Supervision charges for statutory excise oversight are not consideration for taxable storage and warehouse services.

Supervision charges recovered for deputing excise staff to oversee liquor storage in a warehouse were held not to constitute consideration for a taxable service. The court reasoned that service tax applies where a service is rendered in a commercial sense to a customer or client, whereas the deputed staff performed a statutory oversight function under the excise law, including monitoring compliance, storage, movement, inventory and insurance of liquor. The amount collected under Section 28A of the Madhya Pradesh Excise Act was therefore a supervision fee for regulatory control, not payment for storage and warehouse services under the Finance Act, 1994. The charges were not liable to service tax, and the question was answered against the Revenue.

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Issues: Whether supervision charges recovered under Section 28A of the Madhya Pradesh Excise Act, 1915 for deputing staff to oversee storage of liquor in a warehouse amount to consideration for a taxable service under the head of storage and warehouse services under Section 65(105)(zza) of the Finance Act, 1994.

Analysis: Service tax is attracted when a service is rendered by a service provider to a customer or client as part of a value-added activity. The supervisory staff deputed by the State Government under the excise law did not render any service to the liquor contractor in the commercial sense. Their function was to discharge a statutory obligation by keeping watch over the warehouse, ensuring compliance with the excise law, and preventing irregularities in storage, movement, inventory and insurance of liquor. The amount recovered under Section 28A was thus a supervision fee for statutory oversight and not consideration for any service falling within the scope of storage and warehouse services.

Conclusion: The supervision charges were not liable to service tax and the question was answered against the Revenue.

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