Simplex Infrastructures Ltd. vs Commr. of Service Tax

Soumitra Pal, J.—In the writ petition the Petitioner has challenged the Show Cause-cum-Demand Notice dated 25th June, 2008 issued by the Commissioner of Service Tax, Service Tax Commissionerate, Kolkata on the ground that it offends Section 67(3) of the Finance Act, 1994. It is submitted that any material supplied free of charge cannot be included in the "gross amount charged" as defined in the said Section. Therefore, it cannot be included in the taxable service which is provided for in Section 67 of the Finance Act, 1994. Submission is that a similar matter Era Infra Engineering Ltd. Vs. Union of India (UOI), the issue came up for consideration before the Division Bench of the Delhi High Court. At the prima facie stage the Division Bench was of the opinion that the Respondents cannot include in the gross amount charged any material that is supplied free of charge by any party in respect of a contract of service and by an interim order directed that the adjudication proceedings may go on and be concluded by the Respondents, but they will not include for the purposes of determining the taxable service the supply of free material to the Petitioner and to that extent the Explanation appearing against Serial No. 7 in the table given in the Notification dated 1st March, 2006 would not be applied to the detriment of the Petitioner. It is further submitted that the question of jurisdiction cannot be decided by the Assessing Officer.

Learned advocate appearing on behalf of the Respondents submits that since the Petitioner has replied to the notice of show cause cum demand directions may be issued to dispose of the matter.

Having heard the learned advocates for the parties, let affidavit-in-opposition to the writ petition be filed by 22nd September, 2008. Reply, if any, by 1st October, 2008. Let the matter appear along with W.P. No. 1953 of 2006 in the Combined Monthly List of November, 2008.

In view of the Explanation appearing against Serial No. 7 and considering the provisions contained in Section 67(3) of the Finance Act, 1994, in my view, a prima facie case has been made out for passing an interim order. Therefore, considering the facts and circumstances of the case, let there be an interim order directing that the adjudication proceedings may go on and be concluded by the Respondents but they will not include for the purpose of determining the taxable service the supply of free material to the Petitioner and to this extent the Explanation appearing against serial No. 7 in the table given in the Notification dated 1st March, 2006 will not be applied to the detriment of the Petitioner. However, this order is passed without prejudice to the rights and contentions of the parties and subject to further orders that may be passed.

All parties concerned are to act on a signed copy of the minutes of the operative portion of this order on the usual undertakings.