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Service Tax Case Law - Meaning of the term 'Consideration'

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Service Tax – Valuation – meaning of term ‘consideration’ - Whether the value of construction material as provided free by the service recipient to the service provider-appellant, for the purpose of providing services under the category of commercial or industrial construction services is required to be added in the value of the services – benefit of Notifications No.15/2004-ST dated 10.09.2004 

HELD - the valuation of the taxable service is the value received by the service provider as “consideration’ from the service recipient for the service provider whether monetary or otherwise. However, it should have flown from service recipient to service provider in the manner that it should accrue as the benefit of the service provider - the construction material provided by the service recipient to the service provider-appellant for construction of Chimney and chimney elevator package though has to be incorporated into the construction at the time when service provider is providing the construction services to the recipient. But the fact remains is that such material provided by the service recipient is to be used for service recipient only.

Hence no benefit has accrued to the service provider due to the said free construction material. Therefore, the said construction material would not constitute a non-monetary consideration - the gross amount charged shall include the construction material if and only if some value is charged for the same.

Hence, the construction material supplied by the service recipient free of cost, the amount thereof is not the gross amount taxable value as not being charged. However, for the construction material as used by the appellant, is liable to take the benefit of Notification No.15/2004-ST - extended period of limitation couldn’t be invoked against the assessee - the impugned SCN as being barred by time and set aside – assessee appeal stands allowed

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