TaxTMI 
TaxTMI 
2026 (9) TMI 1922
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.... to the decision of the State Government to regulate the wholesale trade and distribution of foreign liquor in the State. In exercise of powers under Section 20A of the Bihar and Orissa Excise Act, 1915, the State Government vested in the appellant the exclusive right and privilege of importing, exporting and carrying on the wholesale trade and distribution of foreign liquor in the State of Odisha. The appellant accordingly undertakes wholesale purchase and sale of Indian Made Foreign Liquor, beer and wine through its depots in the State, subject to the applicable excise laws, rules and policies. 2.1. For carrying on the aforesaid wholesale trade, the appellant was required under the applicable excise laws and Excise Policies issued by the Government of Odisha from time to time, to obtain/renew the requisite licence and pay the prescribed licence fees. During the financial years 2015-16 and 2016-17, the State Government also prescribed an "Additional Rounding Off Licence Fee" consequent upon its decision to round off the MRP of liquor to the next Rs.5/- for convenience of cash transactions at retail shops. The amounts so paid were reflected in the appellant's books under the....
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....ted by the Government of Odisha; that the same constituted consideration for taxable "support services" up to March 31, 2016 and for taxable services provided by Government thereafter up to March 31, 2017; and that the extended period of limitation was invocable. 2.6. Aggrieved by the confirmation of the demand of Service Tax along with interest and penalties, the appellant has filed this appeal. 3. The Ld. Counsel for the Appellant submits that the very foundation of the impugned demand is misconceived, inasmuch as the licence fees and additional licence fees paid by the appellant to the Government of Odisha do not constitute 'Consideration' for any "service" rendered by the State Government within the meaning of Section 65B(44) of the Finance Act, 1994. Section 65B(44) necessarily contemplates an activity carried out by one person for another for consideration. 3.1. It is the case of the appellant that the nature of the appellant's rights has necessarily to be appreciated in the context of the constitutional and statutory regime governing intoxicating liquor. The appellant submits that there is a distinction between the State parting with or regulating its exclusive ....
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....a)(iv) was substituted so as to bring within the tax net generally services provided by Government to business entities, does not cure the more fundamental defect in the Department's case; that the amendment merely altered the scope of the Negative List; it did not dispense with the threshold requirements of Section 65B(44); there must still be a "service", namely an activity carried out by one person for another for consideration. The Ld. Counsel for the appellant argues that if the licence fee represents a statutory impost or the price attached to the State parting with its exclusive liquor privilege, rather than consideration for an activity performed for the appellant, the substitution of "any service" for "support services" cannot by itself create a taxable service where none otherwise exists. 3.5. Further, it is also the appellant's submission that the legislative and executive developments concerning liquor licence fees place the matter beyond doubt for the period commencing April 1, 2016. Reference was drawn to the 26th Meeting of the GST Council held on March 10, 2018, Agenda Item 14(iv), which specifically considered taxability of licence fee and application fee fo....
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....l position, the Ld. Counsel for the appellant submitted that the licence fees and additional licence fees paid by them to the Government of Odisha cannot constitute 'consideration' for any taxable service rendered by the State Government. Thus, the appellant's contention is that the demand of Service Tax of Rs.53,88,08,005/-, together with consequential interest and penalties, confirmed in the impugned order is legally not sustainable. 3.10. Alternatively, the appellant has also contested the demand on the ground of limitation. The appellant submits that the show cause notice proposing recovery of service tax for the period from July 1, 2012 to March 31, 2017 was issued on April 18, 2018, invoking extended period of limitation. On the grounds that they are a Government of Odisha undertaking, incorporated for the purpose of regulating the wholesale trade and distribution of foreign liquor in the State and that, all the activities undertaken by them are in the public domain and they have not suppressed any information from the department, it is submitted that extended period cannot be invoked to demand Service Tax in this case 4. The Ld. Authorized Representative of the Revenue....
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....rs contained in List II. In exercise of such legislative competence, Section 20A was inserted in the Bihar and Orissa Excise Act, 1915, whereunder the exclusive right and privilege of importing, exporting and carrying on wholesale trade and distribution of foreign liquor was vested in the State Government, with power to appoint a corporation owned or controlled by the State Government for such purpose. The Government notification issued thereunder thereafter vested such wholesale trade and distribution in the appellant. The appellant's position thus flows directly from the State excise legislation and the statutory notification issued thereunder and not from any consensual arrangement for procurement of a service. This constitutional character of the liquor licence assumes particular significance because the State does not stand in the position of an ordinary commercial service provider. The right to manufacture, possess, transport, purchase or sell intoxicating liquor is within the exclusive regulatory domain of the State and the State may permit its exercise upon such terms and payment as the governing excise law prescribes. The amount charged for permitting exercise of such ....
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....rt pass fee, export pass fee and other fees. Rejecting such distinction, the Tribunal held that these were statutory levies connected with the State's exclusive privilege concerning liquor and were not charges against provision of any service. The Tribunal accordingly held that, in the absence of any service corresponding to the statutory fees paid to the State Government, service tax could not be levied thereon. The decision expressly follows Anheuser Busch InBev India Ltd. v. Commissioner of Central Tax, Bengaluru North West, 2021 (52) G.S.T.L. 429 (Tri.-Bang.). 6.5. For the period prior to 01.04.2016, we find that the services provided by Government or a local authority were placed in the Negative List, subject, inter alia, to an exception in respect of "support services" provided to business entities. "Support services" under Section 65B(49) contemplated infrastructural, operational, administrative, logistic, marketing or other support comprising functions which entities ordinarily carry out themselves but may obtain as services by outsourcing from others. The statutory grant of a liquor licence or privilege plainly answers none of these descriptions. Grant of a licence ....
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....exclusive privilege of wholesale distribution and retail vending of IMFL under the Tamil Nadu Prohibition Act, 1937, was authorised, upon insertion of Rule 9A in the Tamil Nadu Liquor Retail Vending (in Shops and Bars) Rules, 2003 with effect from March 29, 2013, to grant to private parties the privilege of running bars by tender. The Tribunal held that, from the date on which such statutory authority was conferred, the activity constituted a statutory function carried out under authority of law and fell within the Negative List, and consequently held that no service tax liability arose from March 29, 2013 onwards. The decision thus reinforces the appellant's submission that an activity undertaken in exercise of authority specifically conferred by the governing State liquor legislation cannot be characterised as an ordinary commercial service exigible to service tax. 6.9. In view of the above discussions, we find that for the period up to March 31, 2016, the grant of licence or exclusive privilege did not constitute "support services" within the meaning of Section 65B(49) of the Finance Act, 1994 and remained covered by the Negative List under Section 66D(a); while for the p....