Tamilnadu State Marketing Corporation Ltd. Vs Commissioner of GST and Central Excise (CESTAT Chennai)
Customs, Excise, and Service Tax Appellate Tribunal (CESTAT), Chennai Bench, has set aside demands for service tax on license fees collected by the Tamilnadu State Marketing Corporation (TASMAC) from bar contractors for periods from March 29, 2013, onwards. The Tribunal’s consolidated order, addressing three appeals by TASMAC, affirmed that these activities, after a specific amendment to state rules, constitute a statutory function and thus fall under the negative list of services, exempting them from service tax.
TASMAC’s Role and Department’s Demand
TASMAC, a wholly-owned undertaking of the Government of Tamil Nadu, holds the exclusive privilege for wholesale and retail distribution of Indian Made Foreign Liquor (IMFL) in the state. As part of its operations, TASMAC grants licenses to private contractors to operate bars within or adjoining its retail outlets, allowing them to sell eatables and collect empty liquor bottles. In return, these contractors pay a license fee to TASMAC.
The Department of GST and Central Excise was of the view that this issuance of licenses amounted to a “service” as defined under Section 65B(44) of the Finance Act, 1994, with the license fee serving as consideration. They contended that this service was not covered under the negative list (Section 66D) or any mega exemption notification. Consequently, show cause notices were issued to TASMAC’s outlets in Villupuram, Cuddalore, and Tiruvannamalai districts, demanding service tax on the gross license fees received during April and May 2013, along with interest and proposed penalties. The total demand amounted to approximately ₹28.14 lakh across the three districts.
