1. After examining the records and hearing both sides, we note that the lower authorities have demanded service tax of over Rs. 38 lakhs from the appellants in respect of "Commercial and Industrial Construction Service" for the period 10.09.2004 to 30.09.2005. They have also imposed a penalty of Rs. 77 lakhs on the party under Section 78 of the Finance Act, 1994. The appellants had paid service tax under the above category on an amount of Rs. 3,30,86,956/- less 67% calculated under Notification No. 15/2004-ST dated 10.09.2004. In adopting the above amount of Rs. 3,30,86,956/-, they did not include the cost of cement and steel supplied free by the clients. According to the Revenue, the cost of these materials also ought to have been included in the gross amount by the service-provider, before claiming the benefit of the said notification. In this dispute, which has been extensively agitated before us by the learned Counsel and the learned JCDR today, an amendment to the above notification vide Notification No. 4/2005-ST dated 01.03.2005 has been referred to by both sides. This amendment added an Explanation to Notification No. 15/2004-ST ibid. This Explanation reads as under: Explanation.- For the purposes of this notification, the "gross amount charged" shall include the value of goods and materials supplied or provided or used by the provider of the construction service for providing such service.
According to the learned Counsel, the expression 'used' occurring in the text of the above Explanation should be construed so as to mean "supplied and used by the service-provider". According to the learned JCDR, the above expression could be construed so as to mean "supplied by the service-recipient and used by the service-provider". According to this construction, the cost of cement and steel should have been included in the "gross amount charged" for the purpose of determining the extent of exemption under Notification No. 15/2004-ST ibid.
Contesting this view, the learned Counsel submits that only that interpretation which would be consistent with the provisions of Section 67 of the Finance Act, 1994 can be adopted. In this connection, learned Counsel has also drawn support from the Supreme Court's judgment in The State of Madhya Pradesh and Anr. etc. v. Dadabhoy's Co. Pvt. Ltd. , wherein it was held that where two constructions were possible, the one which sustained its validity must be preferred.
2. We have considered the submissions. It is not in dispute that the Explanation added to Notification No. 15/2004-ST by Notification No.4/2005-ST is retrospective in operation. The question now is as to how the expression 'used' can be understood. The three expressions 'supplied', 'provided' and 'used' occurring in the text of the Explanation are separated by the word "or". It is pertinent to note that the phraseology used in the Explanation is not "supplied, provided or used". It appears, in this situation, the principle of ejusdem generis cannot be applied to the expression used. Prima facie, therefore, we are inclined to accept the interpretation offered by the learned Counsel, which also seems to be consistent with the legislative intent underlying the relevant statutory provision (Section 67 of the Finance Act, 1994). Accordingly, for the present purpose, we read the expression 'used' so as to mean "supplied and used by the service-provider" for purposes of the present case, wherein cement and steel were supplied by the service recipient and used by the appellants as part of rendering of the taxable service in question. In this view of the matter, prima facie, the appellants were not liable to include the cost of cement and steel in the "gross value charged" for the purpose of determining the service tax liability under Notification No.15/2004-ST ibid. Accordingly, there will be waiver of predeposit and stay of recovery in respect of the tax and penalty amounts.