Tribunal rules license fee for catering services not taxable.

The Tribunal set aside the demand for service tax on the license fee paid by the appellant to the Railways, ruling that the fee was solely for authorization to provide catering services and not for support services. The demand for the period before 01.04.2016 was rejected, and for the period after, the demand was not sustained due to improper identification of the grant of license as a taxable service. The appellant did not contest the demands for the differential service tax and the excess service tax collected but not deposited, which were upheld.

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Issues Involved:
1. Taxability of the license fee paid by the appellant to the Railways.
2. Differential service tax due on the difference in value of catering service as declared in balance sheet and ST-3 returns.
3. Service tax collected in excess but not deposited.

Summary:

Issue 1: Taxability of the License Fee Paid by the Appellant to the Railways

The appellant contested the demand for service tax on the license fee paid to the Railways, which was alleged to be for "support services" such as infrastructural, operational, and marketing support. The appellant argued that the license fee was solely for the authorization to provide catering services on trains, as per the Railway Catering Policy, 2010, and not for any support services. The Tribunal examined the Master License Agreement and the show cause notice, concluding that the identified support services did not qualify as taxable services under the Finance Act. The Tribunal also noted that the Circular dated 11.10.2019 clarified that the act of granting a license is taxable only after 01.04.2016. Therefore, the demand for service tax on the license fee for the period before 01.04.2016 was set aside. For the period after 01.04.2016, the Tribunal found that the show cause notice did not properly identify the grant of license as a taxable service, and thus, the demand could not be sustained. Consequently, the demand of Rs. 11,15,69,363/- was set aside.

Issue 2: Differential Service Tax Due on the Difference in Value of Catering Service

The appellant did not contest the demand for differential service tax amounting to Rs. 10,26,416/-. The appellant had already deposited this amount with interest on 06.10.2015.

Issue 3: Service Tax Collected in Excess but Not Deposited

The appellant also did not contest the demand for service tax collected in excess but not deposited, amounting to Rs. 1,32,66,338/-. The Tribunal upheld this demand.

Conclusion:

The Tribunal set aside the impugned order dated 15.10.2018 in so far as it confirmed the demand of service tax on the license fee paid by the appellant to the Railways with interest and penalty. The appeal was allowed to this extent, while the other two demands were not contested by the appellant and thus upheld.

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