Service providers not liable for service tax on free materials supplied by recipients under Section 67

CESTAT Kolkata ruled that service providers are not liable to pay service tax on free supplies of material provided by service recipients. Following precedent from Vantage International Management Company, the tribunal held that free material supplies should not be included in the assessable value of services. The impugned order was set aside, appeal allowed with consequential relief.

---

---

Issues Involved:
Appeal against demand of service tax on free supplies of material provided by service recipient.

Facts:
- Appellant providing taxable services and receiving mining contracts and work orders.
- Revenue demanding service tax on free supplies of material not included in taxable value.

Appellant's Argument:
- Explanation (a)(ii) of Section 67 not applicable as no reimbursement was charged.
- Citing precedent cases Commissioner of Service Tax v. Bhayana Builders Pvt. Ltd. and Vantage International Management Company v. Commissioner of CGST.

Revenue's Position:
- Supporting the impugned order demanding service tax.

Judgment:
- Tribunal considered whether free supplies of materials should be added to taxable value.
- Referring to Vantage International Management Company case, where it was held that free supplies need not be included in assessable value.
- Relying on Bhayana Builders case, emphasizing that the value of goods/materials provided free of cost need not be included in the gross amount charged for taxable services.
- Concluding that the impugned order demanding service tax on free supplies of materials is not valid.
- Setting aside the impugned order and allowing the appeal.

---