Custom, Excise & Service Tax Tribunal
Ambuj Hotels & Real Estates Pvt Ltd vs Directorate General Of Gst ... on 3 April, 2023
Author: Dilip Gupta
Bench: Dilip Gupta
CUSTOMS EXCISE & SERVICE TAX APPLELLATE TRIBUNAL
NEW DELHI
PRINCIPAL BENCH, COURT NO.-1
SERVICE TAX APPEAL NO. 51712 OF 2022
(Arising out of Order-in-Original No. 28/2021-ST dated 24.12.2021 passed by the
Additional Director General, Adjudication, New Delhi)
M/s Ambuj Hotels & Real Estates Pvt. Ltd. Appellant
7575/1, Ram Nagar, Pahar Ganj
New Delhi-110055
H.O. at D-58/9-A, Hotel Siddharth, Sigra,
Mahmoorganj, Varanasi,
Uttar Pradesh-221010
VERSUS
Director General of GST Intelligence
West Block-VIII, Wing-6
Respondent
2nd Floor, R K Puram,
New Delhi-110066
APPEARANCE:
Shri Arjun Raghavendra, Advocate for the Appellant
Shri Rajeev Kapoor, Authorised Representative for the Respondent
CORAM: HON'BLE MR. JUSTICE DILIP GUPTA, PRESIDENT
HON'BLE MR. P. V. SUBBA RAO, MEMBER (TECHNICAL)
Date of Hearing: 12.01.2023
Date of Decision: 03.04.2023
FINAL ORDER NO. 50418/2023
Justice Dilip Gupta:
M/s. Ambuj Hotels & Real Estate Pvt. Ltd.1 has filed this appeal
to assail the order dated 24.12.2021 passed by the Additional
Director General (Adjudication), New Delhi2. The demands proposed
in the show cause notice dated 15.10.2018 that have been confirmed
in the said order are:
a. Service tax on the license fee paid by the
appellant to the Railways amounting to Rs.
1. the appellant
2. the adjudicating authority
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ST/51712/2022
11,15,69,363/- under section 73(2) of the
Finance Act, 19943 along with consequential
interest under section 75 of the Finance Act and
100% penalty under section 78 of the Finance
Act;
b. Differential service tax due on the difference in
value of catering service as declared in balance
sheet and ST-3 returns, amounting to Rs.
10,26,416/- under section 73(2) of the Finance
Act, along with consequential interest under
section 75 of the Finance Act and 100% penalty
under section 78 of the Finance Act; and
c. Service tax collected in excess, but not
deposited, amounting to Rs. 1,32,66,338/-
under section 73A along with applicable interest
under section 73B and a penalty of Rs.
1,00,000/- under section 78A of the Finance Act.
2. The demand confirmed at (a) relates to taxability of what was
alleged in the notice and confirmed in the order as "support services"
provided by Indian Railways to the appellant, for which the appellant
is said to have paid license fee during the period July 2013 to June
2017. Service tax has been demanded on this amount under a
reverse charge. The support services that have been confirmed are
infrastructural support, operational support and marketing support.
The demands confirmed at (b) and (c) have not been contested by
the appellant.
3. the Finance Act
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3. It necessary to understand what services are involved and why
the license fee is paid, and for that it is necessary to understand the
process of issuing licenses by Indian Railways to caterers on board
their trains. The Catering Policy, 2010 defines license, lays down the
procedure for fixation of license fee and the procedure for bidding and
issuing of license. Tenders are called for quoted license fee from all
interested bidders. Evaluation of all quoted license fees is undertaken
to determine who has quoted the highest license fee. The bidder
whose quoted license fee (minimum license fee+ markup) is the
highest among all the bids, receives the letter of award. The license is
awarded at the quoted license fee to the highest bidder through a
Master License Agreement.
