Free issue materials excluded from service tax value for pipeline laying, as they are not consideration under Section 67.

Free of cost pipes and other materials supplied by the service recipient were held not to form part of the taxable value for service tax on laying long distance pipelines. Applying the Larger Bench view, the Tribunal treated such materials as no consideration flowing to the service provider and therefore outside the gross amount charged under Section 67 of the Finance Act, 1994. On that basis, the valuation adopted in the demand was rejected and the tax demand failed.

---

---

Issues: Whether the value of pipes and other materials supplied free of cost by the service recipient was includible in the taxable value of the service for the purpose of Service Tax under the relevant notification and Section 67 of the Finance Act, 1994.

Analysis: The appeal concerned service tax on laying long distance pipelines, where the appellant had availed exemption under Notification No. 15/2004-S.T. The demand proceeded on the footing that the value of pipes and materials supplied by the service recipients had to be included in the assessable value. The Tribunal followed the Larger Bench ruling that goods and materials supplied free of cost by the service recipient do not constitute consideration flowing to the service provider and therefore do not form part of the gross amount charged or taxable value under Section 67.

Conclusion: The free of cost materials supplied by the service recipient were not includible in the taxable value, and the demand could not survive. The appeal was allowed and the impugned order was set aside.

---