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The value of the goods/ material supplied or provided free of cost cannot be included in computation.

Case Covered:

M/s. Raunaq International Ltd.

Facts of the Case:

M/s. Raunaq International Ltd, C/o M/s. Utility Energy Tech. & Engineers (P.) Ltd. Parichha Thermal Power, Jhansi were engaged in providing taxable services of “Erection, Commissioning & Installation Service” to their clients and were registered with the Department under the category of “Erection, Commissioning & Installation Service” having registration certificate number AAA5747CST010.

M,/s Parichha Power Projects, Jhansi (through their Project Planning, Monitoring, and Management unit, Headquarter, Shakti Bhawan, Lucknow had given the initial Work order for the supply, Erection, Testing & (commissioning of complete BOP Package to M/s Reliance Infrastructure Ltd. Mumbai (Formally known as Reliance Energy Ltd.). Thereafter, M/s Reliance Infrastructure had sublet the BOP Package to different terms The erection contract was awarded to M/s. Utility Energy/ tech & Engineers Pvt. Ltd. and supply of L. P. Pipe contract to the party. Later on, the Erection Contract was further sublet to the party by M/s. Utility Energy tech & Engineers Pvt. Ltd.Thus, eventually, both the erection contracts as well as the L.P. Piping Contract were given to the party. For the work order between M/s. Utility Ener$/ tech and Engineers Pvt. Ltd. and the party, an agreement dated 22.5.2008 for Rs.7,43,33,739 / – (inclusive of all taxes and duties) was entered into.


I have carefully gone through the facts of the case, and I observe that the sole matter to be decided here is whether the free of cost supplies are includible in the taxable value of service.

I observe that the said issue was in dispute for a long time, with varied conflicting views of different authorities on it. Thereafter, the matter was referred to the larger bench of CESTAT, which has “by holding that the value of the goods/materials cannot be added for the purpose of the aforesaid notification dated September 10, 2004, as amended by notification dated March 01, 2005.”


ln view of the aforesaid decision of Apex Court, I am of the considered opinion that the present judgment of the Apex Court (supra) is squarely applicable in the facts of the instant case. I am of the considered view that the value of the goods/material supplied or Provided free of cost cannot be included in the computation of gross amount charged by the service receiver, for valuation of taxable services under Section 67 of the Act.

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The value of the goods/ material supplied or provided free of cost cannot be included in the computation.

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