SC Upholds Tribunal Order Quashing ₹2.44 Billion Tax Demand Against Bharti Airtel

The Supreme Court on Monday upheld the January ruling of the Chandigarh bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT), which had quashed a service tax demand of ₹1.19 billion and a penalty of ₹1.25 billion against Bharti Airtel Ltd.

The case related to the “Airtel Employees Services Scheme”, under which employees received a waiver on telephone charges up to a call-free allowance limit for mobile and fixed-line connections. The benefit applied only to Bharti Airtel employees, not to their relatives or staff of group companies.

The tax department had claimed that the waiver amounted to a taxable service and issued show-cause notices for April 2006–September 2008, later confirming the demand and penalty.

Bharti Airtel argued that no consideration was received in cash or kind for the calls made within the free allowance and cited a government circular stating that services provided free of charge were not taxable.

The appellate tribunal agreed, holding that the waiver was a concession rather than a chargeable service, as no consideration accrued to the company. It also observed that the tax department’s show-cause notice was vague and failed to specify the taxable service rendered.

By dismissing the tax authority’s appeal, the Supreme Court has effectively affirmed the tribunal’s finding that Bharti Airtel was not liable to pay service tax on the employee call-free allowance.