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Informist, Thursday, Dec. 18, 2025

 

NEW DELHI – The Supreme Court Thursday issued a notice to the Commissioner of GST and Central Excise, Chennai, on a plea by Indian Railway Catering and Tourism Corp. Ltd. challenging the service tax demand and penalty orders against it on renting of immovable properties within the premises of railway stations. In March, the top court will hear IRCTC's appeal against an order by the Customs, Excise and Service Tax Appellate Tribunal, Chennai, which had upheld the service tax demand and penalty.  

 

The case has its genesis in the Indian railways entering into a memorandum of understanding with IRCTC for catering services. In terms of the memorandum, IRCTC had awarded licences to construct food stalls and plaza on vacant land within the premises of railway stations and licensees were permitted to set up and operate stalls or kiosks. 

 

The licence holder would sell food and beverages at static catering stalls at a rate fixed by the Indian railways as approved by the petitioner, for which the company would charge licence fees and user charge. The licence fee was based on the percentage of actual sales turnover and user charges are collected for the area, which are paid by the licensee every month, irrespective of the turnover. Both these licence and user fees are shared by the petitioner and the Indian railways in the ratio of 60:40.

 

The tax department said that IRCTC was liable to pay service tax on the renting of immovable properties and passed demand orders against the company for the period between 2007 and 2010. It was not engaged in providing services of renting of immovable properties and it was not the owner of the vacant space and land, IRCTC said, adding that Indian railways was the owner of land.

 

"We have very carefully perused the MoU  between the Indian Railways and appellant (IRCTC) and also the agreement between the appellant and the license holder; from these, we find that it is a pure commercial agreement; the only difference is in terming of the rental as fees/charges," the appellate tribunal said in its order in July. It is the settled position of law that an understanding between two independent entities or juridical persons cannot circumvent the levy of any tax or duty and hence, any device to circumvent deliberately the levy of tax cannot bind a statutory authority, the appellate tribunal said. 

 

At 1316 IST, shares of IRCTC were unchanged at INR 666.20 on the National Stock Exchange.  End

 

IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT

 

Reported by Surya Tripathi

Edited by Avishek Dutta

 

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