Free supplies excluded from service tax valuation for site formation service under section 67, with the adjudication order quashed.

Free supplies of diesel and explosives provided by the service recipient were held not includible in the gross consideration for valuing taxable site formation and clearance service under section 67 of the Finance Act, 1994. The valuation dispute turned on whether materials supplied free of cost could form part of the service consideration; the tribunal followed its decision in a connected appeal on identical facts and reasoning. On that basis, the free supplies were excluded from the taxable value, the adjudication order was quashed, and the appeal succeeded.

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Issues: Whether the value of diesel and explosives supplied free of cost by the service recipient was required to be included in the gross consideration for computing service tax liability on the taxable site formation and clearance service.

Analysis: The appeal was disposed of after waiving pre-deposit. The liability had been based on the premise that the value of materials supplied free of cost by the service recipient formed part of the consideration for valuation under Section 67 of the Finance Act, 1994. The same issue had already been decided in favour of the appellant in a connected appeal involving identical facts and reasoning, and the present appeal was decided on the same basis.

Conclusion: The free supplies were not to be added to the gross consideration for valuation, and the adjudication order was quashed. The appeal succeeded.

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