Transaction of purchase/ sale of liquor by Corporation not covered under ‘Business Auxiliary Services’

Rajasthan State Beverages Corporation Limited Vs The Principal Commissioner (CESTAT Delhi)

CESTAT Delhi held that the transaction of purchase and sale of liquor by the Corporation will not fall within the ambit of ‘Business Auxiliary Services’ and would, therefore, not be taxable.

Facts- The State Government of Rajasthan incorporated the Corporation to ensure quality of liquor and effective controlled distribution. For this purpose, all the liquor manufacturers/ re-sellers have to sell their products only to the Corporation as per the excise laws of the State and all the retail licensees can purchase liquor only from Corporation. Thus receipt, storage and dispatches of liquor can only be done by Corporation. To ensure optimum utilisation of space and resources, the Corporation gives advance planning of purchase and sale of liquor and the manufacturers have to abide by that. In case of failure, conditions are imposed under the Agreement and the consequence have to be borne by the liquor manufacturers.

Accordingly, show cause notices alleging that the Corporation had earned commission on sale of liquor and the balance sheet/ trial balance also showed income under the head ‘other incomes’, but the Corporation had not paid service tax which was required to be deposited by it under ‘business auxiliary services’ prior to 01.07.2012 and, thereafter, as a taxable service not covered either in the negative list of services or exempted list of services. The show cause notice separated the taxability of service prior to 01.07.2012 and after 01.07.2012.

Conclusion- Held that in view of the decisions of the Rajasthan High Court in the case of M/s. Hindustan Coca Cola Beverages Pvt. Ltd. vs. Commissioner of Income-Tax-III, Jaipur and the decision of the Chhattisgarh High Court in the case of Union of India vs. M/s. Chhattisgarh Estate Beverages Corporation it has to be held that the transaction of purchase and sale of liquor by the Corporation will not fall within the ambit of BAS and would, therefore, not be taxable.

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