2024 (11) TMI 615 - AT - Service Tax

Brewery license transfer creates deemed sale under Article 366(29A)(d), not taxable service for four years

M/s Tripti Alcobrew Pvt. Ltd. Versus Commissioner of Central Excise & CGST, Bhopal

M/s Tripti Alcobrew Pvt. Ltd. Versus Commissioner of Central Excise & CGST, Bhopal - TMI Issues Involved:1. Whether the License Agreement constituted a 'deemed sale' under Article 366(29A)(d) of the Constitution.2. Whether the consideration received under the License Agreement should be included in the assessable value for 'renting of immovable property service' for service tax purposes.3. Whether the extended period of limitation for service tax demand was applicable.Issue-wise Detailed Analysis:1. Deemed Sale under Article 366(29A)(d) of the Constitution:The primary issue was whether the License Agreement constituted a 'deemed sale' under Article 366(29A)(d) of the Constitution, which pertains to the transfer of the right to use goods. The appellant argued that the License Agreement, which involved the endorsement of a brewery license to Skol/Sab Miller, was a deemed sale, and therefore, service tax could not be levied on the consideration received. The appellant contended that the transfer of the right to use the brewery license was free from interference or hindrance and was akin to a sale. The Tribunal examined the terms of the License Agreement, noting that Skol/Sab Miller had the right to use the brewery license and the permitted capacity without any hindrance or encumbrance from the appellant. The Tribunal concluded that the transaction met the criteria for a deemed sale, as it involved the transfer of the right to use the brewery license, thus falling within the ambit of Article 366(29A)(d). Consequently, the consideration received under the License Agreement could not be subjected to service tax.2. Inclusion of Consideration in Assessable Value for Service Tax:The department argued that the consideration received under the License Agreement should be included in the assessable value for 'renting of immovable property service' because the License Agreement was integral to the Lease Deed. The Commissioner had concluded that the License Agreement was a natural extension of the Lease Deed, and the consideration should be clubbed for service tax purposes. However, the Tribunal found that the License Agreement and the Lease Deed were separate transactions. The Tribunal emphasized that the License Agreement involved a deemed sale, and the consideration received could not be clubbed with the rental income from the Lease Deed for service tax purposes. The Tribunal set aside the Commissioner's order, which had erroneously included the consideration from the License Agreement in the assessable value for service tax.3. Extended Period of Limitation:The appellant challenged the invocation of the extended period of limitation under the proviso to Section 73(1) of the Finance Act, arguing that the circumstances did not warrant such an extension. However, since the Tribunal concluded that the consideration under the License Agreement was not subject to service tax, it found it unnecessary to address the issue of the extended period of limitation. The Tribunal's decision to set aside the service tax demand rendered the limitation issue moot.Conclusion:The Tribunal allowed the appeal, setting aside the Commissioner's order dated 27.04.2018. It held that the License Agreement constituted a deemed sale under Article 366(29A)(d) of the Constitution, and the consideration received could not be subjected to service tax. Consequently, the inclusion of the License Agreement's consideration in the assessable value for 'renting of immovable property service' was incorrect. The Tribunal's decision provided consequential relief to the appellant.