4. The process of catering onboard the trains of Indian Railways
was governed during the period in dispute by the Railway Catering
Policy, 20104 issued under a Commercial Circular dated 21.07.2010 of
the Ministry of Railways. It defines „license‟ as an authorization to
provide catering service onboard the trains covered in the respective
Master License Agreements. „License‟ and „Licensee‟ have been
defined in the Master License Agreement as follows:
"15. License: is a document issued by either Indian
Railways or IRCTV giving authorization to the licensee
to operate a particular service. This license can be for a
stipulated period defined for that unit. The license can
be issued either by calling of applications or through a
2 packet tendering system as the case may be.
16. Licensee: An agency which can be a company
or a firm/Society/Cooperative or an individual. The firm
can be a proprietorship or partnership. The licensee is
the person authorized by railway administration or
IRCTC to carry out the business."
4. the 2010 Policy
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5. In accordance with this policy, for catering on each train, a
minimum license fee is calculated. The fixation of minimum license
fee for mobile units is governed by paragraphs 18.2 and 18.3 of the
2010 Policy and it is as follows:-
"18.2 Minimum licence fee will be fixed as 12% of the
estimated annual sales turnover for static units,
mobile units of Ordinary Mail/Express trains & premium
super fast trains and 15% for Rajdhani/Shatabdi
trains/Duronto trains of the annual sales turnover
based on actual occupancy figures certified by the Train
Superintendent.
18.3 At the time of renewal of licence, licence fee
should be enhanced/reassessed based on actual sales
turnover of the unit. Licence fee will be reassessed and
revised at the time of each renewal subject to a
minimum of 10% increase over the prevailing licence
fee of the unit. To arrive at a realistic figure zonal
railways will ensure that a fresh assessment of sales
turnover/revenue is conducted during the peak
period and lean period i.e. with the periodicity of three-
three months in order to assess the actual sales
turnover so as to fix the revised licence fee."
6. The appellant has described the process pertaining to the
license of catering service on the Dhanbad - Alappuzha Express -
Train No. 13351/52. Three teams of railway officers carry out an
assessment of sales turnover of pantry car on the train in both the
directions. The quantity sold of each item is kept count of and the
sales turnover for one ride i.e., both directions of the train is arrived
at the old rates and at the revised rates. Similar exercise is carried
out by two more teams and in total, three such assessments are
carried out. The highest value of the three assessments is picked and
is subsequently multiplied by the number of days on which the train
runs to arrive at the annual assessed value at both the old rates and
the revised rates.
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7. At the old rate, the assessed value worked out to Rs.
1,42,415/-, while at the revised rate it worked out to Rs. 1,95,895/-.
Thus, the annual assessment at the old rate would be Rs. 1,42,415 x
365 days = Rs. 5,19,81,475 and 12% of this annual assessment
would be Rs. 62,37,777/-. At the revised rate, the annual assessment
would be Rs. 1,95,895 x 365 days = Rs. 7,15,01,675/- and 10% of
this annual assessment would Rs. 71,50,168/-. The prevailing annual
license fee till then was Rs. 95,74,740/- and with an increment of
10%, this value would be Rs.1,05,32,214/-. According to paragraphs
18.2 and 18.3 of the 2010 Policy, the best of three is set as the
annual minimum license fee. In the instant case, it would be Rs.
1,05,32,214/-.
8. For a contract term of 5 years, this value would Rs 1,05,32,214
x 5 years = Rs. 5,26,61,070. This is the minimum license fee that is
determined. Once the minimum license fee is determined, the bidding
process starts.
9. The relevant portion of the bid document for the Dhanbad -
Alappuzha Express - Train No. 13351/52 is:
"for and on behalf of the Preside of India, East Central
Railway invites sealed bid on single stage two packet
system, from food and catering service providers for
"Provision of Catering Services on Train Number
13351/52."
(emphasis supplied)
10. It is clear from the aforesaid bid notice that the invitation is
only for bids to provide catering service on board the train and no
services are offered in return for the license fee in the bid document.
11. Further, once a bidder is selected as the licensee, then such a
bidder has to pay license fee for the authorization to provide catering
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ST/51712/2022
services. This is clear from the following extracts of the bid
document:
"1.1.3. The Bidder, once selected shall become
"Licensee" and shall be liable to pay License Fee as per
terms and conditions determined by the Railway.
