The Customs, Excise and Service Tax Appellate Tribunal (CESTAT), New Delhi, has held that fees collected towards the prescribed cost of tender documents cannot be subjected to service tax when no identifiable service is provided to bidders.
The bench of Ajay Sharma (Judicial Member) and Hemambika R. Priya (Technical Member) set aside an order confirming a service tax demand of ₹72,071, along with interest and an equal penalty.
The dispute arose from an audit of the corporation’s records for April 2012 to March 2016. The department found that it had collected ₹13,45,248 towards storage charges and tender cost or fees, allegedly without paying service tax of ₹1,72,521.
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A show cause notice dated August 17, 2017 proposed recovery of the amount, along with interest and penalties. The adjudicating authority subsequently dropped the demand of ₹1,00,450 relating to storage charges but confirmed ₹72,071 on tender fees.
The Commissioner (Appeals) upheld the demand on May 8, 2019, prompting the corporation to approach the Tribunal.
The corporation argued that the tender or application fees of ₹5,63,200 represented recovery towards the sale of tender documents, rather than consideration for any service.
It explained that the documents were printed material or booklets containing details of the work, schedules, agreement formats, contractual terms and conditions, and the opening and closing dates for bids.
According to the corporation, ownership of these documents passed to purchasers, who were free to decide whether to participate in the bidding process. It maintained that supplying the documents did not involve rendering any service to prospective bidders.
The department defended the demand, relying on the Commissioner (Appeals)’ finding that tender fees formed part of a service and fell within the statutory definition of “service” under the Finance Act, 1994. It also relied on the allegation that the corporation had suppressed information about the receipts.
The Tribunal identified the sole issue as whether the tender fees collected by the corporation were liable to service tax.
It observed that service tax requires the provision of a taxable service by one person to another for consideration. In this case, the amount collected represented only the prescribed cost of tender documents.
The transaction could therefore be viewed as the sale or supply of documents, rather than the provision of a taxable service.
The Bench further explained that a tender is ordinarily an invitation to offer. Issuing tender documents does not, by itself, establish a contractual service arrangement with every bidder. Consequently, there was no identifiable service between the tendering authority and the bidder against payment of the document cost.
The Tribunal relied on its decision in Rajcomp Info Services Limited v. Principal Commissioner of CGST & Central Excise, Jaipur, decided on February 3, 2026.
The Tribunal had held that collecting fees for supplying tender documents did not establish a contractual service arrangement with bidders. Providing the documents was treated as a sale of documents, without an element of service against the fee.
The precedent also drew support from Ajmer Vidyut Vitaran Nigam Ltd. v. Principal Commissioner of CGST & Central Excise, Jaipur.
The Tribunal set aside the impugned appellate order and allowed the corporation’s appeal, removing the service tax demand and the associated interest and penalty.
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