2026 (1) TMI 1490 - AT - Service Tax

Value of free oxygen supplies not includible in taxable service; free supplies excluded from service tax valuation and demand set aside

Issue concerns whether value of oxygen supplied free by the service recipient must be included in the value of taxable service for service tax. Reliance ... Demand of Service - Value of free supplies not includible in taxable service - Consideration under Section 6 of the Finance Act, 1994 - Extended period and recovery under Section 73(1) of the Finance Act, 1994 - whether the value of Oxygen supply free of cost by the service recipient to the appellant is to be included in the value of taxable service for payment of Service Tax or not. - HELD THAT:- The said issue has been examined by the Hon’ble Apex Court in the case of M/s. Bhayana Builders (P) Ltd.[2018 (2) TMI 1325 - SUPREME COURT] wherein the Hon’ble Apex Court held that the value of free supplies made under the contractual arrangement by the service receiver to the service provider cannot be added to the value of taxable service provided by the service provider. Thus, we hold that the value of Oxygen supply free of cost by the service recipient to the appellant is not to be included in the value of taxable service. Therefore, we do not find any merit in the impugned order. The same is set aside. In result appeal is allowed with consequential relief, if any. Issues: Whether the value of oxygen supplied free of cost by the service recipient to the service provider must be included in the value of taxable service for payment of Service Tax.Analysis: The Tribunal examined the contractual arrangement under which oxygen was supplied free of cost by the service recipient to the appellant for processing activities and considered the applicability of valuation principles under Section 6 of the Finance Act, 1994 and the demand framed under Section 73(1) of the Finance Act, 1994. The Tribunal relied on the authoritative ruling of the Hon'ble Supreme Court in M/s. Bhayana Builders (P) Ltd., which holds that free supplies made by the service receiver to the service provider under a contract cannot be added to the value of the taxable service. Applying that principle to the facts where oxygen was contractually provided free by the recipient, the Tribunal found no basis to include the value of such free supplies in the taxable value of the service.Conclusion: The value of oxygen supplied free of cost by the service recipient is not to be included in the value of the taxable service; decision is in favour of the assessee.