1.3 (l) In consideration of the award of the License to
the Licensee, the Licensee shall be liable to pay License
Fee to Railway which shall be more than minimum
license fee determined by Railway."
12. In response to the bid notice, all the bidders offer their "quoted
license fee", which is defined in the Policy 2010 as :
"23. Quoted license fee:
This is the license fee quoted by a licensee including
mark up over minimum license fee."
13. The bid is then awarded to the bidder who has bid the highest
"quoted license fee". The relevant extract of the selection process, as
stated in the bid document, is as follows:
"3.5 Selection Process
3.5.1 The responsive bids shall be evaluated in the
following manner:
a. Scrutiny of bids for Minimum Eligibility as per
Chapter 3 of Section A. Such bids that meet
with the eligibility criteria will be called "eligible
bids"
b. The eligible bidders will be evaluated techno-
commercially and awarded a Techno-
Commercial Score to assess the capability of
the eligible bidder(s) on the basis of scrutiny of
information provided in Annexure - A/4 (Tech
Form 1, 3 to 5) and the scoring scale at
Annexure - A/5
c. The highest Techno-Commercial score (HTS)
secured by any of the bids will be the base
Techno-Commercial index.
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ST/51712/2022
d. All bids whose techno-commercial score is
more than or equal to 60% of HTS will be
"techno-commercially qualified" for
consideration of Railway Administration.
e. Price Bids will be opened for "techno-
commercially qualified" bids only. The date,
time and venue of opening of price bid will be
intimated only to the "techno-commercially
qualified bidders".
f. Highest Priced bid will be selected for award of
contract.
g. In the event of highest price being the same
for more than one bid, bid with higher techno-
commercial score should be considered by
award of contract."
14. In the instant case, the appellant was the highest bidder with a
quoted license fee of Rs. 13,63,51,000/-. This highest quoted license
fee becomes the license fee and the license is tentatively awarded,
initially through a letter of award. On acceptance of the letter of
award, a Master License Agreement is signed between the highest
bidder and the Railways.
15. The show cause notice dated 15.10.2018 considered the Master
License Agreement between the appellant and the Railways and the
relevant portions of the show cause notice are reproduced below:
"5.2 It appears to emerge from MLAs that:
(i) The support provided in the instant case by
Indian Railway includes:
(a) Infrastructural support - The Railway
provides basic infrastructure to the Licensee as
pantry car, manifold room for gas cylinders as
mentioned in para 6.25 and 6.29 (iv) of Article
6 of MLA.
(b) Operational Support - The Railway
issues travel authority/passes on demand to
the Licensee and its staff for providing services
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ST/51712/2022
on the Train as mentioned in para 7.1 (c) of
Article 7 of MLA.
(c) Marketing Support - The Railway
grants rights to the Licensee to commercially
advertise on disposable accessories alongwith
distribution of books, magazines and
newspapers or do promotional as mentioned in
para 7.2 of Article 7 read with para 1.3K of
Annexure-I of MLA.
(ii) Para 19.1 of MLA provides that License Fees
(paid in advance) shall be refunded to Licensee on
pro-rata basis in the event of permanent
cancellation/withdrawal/non-operation of the train
services by the Railway. It thus, appears that there
is a provision of service by Railway and receipt of
Service by Licensee and Licensee shall pay only for
the time period in which it obtained and received
services from the Railway.
(iii) Licensee shall be liable to pay all taxes payable
on account of the grant of License and that Railway
shall not be responsible towards the same at any
time during the term.
Therefore, it appears that certain individual functions
that caterer would carry out in ordinary course of their
operations such as arranging their own equipment and
spaces for carrying out, managing and supervising their
business activities are, in the present case, being
enabled to them by the Railway who make available the
pantry car, including manifold room and washing
facilities, for use of the caterer through granting right
to use and right to provide additional services, including
advertisement & promotion and provide the caterer
with travel passes for providing the service on trains
and that Railway principally render assistance to the
caterer that is infrastructural, logistical, operational,
marketing or of other kind in lieu of the License Fees.
