2025-VIL-549-CESTAT-AHM-ST
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SERVICE TAX CESTAT Cases

Service Tax – Majority Order - Works Contract Services, Valuation of Taxable Service, Actual Value of Goods – Respondent-assessee was engaged in the supply of elevators which were covered under the categories of Erection, Commissioning and Installation and Maintenance and Repairs Service - For the period from April 2007 to June 2017, Respondent were discharging VAT/Sales Tax on 85% of the total invoice value, claiming it to be the value of goods, and on the remaining 15%, they were discharging service tax – Dept case that the 85% value shown towards goods was not the actual value and that the entire contract value should be subjected to service tax. The matter was remanded by the Tribunal earlier to the adjudicating authority to ascertain the genuineness of the 85% value claimed towards goods. On remand, the Commissioner examined the various materials furnished by the respondent and was satisfied that the 85% value of goods on which VAT/CST had been paid was the actual value and accordingly dropped the demand - Whether the 85% value shown towards goods and 15% towards services by the respondent is the actual value or a notional value - HELD - The provisions of Rule 2A of the Service Tax (Determination of Value) Rules, 2006, provide that the value of works contract service shall be equivalent to the gross amount charged for the works contract less the value of transfer of property in goods involved in the execution of the said works contract. The explanation to the rule further provided that where VAT/Sales Tax has been paid on the actual value of transfer of property in goods involved in the execution of the works contract, such value adopted for the purposes of payment of VAT/Sales Tax shall be taken as the value of transfer of property in goods for determining the value of works contract service - The respondent had been consistently following the 85:15 ratio as per the contracts entered into with the customers and had been paying VAT/Sales Tax on the 85% value of goods. The Tribunal relied on the decisions in the cases of Safety Retreading Company Pvt. Ltd. and Johnson Lifts Pvt. Ltd. which held that where VAT/Sales Tax has been paid on the goods component as per the State legislation, the balance can be treated as the service component for the purpose of service tax. Further, the respondent had submitted the Chartered Accountant and Cost Accountant certificates in support of their claim and the assessee has not arbitrarily adopted 85 to 15% bifurcation in respect of their transactions. Accordingly, the 85% value shown towards goods on which VAT/CST had been paid is the actual value and the balance 15% towards services on which service tax was paid is acceptable - The appeal filed by the department is dismissed by Majority Order
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