Free supplies by service recipient not part of taxable consideration for service tax exemption notifications

For service tax exemption under the relevant notifications, the value of materials supplied free of cost by the service recipient is not part of the consideration charged for the service and cannot be added to the taxable value. The taxable value remains confined to the consideration actually received by the service provider. On that basis, non-disclosure of the free supplies did not justify denial of the notification benefit, and the contrary stand was held unsustainable.

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Issues: Whether the value of free supplies received by the service provider from the service recipient was includible in the consideration for service tax purposes and whether non-disclosure of that value denied the benefit of the exemption notifications.

Analysis: The taxable services were provided on consideration actually received, while materials supplied free of cost by the recipient were not part of the amount charged for the service. The issue stood covered by the Larger Bench decision holding that such free supplies do not form part of the taxable value for these exemption notifications, and no contrary contention survived for adjudication.

Conclusion: The free supplies were not includible in the assessable consideration, and denial of the notification benefit on that basis was unsustainable.

Ratio Decidendi: For service tax exemption under the relevant notifications, the value of materials supplied free of cost by the recipient is not part of the consideration charged for the service and cannot be added to the taxable value.

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