*****
6.2A It appears from the foregoing that the Indian Railways provided "Support Services" to the Licensee. It further appears that these are taxable by virtue of not being covered under Section 66D. It also appears that the tax is payable by the Licensee on reverse 9 ST/51712/2022 charge basis under Notification No. 30/2012-ST (Sl. No.
6) dated 20.06.2012.
xxxxxxxxx 6.5 Further, it appears that from 01.04.2016, changes were made by Finance Act, 2015 (20 of 2015) whereby the words "support services" were substituted by "any service" in sub-clause (iv) of clause (a) of Section 66D of the Finance Act, 1994. Moreover, clause 49 of Section 65B of Finance Act was omitted from 01.04.2016 by virtue of Not. No. 15/2016-ST dated 01.03.2016 issued in terms of clause (h) of section 107 of the Finance Act, 2015. Further, the words "by way of support services" were omitted against Sl. No. 6 in column (2) of the Notification No. 30/2012-ST dated 20.06.2012 vide Notification No. 18/2016-ST dated 01.03.2016, w.e.f. 01.04.2016. In view of these changes, read with definition of service in Section 65B(44) of the Finance Act. 1994 (service means any activity carried out by a person for another for consideration, and includes a declared service.....), it also appears that License Fee paid to Indian Railway by Ambuj were also taxable from 01.04.2016 onwards under reverse charge mechanism.
6.6 Accordingly, it appears that Ambuj have not paid their Service Tax liability (inclusive of Education Cess, Secondary & Higher Education Cess, Swachh Bharat Cess and Krishi Kalyan Cess) on amount pain as consideration by them to Indian Railays, under reverse charge mechanism, during the period 01.04.2013 to 31.03.2017 which, calculated on the basis of the MLAs (RUD-6 to 13), information provided by Ambuj and information provided by different Railway Zones (collectively RUD-14), totals Rs. 11,15,69,363/-."
16. Shri Arjun Raghavendra, learned counsel for the appellant contends that the license fees paid to the Railways by a licensee is the consideration for award of license and no other services are promised or negotiated in this process between the Railways and the licensee. To support this, learned counsel placed reliance on the communication dated 15.09.2022 sent by the Railways. In this 10 ST/51712/2022 communication, the request made for reduction in license fee was considered and the calculation is based on a reassessment of the sales turnover alone and not any other parameter associated with any support provided by railways. The contention, therefore, is that the license fee is based solely on the assessed sales turnover and the show cause notice has misread/misinterpreted the rights and obligations of the parties. Learned counsel pointed out that reference to some of the necessary arrangements were misinterpreted and wrongly construed by the department as providing three kinds of support services. Learned counsel referred to a table that provides the exact text of the Agreement based on which the show cause notice made the allegation, the alleged activities and why the allegations were incorrect. The table is as follows:
Sl. Alleged activities as in Actual text from the Why the allegation No. the show cause notice Master License fails when read with and subsequently Agreement to which the actual text of the confirmed in the the show cause notice agreement?
