2017 (11) TMI 1576 - AT - Service Tax

Valuation - includibility - Revenue is of the view that the free services provided by M/s. Bharti Airtell and the services for which M/s. Bharti Airtell have charged certain amounts from the applicant are includable in the assessable value of the services provided by the applicant - difference of opinion - Held that - As there are contrary views and difference of opinion between the Members, therefore, the matter be placed before the Hon ble President to refer the matter to the third member to resolve the issue - Whether the appellants be granted full waiver of pre-deposit of Service Tax, fine and penalty for stay of operation of impugned order as held by Member (Judicial) - matter referred to Third Member.

Summary

Issues:
1. Inclusion of free services provided by M/s. Bharti Airtel Limited in the assessable value of services.
2. Treatment of reimbursed amounts for seats and staff welfare charges in the taxable value of services.

Analysis:

Issue 1: Inclusion of free services in assessable value:
The applicant provided Maintenance, Management, or Repair Services to M/s. Bharti Airtel Limited, who also offered free office space and charged infrastructure/staff welfare fees. The Revenue contended that these free services and charged amounts should be part of the assessable value for service tax. The applicant sought a waiver of pre-deposit for the confirmed demands. The Tribunal considered the arguments and cited the decision in the case of Bhayana Builders Pvt. Limited, granting a waiver for the service tax, interest, and penalties related to the free services provided by M/s. Bharti Airtel.

Issue 2: Treatment of reimbursed amounts:
Regarding the reimbursed amounts for seats and staff welfare charges, the applicant argued that these were input services received from M/s. Bharti Airtel and not part of the taxable service. The Revenue opposed this, stating that these amounts should be included in the taxable value. The Tribunal examined the agreements between the parties and found that the cost of office space and infrastructure provided by M/s. Bharti Airtel was well-defined. The Tribunal concluded that the free facilities were non-monetary considerations that needed to be included in the taxable value of services. Therefore, a pre-deposit of ?1 Crore was directed, with the balance being waived during the appeal.

Conclusion:
The Tribunal granted a waiver for the free services provided by M/s. Bharti Airtel but required a pre-deposit for the reimbursed amounts related to seats and staff welfare charges. The differing views between the Members led to a referral to the Hon'ble President for resolution.