The Chennai Bench of Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has held that Tamil Nadu State Marketing Corporation Ltd. (TASMAC) is liable to pay service tax of the licence fees received for the period 1.7.2012 to 28.3.2013.
The bench of P. Dinesha (Judicial Member) and M. Ajit Kumar (Technical Member) has observed that interest is necessarily linked to the delayed or deferred payment of duty, liability arises automatically by operation of law, as under section 75 of the Finance Act 1994.
The appellant/assessee, M/s. Tamil Nadu State Marketing Corporation Ltd. (TASMAC), a 100% Government of Tamil Nadu undertaking is a company incorporated under the Companies Act, 1956 and the appellant is vested with the exclusive privilege of wholesale distribution as well as retail vending of Indian Made Foreign Liquor (IMFL) in the State of Tamil Nadu under the Tamil Nadu Prohibition Act, 1937. The retail vending of IMFL is done through its outlets located throughout the State of Tamil Nadu.
Directorate General of Central Excise Intelligence (DGCEI), Chennai conducted an investigation against TASMAC on the issue of non- payment of service tax on the amount received by them as license fee from bar operators. Investigation conducted by DGCEI revealed that TASMAC floated a tender for giving license to run the bars and the successful bidders were issued with license by the District Manager of TASMAC.
The contractors who are given such license by TASMAC can sell eatables in the bars located within or adjoining the TASMAC shops and can collect empty liquor bottles left by the consumers of liquor in the bar. In lieu of such a license given to them, the contractors have to pay a license fee.
The contractors can do business as per the business timing of TASMAC shops. The license given by TASMAC is renewed subject to the performance of the contractor during the previous year and if any deficiency is noticed in service of the contractor or any misuse noticed, license can be cancelled. Other than eatables, no sale or stock of liquor by contractor is allowed.
Two other legal issue raised in appeal are the levying of interest under section 75 and imposition of penalty under section 76 (as it stood prior to amendment on 14/05/2015), 77 & 78 of the Finance Act 1994.
The tribunal held that interest is necessarily linked to the delayed or deferred payment of duty, such liability arises automatically by operation of law, as under section 75 of the Finance Act 1994. The same cannot hence be set aside once delayed payment of duty is demanded. Similarly, the imposition of penalty under section 76 of the Finance Act, 1994 is statutory in nature and becomes payable when there is a failure to pay service tax in the normal course.
The tribunal concluded that the entire dispute was one of interpretation and subsequently dropped penalties under section 77 & 78 of the Finance Act 1994.
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Case Details
Case Title: M/s. Tamil Nadu State Marketing Corporation Ltd. Versus Commissioner of GST & Central Excise
Case No.: Service Tax Appeal Nos.40348 to 40355 of 2016
Date: 09.01.2025
Counsel For Appellant: G. Neelamegam
Counsel For Respondent: Anandalakshmi Ganeshram
