In an important ruling, the Chandigarh Bench of Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has held that service tax is not payable by Bharati Airtel on the free allowance given to the employees which is in the nature of discount/concession.The tribunal allowed the appeal of Bharti Airtel and quashed the order.
The appellants/assessee are registered under the names “Telecommunication Service, Business Support Services, Sponsorship Service,” among others, and are involved in the provision of a variety of taxable services. The appellant provides its employees with the “Airtel Employees Services Scheme” (Scheme), which exempts them from paying phone bills up to the Call Free Allowance (CFA) limit for mobile phones and fixed line connections. This waiver is only available to appellant employees, not their family members or employees of other group companies.
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If an employee exceeds the CFA limit that has been granted to him, the appellant collects the excess amount and deposits the appropriate amount of service tax due. The CFA limit is based on a monthly entitlement basis, and any unused portion is not carried forward to the next month.
However, if the employee can demonstrate that the excessive use was directly relevant to their job, they may be granted an exemption, subject to the approval of Function Heads or the CEO/COO as stipulated by the Scheme. If the waiver is approved, the money that was waived will be reimbursed in accordance with a predetermined procedure.
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The Bangalore Circle received show-cause notices from the department requesting that they pay service tax under “telephone services” on the amount of call-free allowance waivers granted to their employees. The department also conducted an audit of the appellant’s circle in Karnataka, and the appellant was asked to provide details of the waiver granted to its employees.
It is evident from the policy that only Bharati Airtel Ltd. workers are permitted to use the CFA. According to the explanation provided below, relatives of employees and employees of the Group Company are only eligible for the CFA rates, although CFA itself is applicable to these relatives.
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According to the Tribunal, money is only written off when it is considered a receivable and has not been received despite a serious effort. In its books of accounts, the appellant has recorded the monies as receivable. In these situations, the assessable value solely includes the actual consideration received or receivable.
The two member bench of S. S. Garg (Judicial Member) and P. Anjani Kumar (Technical Member) has observed that the Show Cause Notice is vague and does not specify the service which the appellant renders; moreover, the benefit of discounts/ free allowance is accruing to the employees rather than the appellant who is the service provider. The tribunal allowed the appeal of Bharti Airtel and quashed the order.
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