2023 (6) TMI 545 - SCH - Service Tax

Levy of Service Tax - support services of Business or Commerce or not - amount received under what has described as 'non-compete fee' - Section 65 (104c) of the Finance Act, 1994 - HELD THAT - With effect from 01.07.2012, there is no dispute that the said amount would be exigible to tax under Section 66E (5) but as on date of the agreement under which the amount was received all that existed on the statute book in a manner of speaking was Section 65 (104c) of the Finance Act, 1994 defines 'support service of Business or Commerce'. The amount which was made under the agreement was a one time payment. In other words, the amount did not spill over after 01.07.2012. In such circumstances, the order of the Commissioner appeal as upheld by the CESTAT appear to be untenable in law. Appeal allowed.

Summary

Issues involved: Whether the Customs, Excise & Service Tax Appellate Tribunal (CESTAT) was correct in upholding the order regarding liability to pay service tax under the Finance Act, 1994 for a 'non-compete fee' received under an agreement.

The Supreme Court of India heard arguments from the appellant's counsel and the Additional Solicitor General regarding the issue of liability to pay service tax under the Finance Act, 1994 for a 'non-compete fee' received under an agreement entered into on 5th March, 2009. The amount in question was sought to be taxed under Section 65 (104c) of the Finance Act, 1994, which defines 'support services of Business or Commerce.' It was noted that as of the date of the agreement, only Section 65 (104c) was in existence, and the amount was a one-time payment that did not extend beyond 01.07.2012. The Court found the order of the Commissioner appeal, upheld by CESTAT, to be legally unsustainable. Consequently, the appeal was allowed, and the impugned order was set aside, with any pending applications disposed of.