CESTAT Rules, Service Tax Not Leviable On License Fee Or Spectrum Charges Payable For Period Before 1st April 2016
Pranav B Prem
The Chandigarh Bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) has ruled that service tax is not leviable on license fee or spectrum charges payable for the period prior to April 1, 2016. The decision came in the appeal filed by Sistema Smart Technologies Ltd. challenging a demand of ₹43.73 crores raised by the Commissioner, Gurugram, under the Finance Act, 1994.
The Bench comprising Judicial Member S.S. Garg and Technical Member P. Anjani Kumar examined whether the department was right in levying service tax on additional license fee liabilities determined post-facto in light of the Supreme Court’s AGR judgment. The appellant had argued that the amount in question pertained to old dues on 2G licenses that were canceled much before April 2016, and during that time, service tax was not applicable.
The appellant, a registered service provider of telecommunication services, was granted 22 UAS licenses by the Department of Telecommunications (DoT). These licenses, except the Rajasthan circle, were canceled by the Supreme Court in its 2G spectrum judgment dated 02.02.2012. Following this, the appellant stopped operations, migrated to spectrum trading and sharing, and eventually demerged its telecom business into Reliance Communications Ltd. as per an NCLT-approved scheme dated 18.07.2017, effective from 31.10.2017.
Despite ceasing operations, a demand notice dated 12.10.2021 was issued, proposing to levy service tax for the period from 01.04.2016 to 30.06.2017 on the license fee liability of ₹222.1 crores. This amount included ₹221.4 crores originally self-assessed and paid, and an additional ₹0.73 crores determined in compliance with the AGR judgment. The Revenue alleged that this constituted a taxable service received from the Government of India under reverse charge and was subject to service tax, interest, and penalties.
The Commissioner confirmed the demand with interest and penalties under Sections 77 and 78 but dropped the penalty under Section 76. In appeal, the appellant contended that the additional license fee liability was purely in respect of old licenses for the period FY 2008–09 to 2013–14. It was highlighted that service tax was made applicable on Government services only from 01.04.2016 under the Finance Act, and during the earlier period, such services were exempt under Notification No. 25/2012-ST as amended by Notification No. 22/2016-ST.
The appellant submitted substantial evidence, including:
Chartered Accountant's Certificate confirming that the dues pertained only to the pre-2016 period.
Copies of original license agreements and DoT letters confirming cancellation of licenses.
Breakup of license fee demand matched service-wise, license-wise, and year-wise to the periods prior to 01.04.2016.
The Tribunal observed that although the appellant paid certain amounts post-2016 due to the AGR judgment, the liability related to a period when service tax was not leviable. It specifically noted that “as per the principle of ejusdem generis, the phrase ‘any other document issued by the Government demanding such payment’ should only include documents of similar nature to an invoice, bill, or challan,” and that an agreement could not be equated to such documents to create a taxable event.
Further, the Tribunal held that the demand was barred by limitation as it was issued in 2021 for dues clearly traceable to the period between 2008–2014. It emphasized that there was no suppression of facts as the appellant had ceased business operations and duly reflected the payments made.
The Tribunal concluded: “The demand of service tax on additional license fee/spectrum charges in the present case pertains to the period FY 2008–09 to 2013–14 which is clear from the CA certificate, and during that period, service tax was not leviable on the license fee/spectrum charges. The same became chargeable to service tax only w.e.f. 01.04.2016.” Accordingly, the Tribunal allowed the appeal and set aside the impugned order confirming the ₹43.73 crore demand along with penalties and interest.
Appearance
Counsel for Appellant/ Assessee: Gajendra Maheshwari and Priyamwada Sinha
Counsel for Respondent/ Department: Raj Pal Sharma
Cause Title: Sistema Smart Technologies Limited V. Commissioner of Central Goods & Service Tax, Gurugram
Case No: Service Tax Appeal No. 60295 of 2023
Coram: Hon’ble Mr. S. S. Garg [Member (Judicial)], Hon’ble Mr. P. Anjani Kumar [Member (Technical)]
