Tribunal excludes diesel value from service tax assessment, following Supreme Court principles.

The Tribunal held that the value of diesel filled in generators should not be included in the assessable value for service tax. It determined that the property in goods (diesel) passed on to the service recipient before consumption for electricity production, similar to the principles established in a Supreme Court judgment. The Tribunal found that the appellants' obligation was to maintain the telecom towers' operational condition, which did not necessitate including the value of diesel in the service tax assessment. As a result, the Tribunal waived the pre-deposit and stayed the recovery of the disputed liability pending appeal.

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Issues:
1. Inclusion of the value of diesel in the assessable value for service tax.
2. Interpretation of the service contract regarding the provision of maintenance and repair services for telecom towers.
3. Transfer of property in goods (diesel) to the service recipient before consumption for electricity production.

Analysis:
The appellants filed a stay petition along with an appeal against an Order-in-Original confirming a demand for service tax along with interest and penalties. The dispute arose from the Department's claim that the value of diesel filled in generators should be included in the assessable value of service tax. The appellants argued that diesel was not essential for providing the service but for generating electricity, and the property in goods (diesel) passed on to the service recipient. The Department contended that without diesel, the service could not be rendered, citing a relevant judgment.

Upon examining the contract, the Tribunal noted that the appellants were obligated to maintain the telecom towers in operational condition, which required readiness for functionality rather than actual functioning. The Tribunal observed that diesel consumption was necessary for generating electricity, which is considered goods, and diesel was an input for producing electricity. The appellants were also required to procure diesel from specific outlets and bill the service recipient separately for the cost of diesel filled, resembling a case of diesel being supplied by the recipient.

The Tribunal referenced a Supreme Court judgment regarding the transfer of property in goods, highlighting that the property in goods (diesel) was transferred to the service recipient before consumption for electricity production. Drawing parallels with the Xerox machines case, the Tribunal concluded that the value of diesel was not includible in the assessable value of the service. Consequently, the Tribunal waived the pre-deposit and stayed the recovery of the disputed liability during the appeal's pendency.

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