2014 (7) TMI 707 - HC - Service Tax

Waiver of pre deposit - Coffee vending machines for employee of the company - Revenue held it as outdoor catering service - VAT paid for the services provided - whether the claim of the appellant that the transactions have suffered Value Added Tax (VAT) and as a consequence thereof, service tax stands excluded, is sustainable- Held that - there was no material placed before the authorities to come to the conclusion that service tax is not payable in view of Notification No.12/2003-ST - Tribunal, did not order the entire amount, but has exercised its discretion and ordered pre-deposit of ₹ 30,00,000 - Since the VAT component has been paid, the interest of the Revenue is safeguarded as against the disputed claim. In this regard, the plea of the appellant relying on the decision of the Supreme Court in Imagic Creative Pvt. Ltd. v. Commissioner of Commercial Taxes, 2008 (1) TMI 2 - Supreme Court of India , more particularly paragraph (28) is relevant. Tribunal was not justified in ordering the pre-deposit in the manner stated in its order - Order modified to the effect that the appellant shall make a pre-deposit of ₹ 15,00,000 - stay order modified.

Summary

Issues:
1. Tribunal's finding on the service of supply of coffee and the element of service tax.
2. Consideration of VAT on the sale of coffee dispensed through vending machines.
3. Application of the Supreme Court judgment regarding the payment of sale tax and service tax.
4. Failure to consider the judgment of the Delhi High Court.
5. Oversight of the decision of the Delhi Bench of the tribunal in a specific case.

Analysis:
1. The appellant, engaged in the business of coffee and tea supply through vending machines, contested the demand for service tax by the department. The department argued that the transaction falls under the definition of 'outdoor caterer' and 'caterer' under the Finance Act, 1994. The adjudicating authority upheld the demand for service tax, considering the supply as a service, not a sale.

2. The Tribunal, in an application for waiver of pre-deposit, found that the appellant's service of supplying coffee to employees had a predominant service element, not a sale. The Tribunal ordered a pre-deposit of Rs. 30,00,000, considering the appellant's undue hardship. The appellant appealed against this order.

3. The appellant relied on the Supreme Court judgment regarding the mutual exclusivity of payment of sale tax and service tax, emphasizing that the VAT component had been paid. The Court highlighted the importance of considering undue hardship and safeguarding the interests of the Revenue in such cases.

4. The Court, after considering the appellant's plea, modified the Tribunal's order, reducing the pre-deposit amount to Rs. 15,00,000. The Court emphasized the need to balance the interests of the appellant and the Revenue, ensuring a fair hearing of the appeal.

5. The judgment focused on the legal intricacies of service tax applicability, the significance of VAT payment, and the need to consider undue hardship in financial matters related to tax disputes. The Court's decision aimed to provide a balanced approach, ensuring a fair hearing while safeguarding the interests of both parties involved in the appeal process.