Free supplies excluded from service tax value for site formation and excavation services under the Bhayana Builders principle.

Free supplies of materials provided by the service recipient were held not includible in the taxable value for service tax on site formation, clearance and excavation services. The Bench followed its earlier decision in the assessee's own case and the Supreme Court ruling in Bhayana Builders (P) Ltd., applying the principle that the value of materials supplied free of cost by the recipient cannot be added to the service value for tax computation. On that identical factual and legal issue, the demand was unsustainable and the appeal was allowed.

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Issues: Whether the value of free supplies of materials provided by the service recipient was includible in the taxable value for discharge of service tax on site formation, clearance and excavation services.

Analysis: The dispute was identical to an earlier period in the assessee's own case, where the same Bench had relied on the Supreme Court's decision in Bhayana Builders (P) Ltd. to hold that the value of free supplies is not to be included in the value of services for service tax purposes. Following that binding approach on an identical factual and legal issue, the impugned demand could not be sustained.

Conclusion: The value of free supplies was held to be excludible from the taxable value, and the appeal was allowed.

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