Sale of export quota rights is not Business Auxiliary Service, so service tax demand and penalty could not stand.

Sale proceeds from export sugar quota or an export licence cannot be treated as assessable value for Business Auxiliary Service where the transaction is only a sale of rights and privileges. That activity is characterised as sale of goods, not provision of a taxable service. The issue was treated as settled by earlier binding Tribunal authority, consistent with Supreme Court rulings relied on there. On that basis, the service tax demand and penalty were held not sustainable.

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Issues: Whether the proceeds received on sale of export sugar quota or export licence could be treated as assessable value for Business Auxiliary Service so as to sustain the service tax demand and penalty.

Analysis: The transaction was held to be a sale of right and privileges in export sugar quota, which is sale of goods and not provision of any service. The issue was treated as no longer res integra in view of the earlier binding decision of the Tribunal, following the Supreme Court rulings relied upon therein.

Conclusion: The demand of service tax and the penalty were not sustainable.

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