Tender Documents Sale Not A Service, No Service Tax Payable On Fees: CESTAT Delhi
The New Delhi Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT), on 13 October held that fees collected for selling tender documents are not subject to service tax, as the sale of documents does not constitute a taxable service.
A Bench of Judicial Member Ajay Sharma and Technical Member Hemambika R. Priya allowed the appeal filed by Rajasthan State Road Development & Construction Corporation Limited against a service tax demand of Rs. 72,071, along with interest and penalty. The Tribunal observed:
“In the instant case, we note that the amount collected was only the prescribed cost of tender documents, hence, the said transaction can be viewed as sale/supply of documents, rather than provision of taxable service. A tender is ordinarily only an invitation to offer and does not itself create a contractual service arrangement in every bidder. There is no identifiable service between the tendering authority and the bidder.”
The case arose after the Service Tax Department demanded tax on fees collected by the Corporation from persons purchasing tender documents. The Department treated the fees as income from providing services and confirmed a demand of Rs. 72,071, along with interest and penalty.
The Corporation challenged the demand, arguing that it merely sold printed documents containing details of the proposed work, contract conditions and bidding requirements. It contended that the transaction constituted a sale of goods rather than a service. It also submitted that purchasing tender documents did not oblige a person to participate in the bidding process.
The Department maintained that the fees formed part of the Corporation's services and were taxable. It also alleged that the Corporation had suppressed relevant information regarding the collection of tender fees.
The Tribunal observed that service tax could be levied only when an identifiable service was provided in exchange for payment. It found that the Corporation had collected only the prescribed price of tender documents and had not provided any separate service to prospective bidders.
It also relied on its earlier decision in Rajcomp Info Services Limited v. Principal Commissioner of CGST & Central Excise, Jaipur, which held that supplying tender documents for a fee does not amount to providing a taxable service.
Accordingly, the CESTAT set aside the service tax demand, interest and penalty and allowed the Corporation's appeal.
For Appellant: Advocates Tushar Sharma and Surbhi Vyas
For Revenue: Mayank Gupta, Authorised Representative