works contract Service

What are the terms of the agreement entered into with the contractor, if you have specifically brought about the clause of supply of raw material then it wont be included, if not then it will be included. However the HC has recently admitted the appeal of L & T wherein it has been stated that supply of rawmaterial to the contracter should not be included. The judgement is awaited we have to " WAIT AND WATCH"

The payment advice received by the assessee specifies that the materials are issued to them free of cost. The dept.people insists that the same should be included in the gross receipt as the cost of such materials in not included in calculating the gross receipt

The department is absolutely right, unless there has been an agreement and arrangement in writing that the same would be supplied by the contractee. In your case you have stated that the payment advise is the only document which speaks about material supplied. There is no way out, as the law is amply clear in case of gross amount concept in view of the determenation of value rules under service tax. We have to wait for the outcome of the judgement in the matter of L & T