How to configure a service instance in Cisco ME switches
Switch (config)# interface gigabitethernet0/10
Switch (config-if)# switchport mode trunk
Switch (config-if)# switchport trunk allowed vlan none
Switch (config-if)# service instance 101 Ethernet
Switch (config-if-srv)# encapsulation dot1q 102
Switch (config-if-srv)# bridge-domain 103

Remember Golden Rules While Configuring Service Instance
1.Service instance port cannot be configured as switch port.
2.Service instance port always a trunk port with no vlans allowed.
3.Bridge-domain and dot1q number could be same or different as encapsulation doesn’t affect on forwarding traffic.
4.Vlans fall under encapsulation doesn’t effect on the router vlan database as those are local to that service instance only.