2026-VIL-1690-CESTAT-KOL-ST
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SERVICE TAX CESTAT Cases

Service Tax – Taxability of licence and facility charges received under a revenue sharing arrangement – Business Support Service under Section 65(104c) of Finance Act, 1994 – Appellant, registered for restaurant service, entered into an agreement with a caterer for running the kitchen of its bar and restaurant, under which food and non-alcoholic beverages were prepared, served and sold and invoiced by the caterer, while alcoholic beverages were sold and invoiced by the Appellant - Appellant realised licence and facility charges at a fixed percentage of the caterer's sales turnover - Whether the licence and facility charges received by the Appellant are liable to service tax as Business Support Service - HELD - The definition of Business Support Service covers services in relation to business or commerce, including infrastructural support services. The service can be considered Business Support Service only if the Appellant provides infrastructural support to the caterer. The agreement provides that the Appellant is entitled to a fixed percentage of the net turnover of the caterer as licence and facility charges. The Appellant and the caterer were jointly running the eatery on a revenue sharing basis, and the two parties act on a principal-to-principal basis - Applying Circular No. 109/3/2009-S.T. dated 23.02.2009, where the contract is on a revenue sharing basis with a fixed and pre-determined percentage of revenue going to one party, one does not provide service to the other. Business Support Service is a generic service of providing support to the business of the service receiver, where the principal activity is undertaken by the client and assistance is provided by the service provider. The same view was taken in Ambience Hospitality, where a joint venture on a principal-to-principal basis with revenue sharing was held not to attract service tax - There is no service element in the agreement, and the amount received is not liable to service tax as Business Support Service. The demand under this category is set aside - Service Tax – Taxability of payouts received from distributors of alcoholic beverages – Advertisement Service – Appellant received payouts in the form of stock and cash from distributors of a beverage group for display of its alcoholic beverages in the restaurant - Whether the payouts received are liable to service tax as Advertisement Service - HELD - The amounts received represent sales incentives in the form of stock and cash from distributors based on the volume of sales in terms of specific agreements. The Appellant did not carry out sale of space or time for advertisement, which it could not undertake since the advertisement of alcoholic beverages is banned in India. The agreement shows that the amount represents only incentives linked with the sale of goods. The payouts cannot be considered consideration for rendering Advertisement Service - The demand under Advertisement Service is set aside. As the demand is not sustained, the question of interest and penalties does not arise, the impugned order is set aside and the appeal is allowed with consequential relief
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