impugned order refers 1. Infrastructural ARTICLE 6. RIGHTS The actual text does not Support: AND OBLIGATIONS OF discuss about providing THE LICENSEE any infrastructure. The Railway provides basic infrastructure to 6.25 Provision of Instead, it states the the Licensee as pantry equipment. responsibilities of the car, manifold room for licensee with regard to The licensee will arrange gas cylinders and the existing his own equipment and washing facilities as infrastructure on the other than those mentioned in paragraphs train. The mention of provided in the Train 6.25 and 6.29 (iv) of "pantry car" and pantry car for MLA. "manifold room" are all satisfactory provision of incidental in describing service. the responsibilities of 6.29 Gas room the licensee. instructions The said paragraphs do (iv) The manifold room is not discuss providing provided with double any infrastructural 11 ST/51712/2022 leaf, swing doors (with support to the licensee. observation glasses) for removal and replacing of new cylinders. These doors should always be kept closed and locked. Before every trip the pantry car manager should ensure that these doors are locked and sealed even if the cylinders are empty. 2. Operational Support: ARTICLE 7. RIGHTS The actual text AND OBLIGATIONS OF discusses the provision The Railway issues travel RAILWAY of an essential activity authority/passes on to be on the train and it demand to the Licensee 7.1 General does not say that this and its staff for providing (c) The Railway shall entry on the train is services on the Train as issue travel provided in lieu of mentioned in paragraph authority/passes on license fee. 7.1 (c) of Article 7 of demand to the Licensee MLA. and its staff for providing services on the Train. 3. Marketing Support: ARTICLE 7. RIGHTS As the text clearly says AND OBLIGATIONS OF these are limited and The Railway grants rights RAILWAY conditional rights and to the Licensee to not guaranteed to the commercially advertise 7.2 Grant of limited licensee. Again, none of on disposable accessories rights to advertisement these are in lieu of the along with distribution of The Railway may grant license fee. books, magazines and limited rights to the newspaper or do Licensee to commercially promotional as advertise on disposable mentioned in paragraph accessories that may be 7.2 of Article 7 read with used by the Licensee in paragraph 1.3K of rendering catering Annexure-I of MLA. services to the passengers on board. Paragraph 1.3K of Annexure-I: The Licensee shall be allowed to provide additional services such 12 ST/51712/2022 as distribution of books, magazines, newspapers etc. Licensee on request may be permitted to undertake promotional advertising campaigns for the benefit of travelling passengers subject to authorization from Railway before the commencement of each campaign. The Licensee is expected to conduct appropriate market research/survey beforehand and may factor in such benefits in the price bid. It may be noted that Railway may or may not permit such campaigns. However, no audio/video material/ stickers or materials that may cause any damage to the Railway property shall be permitted under this clause.
17. The identification of these activities as „support services‟ for which license fee was paid is, according to the learned counsel for the appellant, factually wrong and also since these activates do not qualify the definition of „support services‟, the entire service tax demand on the license fee for an amount of Rs. 11,15,69,363/- has to be set aside in its entirety.
18. Learned counsel for the appellant has, however, not contested the demand made for the differential service tax due and this amount was, according to the learned counsel for the appellant, deposited on 06.10.2015 with interest. Learned counsel for the appellant also 13 ST/51712/2022 stated that the appellant is not contesting the demand towards deposit of the excess service tax collected by the appellant.
19. Shri Rajeev Kapoor, learned authorized representative appearing for the Department supported the impugned order and pointed out that service tax has been demanded on the license fee paid by the appellant to the Railways in lieu of the support service rendered by the Railway to the appellant. Elaborating this submission, learned authorised representative submitted that the Railways was providing infrastructural support by way of providing space, i.e. pantry car, including manifold rooms and washing facilities for the use of the appellant as well as marketing support by allowing advertisement and promotion and operational support and issue of travel passes for providing catering service on trains. These would fall under „support service‟ provided by the Railway and would be taxable as these are excluded from the negative list by virtue of clause (a)(iv) of section 66D of the Finance Act. Under section 99 of the Finance Act, „support service‟ provided by the Railways to a business entity are taxable w.e.f. 01.10.2012 and as per rule 2(1)(d)(i)(E) of the Service Tax Rules, 1994, the appellant is liable to pay service tax.
With effect from 01.04.2016, „support service‟ was substituted by „any service‟ in sub-clause (a)(iv) of section 66D of the Finance Act. „Service‟ w.e.f. 01.04.2016, has been defined, in section 65B(44) of the Finance Act, as any activity carried out by a person for another for consideration, and includes a declared service. Hence, the appellant is liable to pay service tax of Rs. 11,15,69,363/- on the license fee paid to the Railways for receiving support service/any service under reverse charge mechanism.
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20. The submissions advanced by learned counsel for the appellant and the learned authorized representative appearing for the Department have been considered.
