Brewery License Endorsement Not Taxable Under Service Tax as Property Rent: CESTAT Delhi Clarifies

🔍 Introduction

In a landmark decision on June 6, 2025, the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) in Delhi ruled that fees paid for brewery license endorsement do not qualify as “renting of immovable property” and hence, are not subject to service tax. This verdict offers much-needed clarity to breweries and license holders navigating service tax liabilities. In this SEO-focused guide tailored for Manika TaxWise, we break down the implications, legal reasoning, examples, and provide actionable tips—all in beginner‑friendly language.

1. What Was the Case About? ⚖️

• Parties Involved: Tripti Alcobrew Pvt Ltd vs Commissioner of Central Excise & CGST, Delhi CESTAT

• Key Issue: Was the license endorsement fee for using a brewery license “renting of immovable property,” thus attracting service tax?

• Context: Tripti had leased its land, plant, and machinery to Skol Breweries and separately endorsed the brewery license for a fee. The department assumed this endorsement equaled renting property and demanded service tax 

2. CESTAT Delhi’s Analysis & Verdict

a. Distinguishing Lease vs License

• Lease Deed: Covered land, building, plant, and machinery. Service tax was paid under renting of immovable property.

• License Agreement: Separate contract for endorsing the brewery license. No transfer of property rights, merely the right to use the license

b. Court’s Findings

1. Separate Transactions: The license endorsement was independent of the lease agreement.

2. License ≠ Property Rent: A license confers permission, not ownership or exclusive possession—unlike a lease

3. Deemed Sale, Not Service: The endorsement fee resembles a “deemed sale” of rights under constitutional Article 366(29A)(d), not a service liable for service tax 

c. Final Decision

CESTAT quashed the department's demand and held that license endorsement fees aren’t taxable under service tax as immovable property rent 

3. Practical Implications for Breweries

✅ What’s Allowed—No Service Tax!

• Separate billing for license endorsement and land/plant lease.

• License fees paid for use of the license alone are exempt from service tax.

⚠️ What to Avoid

• Don’t bundle license endorsement with lease invoices trying to dodge tax.

• Document both agreements clearly to show they’re distinct.

📝 Record-Keeping Checklist

1. Separate Agreements: Clearly outline lease vs endorsement terms.

2. Distinct Invoicing: Issue separate invoices: rent vs endorsement fee.

3. Label Appropriately: Tag endorsement fees as “license endorsement – not immovable property rent.”

4. Quick Summary Table

Aspect	Endorsement License Fee	Rent of Property/Plant
Nature of Transaction	Transfer of license rights (deemed sale)	Renting/letting immovable property
Service Tax Applicability	❌ Not taxable	✅ Taxable (15% + cess)
Invoice Type	License Endorsement Fee	Rent for land/building/plant
CESTAT Verdict	Not taxable	Properly taxed if applicable

5. Why This Ruling Matters

• Brings clarity in distinguishing license from lease.

• Offers significant tax relief—avoiding 15% service tax + applicable cesses on endorsement fees.

• Sets a precedent for other licensing deals beyond breweries.

6. Real‑World Example

Suppose BrewMaster Pvt Ltd leases its brewery premises to a craft beer company and separately endorses its brewery license:

• Lease Income: ₹50 lakh/year → billed as rental; service tax applicable.

• License Endorsement Fee: ₹20 lakh/year → billed separately; no service tax post this CESTAT judgment.

7. Pro Tips for Licensee & Lessor

• Consult Your Tax Advisor: Review agreements in light of this ruling.

• Ensure Contract Segregation: Prevent legal ambiguities.

• Monitor Future CESTAT Rulings: This may extend to other industries like telecom, pharma, etc.

✅ Conclusion

The recent CESTAT Delhi ruling is a game changer for breweries and related industries. By distinguishing license endorsement from property rent, the tribunal correctly exempted license fees from service tax. Businesses benefit from deeper clarity, lower tax burdens, and simplified compliance. For breweries and license holders—it's time to reassess contracts and seize the tax advantage.

Frequently Asked Questions (FAQs)

1. Q: Is the brewery license endorsement fee subject to GST?
   A: This ruling pertains to service tax. GST treatment requires separate assessment under GST laws.

2. Q: What if license endorsement and rent are billed together?
   A: That could attract service tax. Separate agreements/invoices are essential to maintain legal clarity.

3. Q: Is this exemption only for brewery licenses?
   A: The judgment applies broadly. It can influence similar licensing agreements in various sectors.

4. Q: Does this precedentially apply across India?
   A: While CESTAT Delhi’s ruling is persuasive nationally, confirm with local tax experts.

5. Q: Were any penalties imposed on Tripti Alcobrew?
   A: No—service tax demands were quashed, rescinding penalties and interest.

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