Licence fee for railway catering permissions is not taxable support service consideration; reverse charge demand and extended limitation fail.

Licence fee paid to Indian Railways for permission to operate food stalls and onboard catering was not consideration for a taxable support service, because the arrangement was only a permission to carry on catering activity and did not create a taxable service-provider relationship. On that basis, service tax under reverse charge mechanism was not payable and the demand failed. The extended limitation period was also unjustified, as no intent to evade tax could be attributed once the underlying activity was held non-taxable; the demand for the period prior to 25.10.2015 was therefore time barred. The impugned demand was set aside in full.

---

---

Issues: (i) Whether service tax under reverse charge mechanism was payable on the licence fee paid to Indian Railways for permission to operate food stalls and onboard catering services. (ii) Whether the extended period of limitation was validly invoked for the demand covering the period 2012-13 to 2016-17.

Issue (i): Whether service tax under reverse charge mechanism was payable on the licence fee paid to Indian Railways for permission to operate food stalls and onboard catering services.

Analysis: The demand was founded on the premise that the licence fee constituted consideration for support services allegedly rendered by the Railways. The licensing arrangement, however, was treated as a permission to carry on catering activity and not as a taxable service with a service-provider and service-recipient relationship. The licence fee was found to be unrelated to any alleged support service and not to be quid pro quo for a taxable activity. The Tribunal followed its earlier decisions on identical facts and held that when the activity itself does not constitute a taxable service, the demand cannot survive.

Conclusion: Service tax under reverse charge mechanism was not payable, and the demand was unsustainable.

Issue (ii): Whether the extended period of limitation was validly invoked for the demand covering the period 2012-13 to 2016-17.

Analysis: The notice was issued on 25.04.2018, and the demand related to a period partly beyond the normal limitation period. Since the underlying activity was held to be non-taxable, no intent to evade tax could be attributed to the appellant. The conditions for invoking the extended period were therefore not satisfied, and the demand for the earlier period was time barred.

Conclusion: The extended period of limitation was wrongly invoked, and the demand for the period prior to 25.10.2015 was barred by time.

Final Conclusion: The impugned demand was set aside in full, with the appellant succeeding on both taxability and limitation.

Ratio Decidendi: Licence fee paid for permission to operate catering activity on railway premises is not, by itself, consideration for a taxable support service; where the underlying activity is non-taxable, the demand fails and the extended period of limitation cannot be invoked absent an element of suppression or intent to evade.

---