Free supplies by service recipient excluded from taxable value unless the notification clearly requires inclusion.

Free supplies by the service recipient are not included in the taxable value for service tax where the governing notification does not expressly require their inclusion. Applying the larger Bench ruling, CESTAT held that goods or material supplied free of cost by the electricity board were neither monetary nor non-monetary consideration flowing to the service provider and therefore could not be added to the assessable value. The departmental demand was unsustainable, the valuation adopted by the department was set aside, and consequential relief followed for the assessee.

---

---

Issues: Whether the value of goods and material supplied free of cost by the service recipient was includible in the assessable value for service tax under the applicable notifications.

Analysis: The appellant was paying service tax on the service component under the relevant notifications, while the department sought to add the cost of towers supplied by the electricity board to the taxable value. The Tribunal applied the larger Bench ruling that free supplies by the service recipient do not constitute monetary or non-monetary consideration flowing to the service provider and, therefore, do not form part of the gross amount charged unless the exemption notification expressly and unambiguously provides otherwise.

Conclusion: The value of the goods supplied free of cost by the service recipient was not includible in the taxable value, and the demand could not be sustained; the finding was in favour of the assessee.

Final Conclusion: The appeal succeeded and the valuation adopted by the department was set aside, with consequential relief to the appellant.

Ratio Decidendi: Free supplies by the service recipient are excluded from the taxable value unless the governing exemption or valuation provision specifically mandates their inclusion.

---