Tribunal rules free diesel supply not taxable, supporting appellant's argument.

The Tribunal found in favor of the appellant, ruling that the cost of free supply diesel should not be included in the taxable service value. The appellant's argument that as ONGC did not pay for the fuel, its value should not be part of the taxable value was supported. The Tribunal emphasized that free supplies by the service recipient should not be considered in the taxable value, citing relevant legal principles and a Supreme Court judgment. The department's order was set aside, and the appeal was allowed in favor of the appellant.

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Issues:
- Whether the appellant correctly excluded the cost of free supply diesel from the taxable service value.

Analysis:

1. The case involved the appellant providing mining services to ONGC by chartering its vessel and receiving diesel for drilling operations. The department claimed the cost of diesel should be part of the taxable value for service tax. The appellant argued that as ONGC did not pay for the fuel, its value should not be included in the taxable value.

2. The appellant's advocate cited relevant judgments to support their position, emphasizing that free supplies by the service recipient should not be included in the taxable value. The Revenue representative supported the department's decision.

3. The Tribunal analyzed the agreement and facts, noting that ONGC provided fuel free of cost, which the department acknowledged. The dispute spanned December 2010 to December 2015, falling under Section 67 of the Finance Act, 1994.

4. Section 67 defines 'consideration' as any amount payable for taxable services. The amendment in 2015 included reimbursable costs incurred by the service provider. As the appellant did not charge ONGC for fuel, its value should not be added to the taxable value.

5. The Tribunal referred to the Supreme Court judgment in a similar case, emphasizing that the gross amount charged by the service provider should have a nexus with the service provided. Free supplies by the recipient should not be part of the taxable value.

6. Based on the analysis and legal principles, the Tribunal found no merit in the department's order. The impugned order was set aside, and the appeal was allowed in favor of the appellant.

7. The judgment was pronounced in the open court on 12.02.2021, with detailed reasoning provided for excluding the cost of free supply diesel from the taxable service value.

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