Service tax valuation excludes free supplies by the contract recipient; the demand was reduced accordingly.

The valuation of service tax for fabrication and laying of cross-country pipelines excluded the value of materials supplied free of cost by the contract recipient. The Tribunal applied the settled rule that free supplies do not form part of the consideration for the taxable service, and noted that the point had already been settled by the Larger Bench and affirmed by the Apex Court. The demand was therefore set aside to the extent it included the value of such free-supplied materials.

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Issues: Whether the value of free supplies of materials by the contract recipient was includible in the gross value for computation of service tax.

Analysis: The dispute related to service tax on fabrication and laying of cross-country pipelines. The lower authorities had included the value of materials supplied free of cost by the recipient while computing tax. The Tribunal followed the settled position that such free supplies do not form part of the consideration for valuation of the taxable service, and noted that the issue had already been concluded by the Larger Bench and affirmed by the Apex Court. The matter was therefore treated as no longer res integra on this point.

Conclusion: The value of free supplied materials was not includible in the taxable value, and the demand was set aside to that extent in favour of the assessee.

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