In a major relief to Bharti Airtel, the Supreme Court has upheld the order of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT), Chandigarh, which had set aside a service tax demand of approximately ₹125 crore raised on the telecom company over the ‘Call Free Allowance’ (CFA) provided to its employees.

The Apex Court dismissed the Special Leave Petition (SLP) filed by the Revenue, thereby affirming that the CFA extended to employees does not constitute consideration for any service rendered and hence, is not includible in the taxable value for service tax purposes.

The dispute revolved around the call usage facility—referred to as Call Free Allowance—granted by Airtel to its employees as part of their employment benefits. The tax authorities had argued that the free call usage constituted a service provided by the company to its employees, thereby attracting service tax under the then-prevailing service tax provisions.

However, the CESTAT had disagreed and ruled that CFA was in the nature of an internal employee benefit or discount, linked to employment and not to any consideration for services. Therefore, it could not be treated as a taxable supply of services.

A copy of the Supreme Court’s detailed judgment is awaited 

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