Supreme Court overturns CESTAT ruling on service tax liability for non-compete fees under the Finance Act, 1994.

The SC found the CESTAT's decision to uphold the service tax liability on a 'non-compete fee' under the Finance Act, 1994, to be legally unsustainable. The Court noted that the fee, received under an agreement dated 5th March 2009, was a one-time payment not extending beyond 01.07.2012. The appeal was allowed, the impugned order was set aside, and any pending applications were disposed of.

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Issues involved: Whether the Customs, Excise & Service Tax Appellate Tribunal (CESTAT) was correct in upholding the order regarding liability to pay service tax under the Finance Act, 1994 for a 'non-compete fee' received under an agreement.

The Supreme Court of India heard arguments from the appellant's counsel and the Additional Solicitor General regarding the issue of liability to pay service tax under the Finance Act, 1994 for a 'non-compete fee' received under an agreement entered into on 5th March, 2009. The amount in question was sought to be taxed under Section 65 (104c) of the Finance Act, 1994, which defines 'support services of Business or Commerce.' It was noted that as of the date of the agreement, only Section 65 (104c) was in existence, and the amount was a one-time payment that did not extend beyond 01.07.2012. The Court found the order of the Commissioner appeal, upheld by CESTAT, to be legally unsustainable. Consequently, the appeal was allowed, and the impugned order was set aside, with any pending applications disposed of.

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