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2023 (4) TMI 322 - AT - Service TaxLevy of Service Tax - license fee paid by the appellant to the Railways under section 73(2) of the Finance Act, 1994 along with consequential interest under section 75 of the Finance Act and 100% penalty under section 78 of the Finance Act - differential service tax due on the difference in value of catering service as declared in balance sheet and ST-3 returns - HELD THAT:- 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. 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/- - 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. 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? - HELD THAT:- 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 & ORS. VERSUS NARAIN PRASAD & ORS., ETC. ETC. [1996 (9) TMI 599 - SUPREME COURT] 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. There is merit in the contention advanced by the learned counsel for the appellant that the consideration paid by the 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. 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 - Appeal allowed.
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