2026-VIL-1671-CESTAT-KOL-ST
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SERVICE TAX CESTAT Cases

Service Tax - Taxability of licence fees and additional licence fees paid to the State Government for grant of exclusive privilege to trade in liquor - Appellant, a State Government undertaking vested with the exclusive right and privilege of importing, exporting and carrying on wholesale trade and distribution of foreign liquor, paid licence fees and additional licence fees under the applicable excise law - Whether the statutory grant or continuance of a liquor licence, and the fees paid therefor, constitute a 'service' within the meaning of Section 65B(44) of the Finance Act, 1994 - HELD - The mere statutory grant or continuance of a licence to carry on the regulated liquor trade cannot by itself establish the essential relationship of service provider and service recipient - The right to manufacture, possess, transport, purchase or sell intoxicating liquor is within the exclusive regulatory domain of the State under Entry 8 of List II of the Seventh Schedule, and the amount charged for permitting exercise of such privilege, though termed a licence fee, cannot be equated with consideration for a service, there being no reciprocity, quid pro quo or corresponding obligation upon the State Government to provide any service against such payments - The grant of a statutory licence does not constitute "support services" within the meaning of Section 65B(49) as it does not answer the description of infrastructural, operational, administrative, logistic, marketing or other support that entities ordinarily perform themselves and may elect to outsource - For the period up to 31.03.2016, the grant of licence or exclusive privilege remained covered by the Negative List under Section 66D(a) - For the period from 01.04.2016, the amendment substituting "any service" for "support services" in Section 66D(a)(iv) merely altered the scope of the Negative List and did not dispense with the threshold requirement of an activity performed for consideration under Section 65B(44) - In any event, the levy for the period from 01.04.2016 to 30.06.2017 stands expressly neutralised by the retrospective statutory dispensation under Section 117 of the Finance (No. 2) Act, 2019, which provides that no service tax shall be levied on services provided by the State Government by way of grant of liquor licence against consideration in the form of licence fee or application fee for that period - Licence fees and additional licence fees paid by the appellant do not constitute consideration for any service rendered by the State Government - The demand of service tax, along with interest and penalties is set aside – The appeal is allowed - Invocation of extended period of limitation - Whether the extended period could be invoked against a State Government undertaking whose activities are in the public domain - HELD - The appellant is a Government undertaking incorporated for the purpose of regulating the wholesale trade and distribution of foreign liquor in the State, and all activities undertaken by the appellant are in the public domain, with no suppression of information from the Department - Suppression of facts with intention to evade tax is not established, and the extended period cannot be invoked to demand service tax in this case.
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