21. The period under dispute can be broken in two different sub- periods since an amendment was made w.e.f 01.04.2016. The taxability of the activity of providing licenses has been clarified by the CBIC Circular dated 11.10.2019. It states that the act of granting license is taxable only after 01.04.2016. Therefore, the grant of license is clearly not exigible to service tax before 01.04.2016 and has to be set aside.
22. The breakup of the demand based both on the normal and the extended period as also for the period prior to 01.04.2016 and post 01.04.2016 is provided in the following table:
Financial License Fee Service Tax Service Tax Demand by different Year paid (in Rs.) demanded criteria (in Rs.) Extended vs. Pre 01.04.2016 normal period vs. Post 01.01.2016 2013-14 17,80,54,328 2,20,07,515 Extended period is Pre 01.04.2016 is 2014-15 11,86,77,110 1,47,05,571 Rs. 3,67,13,086 Rs. 8,23,86,463 2015-16 32,40,18,260 4,56,73,377 Normal period is 2016-17 14,01,78,000 2,09,14,900 Rs. 7,48,56,277 Post 01.04.2016 is 2017-18 5,51,20,000 82,68,000 Rs. 2,91,82,900 81,63,47,698 11,15,69,363
23. If the demand is set aside for the period prior to 01.04.2016, then in effect the entire demand for extended period will be set aside and a partial demand of Rs. 4,56,73,377/- for the normal period will also be set aside, leaving an amount of Rs. 2,91,82,900/-.
24. For this demand of Rs. 2,91,82,900/-, which is the license fee paid after 01.04.2016, the submission of the learned counsel for the 15 ST/51712/2022 appellant is that the activities alleged in the show cause notice and subsequently confirmed in the impugned order are not the activity for which license fee was paid. Learned counsel submitted that every demand for service tax has to be against a proper taxable service, but the show cause notice does not identify the "grant of license" as a taxable service.
25. The taxable event under the Finance Act is the provision of service and not the consideration paid, as is clear from section 66B of the Finance Act. The liability to pay service tax emanates from section 68 of the Finance Act. Even under section 68(2) of the Finance Act, liability under reverse charge mechanism is in respect of „taxable service‟. It is, therefore, an essential pre-requisite that a taxable service is identified before any service tax is levied under section 68 of the Finance Act. The demand for recovery of service tax under section 73 of the Finance Act also arises when the service tax which was required to be paid under section 68 of the Finance has not been paid or has been short paid. It is, therefore, important that the correct taxable service is identified in the show cause notice and it is not enough to identify that there is an amount of money paid from one person to another.
26. In the instant case, the show cause notice in paragraph 15 (ii), demanded service tax amounting to Rs. 11,15,69,363/- during the period 01.04.2013 to 31.03.2017, not paid by the appellant on the services described in paragraphs 5 and 6 and paragraph 6.2A concludes that the Indian Railways provided "support services" to the appellant and would be taxable on a reverse charge, as it is not covered in the negative list of service provided under section 66D of the Finance Act.16
ST/51712/2022
27. While confirming the demand, the Commissioner observed as follows:
"19.6. xxxxxxxxx. I find from the above-mentioned agreement that the Railways had provided the following supports:
a) Infrastructural support: The Railway provides basic infrastructure to the Licensee as pantry car, manifold room for gas cylinders and washing facilities as mentioned in the para6.25 and 6.29 (iv) of Article of MLA.
(b) Operational Support: The Railway issues travel authority passes on demand to the Licensee and its staff for providing services on the Train as mentioned in para 7.1 (c) of Article 7 of MLA.
(c) Marketing Support: The Railway grants rights to the Licensee to commercially advertise on disposable accessories along with distribution of books, magazines and newspapers or do promotional as mentioned in para 7.2 of Article 7 read with para 1.3K of Annexure-l of MLA.
The aforementioned services provided by railway to the Noticee is covered under "support services" as defined under section 65B(49) referred to above. Thus, I find that railways had provided support services to the Noticee. The said services provided by the Railways does not fall under Section 66D (Negative list of services) of the Finance Act 1994."
