2025-VIL-719-CESTAT-DEL-ST
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SERVICE TAX CESTAT Cases

Service Tax - Works contract, Valuation of service portion, Rule 2A of Service Tax (Determination of Value) Rules, 2006 - Appellant had followed two different valuation methods under Rule 2A for the same contract/invoice - paying service tax on full value of labour charges under Rule 2A(i) and paying service tax on 70% value of painting work under Rule 2A(ii)B. The department alleged short payment of service tax - Whether the appellant was justified in adopting two different valuation methods under Rule 2A for the same contract/invoice - HELD - The appellant was justified in bifurcating the composite contract into two parts - one where the value of goods transferred was determinable, and another where the value of consumables like paint was not determinable. For the former, the appellant rightly opted for valuation under Rule 2A(i), while for the latter, valuation under Rule 2A(ii)B was permissible as the value of paint consumed could not be separately quantified. The Tribunal relied on the constitutional provision of deemed sale under Article 366(29A) and the principles laid down in the decisions of the Supreme Court in Larsen & Toubro Ltd. v. State of Karnataka and the High Court of Madhya Pradesh in Agarwal Colour Advance Photo System v. Commissioner of Central Excise - When the law permits two different methods, the assessee cannot be faulted for adopting the appropriate method for each part of the composite contract - the order under challenge is set aside and the appeal is allowed
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