covered thereby and, therefore, are paying service tax as well. The dispute, however, is with regard to the valuation of taxable service provided by them. Under Section 67 of the Act deals with such a valuation.

3. It is a matter of common knowledge that for undertaking construction projects, the assessees not only render services, lot of materials/goods are also used in the construction of building or civil structure etc. For valuation of taxable services, the material/goods element has to be excluded. In order to make the things easier for the assessees as well as the Assessing Officers (AOs), the Government issued the Notification No. 15/2004-ST dated September 10, 2004 as per which service tax is to be calculated on the value which is equivalent to 33% of the gross amount charged from any person by such commercial concern for providing the taxable service. This notification was amended vide another Notification No. 4/2005-ST dated March 01, 2005 whereby an explanation was added to the original notification. This explanation mentions that the 'gross amount charged' shall include the value of goods and material supplied and provided or used by the provider of construction services for providing such service. It is made optional for the assessees to take advantage of the aforesaid notification and get the value calculated as per the aforesaid formula provided therein. The assessees have availed the benefit and paid the service tax @33% of the gross amount which they have charged from the persons for whom construction was carried out, i.e., the service recipients. It so happened that in all these cases where the construction projects were undertaken by the assessees, some of the goods/materials (particularly, steel and cement) were supplied or provided by the service recipients. As these materials were to be utilised in the projects meant for service recipients themselves, obviously, no costs thereof was charged from the assessees. The Department wants that value of such goods/materials even when supplied or provided free should be included, while calculating the "gross value" and 33% thereof be treated as value for the purpose of levying service tax.

4. The question, therefore, which has fallen for consideration is as to whether, the value of goods/material supplied or provided free of cost by a service recipient and used for providing the taxable service of construction or industrial complex, is to be included in computation of gross amount (charged by the service provider), for valuation of the taxable service, under Section 67 of the Act and for availing the benefits under Notification No. 15/2004-ST dated September 10, 2004 as amended by Notification No. 4/2005-ST dated March 01, 2005 (whereby an Explanation was added to Notification No. 15/2004-ST).

5. We may mention here that different benches of the Customs, Excise and Service Tax Appellate Tribunal (for short 'CESTAT') had given conflicting views on the aforesaid question and, therefore, the matter was referred to the Larger Bench which has, by impugned judgment dated September 6, 2013 rendered in a batch of matters, has decided the issue in favour of the assessees by holding that the value of the goods/materials cannot be added for the purpose of aforesaid notification dated September 10, 2004, as amended by notification dated March 01, 2005. It is the said judgment of the Larger Bench dated September 6, 2013, correctness whereof is the subject matter of present appeals.

6. For answering the question, it would be necessary to refer to the relevant pro