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Legal Case Shots

Court judgements broken down into the case type, how the decision played out, and the lesson worth remembering, with the full judgement available as a PDF.

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Legal Case Shots is a searchable database of Supreme Court of India judgments, each broken down into the case type, the court's key holding, and a practical lesson learnt, with the full judgment available as a PDF for citation or deeper reading.

Tax & Customs LawSupreme Court of India

C.C.E., Raipur v. M/s. Karamjit Singh

Civil Appeal · 2018 INSC 172Decided 19 Feb 2018
Civil Appeal Nos. 1335-1358 of 2015
Justice A.K. Sikri · Justice Ashok Bhushan

Background

This was a consolidated judgment deciding a common legal question across more than 40 tagged civil appeals, including C.A. Nos. 2452-2455 of 2014 (Revenue vs Karamjit Singh and connected matters). The dispute was whether, when a construction service provider pays service tax on only 33% of the amount it charges to the customer (under exemption notifications), the value of free goods/materials supplied by the customer itself (not billed by the service provider) must also be added into the "gross amount charged" for calculating that 33%.

Decision Breakdown

The Supreme Court held that service tax under Section 65(105) of the Finance Act, 1994 can only be levied on the value of the taxable service actually charged by the service provider, and that the exemption notifications' formula of "33% of the gross amount charged" refers only to amounts actually billed by the service provider, not the value of goods or materials supplied free by the service recipient, since nothing is "charged" for those by the provider. The Court agreed with the CESTAT Full Bench's view below and rejected the Revenue's argument that omitting such free supplies distorts the formula's intended balance. As a result, the Court dismissed all the Revenue's appeals in this batch, including the one concerning C.C.E., Raipur vs Karamjit Singh.

Lesson Learnt

Service tax exemption formulas based on a percentage of "amount charged" are tied strictly to what the service provider itself bills: tax authorities cannot inflate that base by adding in the value of materials the customer supplies for free.

C.C.E., Raipur v. M/s. Karamjit Singh – Legal Case Shots | LegalAware