28. It clearly transpires that the license fee is based solely on the assessed sales turnover. It cannot be said that the license fee is quid pro quo for any support offered by the Railways. It also needs to be noted that license fee is paid as consideration for the service provided by the Railways to the appellant by way of grant of the authorization to provide catering service on the train. This would be clear from the bid document and the relevant portion is reproduced:
"1.3.12 In consideration of the award of the License to the Licensee, the Licensee shall be 17 ST/51712/2022 liable to pay License Fee to Railway which shall be more than minimum license fee determined by Railway apart from the Security Deposit. The licensee shall submit the bill for providing on-board catering services on 10 days basis and the 90% of the payment will be settled based on the provisional bills while the final bills along with train occupancy certificate issued for each trip by the Train Superintendent will be settled on monthly basis. Railway will make payment of such amounts after due verification. In addition, Railway will make mandatory deductions for tax at source or any other deductions in respect of catering services.
1.3.13 In consideration of the award of the License to the Licensee, the Licensee shall be liable to pay License Fee to Railway which shall be more than minimum license fee determined by Railway. The entire License Fee shall be payable in advance 2+2+1yearly basis. The License Fee for the first 2 years will be payable fifteen (15 days) prior to commencement of the License at the beginning of license and the license fee for the second 2 years shall be paid within fifteen (15 days) after completion of first two years of the contract subsequently the license fee for the 5th year shall be paid with n fifteen (15 days) after completion of the 4th year of the license. In case of renewal for another period of 5 years, the same procedure shall be followed for payment of license fee. The licensee shall submit the bill for providing on-board catering services on monthly basis, along with train occupancy certificate issued for each trip by the Train Superintendent. Railway will make payment of such amounts after due verification. In addition, Railway will make mandatory deductions for tax at source or any other deductions in respect of catering services."
29. The limited question that arises for consideration is whether the activity identified in the show cause notice qualifies to be a taxable service for which the license fee is said to be the consideration. The demand of tax in the show cause notice is on support services. However, the consideration paid as license fee is not linked with such 18 ST/51712/2022 support. When the activity identified to be taxed in the show cause notice is found to be non-taxable, the demand proposed in the show cause notice cannot sustain as was held by the Madras High Court in R. Ramadas vs. Joint Commissioner of Central Excise, Puducherry5. In Commissioner of Central Excise, Nagpur vs. M/s. Ballarpur Industries Ltd.6, the Supreme Court held that what is not invoked in the show cause notice cannot be examined in proceedings arising from the said notice. As noticed above, the demand on "grant of license" was not invoked in the show cause notice.
30. The license fee is the consideration paid for the „grant of license‟. It is pertinent to note that the words "license fee" is defined the Oxford Dictionary to mean "a fee paid to an organization for permission to own, use or do something." The Supreme Court in State of Orissa vs. Narain Prasad7 explained the meaning of expression "Privilege" and held that "Privilege really means the license or permit granted by the State". In the instant case, the license fee paid by the appellant to Railways is the consideration for the privilege to be the sole catering agent on board the trains for which a license was issued. This "grant of license/privilege" is the service which was taxable and the value of this service is equal to the license fee which is the consideration paid for this service. The show cause notice has not identified this service. To tax this service would, therefore, result in going beyond the scope to the show cause notice.
31. There is, therefore, merit in the contention advanced by the learned counsel for the appellant that the consideration paid by the
5. 2021 (44) G.S.T.L. 258 (Mad.)
6. 2007 (215) E.L.T. 489 (SC)
7. (1996) 5 SCC 740 19 ST/51712/2022 appellant as license fee cannot be subjected to levy of service tax. The other two demands proposed in the show cause notice and confirmed by the adjudicating authority have not been contested by the appellant.
32. Thus, the impugned order dated 15.10.2018 in so far as it confirms the demand of service tax on the license fee paid by the appellant to the Railways with interest and penalty is set aside and the appeal is allowed to this extent.
(Order pronounced on 03.04.2023) JUSTICE DILIP GUPTA (PRESIDENT) P.V. SUBBA RAO MEMBER (TECHNICAL) JB, Shreya