Valuation of service tax on free infrastructure and seating charges was treated as a debatable issue, with pre-deposit waived.

A managed service valuation dispute concerned whether free infrastructure and reimbursed seating charges formed part of the taxable value by constituting non-monetary consideration. The material before CESTAT Chandigarh indicated that the issue was prima facie debatable, and the third Member noted that the record did not clearly establish non-monetary consideration for the uncharged facilities. On that basis, the stay application was substantially allowed and full pre-deposit of service tax, interest and penalties was waived pending final adjudication of the appeal.

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Issues: Whether the appellant was required to make a pre-deposit of the service tax, interest and penalties demanded on the alleged inclusion of free infrastructure and reimbursed seating charges in the taxable value of the service.

Analysis: The dispute arose from a managed service arrangement under which the service recipient provided office space, seats and allied infrastructure, part of which was billed to the appellant and part of which was provided free of cost. The differing views in the Bench centred on whether the unbilled facilities constituted non-monetary consideration and were therefore includible in the taxable value. The majority view proceeded on a prima facie assessment that the arrangement disclosed a debatable valuation issue, while the third Member found that the available material did not show clear evidence of non-monetary consideration for the uncharged seats and that the matter required closer scrutiny at final hearing.

Conclusion: The appellant was not required to make the full pre-deposit sought at the stay stage, and the appeal was admitted with waiver of pre-deposit pending final disposal.

Final Conclusion: The interlocutory application was allowed in substantial measure, leaving the merits of taxability to be decided in the appeal.

Ratio Decidendi: Where the valuation dispute is prima facie debatable and the record does not clearly establish non-monetary consideration attributable to the disputed facilities, pre-deposit may be waived pending final adjudication.

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