2014 (8) TMI 193 - AT - Service Tax

Waiver of pre deposit - Outdoor catering service - Service of providing food items to the passengers travelling by Shatabdi/Rajdhani and mail/express trains - Tax on sale of chips, biscuits etc. - Held that - It is a matter of common knowledge that in trains there is service of serving breakfast, lunch and dinner. There is a separate activity of sale of packaged items like biscuits, cakes, potato chips etc. which activity is distinct from the activity of serving meals. In the latter activity packaged food items are sold at MRP prices and no separate amounts are charged as service charges. In our prima facie view the said activity is one of sales and not of service and service tax is not payable on the value of items sold (after allowing 50% abatement as done in the impugned order). The order-in-original does not demonstrate any facts to rebut the argument of the appellant that the difference in figures of receipts as per their annual financial statements and the value of services on which tax has been paid is on account of such sales is not rebutted by Revenue, though such a stand was taken while replying to the Show Cause Notice. So prima facie we accept the contentions of the appellant and consequently we grant waiver of pre-deposit of dues arising from the impugned order for admission of appeal and stay its collection during the pendency of the appeal - Stay granted.

Summary

Issues:
- Pre-deposit of service tax and penalty confirmed against the appellant for the period 2006-07 to 2009-10.
- Tax liability on the sale of confectionary items like chips, cakes, biscuits.
- Abatement under Notification No. 1/2006 for outdoor catering services on trains.

Analysis:
1. The appellant, a caterer providing food items to train passengers, sought to dispense with the pre-deposit condition of service tax and penalty amounting to Rs. 1,46,26,474/- confirmed for the period 2006-07 to 2009-10. The appellant recovered the cost of services from M/s. IRCTC and discharged service tax liability after claiming abatement as per Notification No. 1/2006. Additionally, the appellant sold confectionary items to passengers against cash, leading to a dispute with Revenue regarding the assessable value of services provided.

2. The Revenue contended that the sale of confectionary items should be added to the assessable value of services under the category of 'outdoor caterers,' resulting in a Show Cause Notice proposing demand confirmation based on the differential value reflected in the appellant's returns and balance sheet. The dispute centered on the tax amount paid by the appellant, which the Revenue claimed was lower than the actual liability, leading to the demand of Rs. 1,46,26,474/-.

3. The appellant argued that the differential amount primarily arose from the tax demanded on the sale of items like potato chips, biscuits, cakes, etc., on trains where no catering was involved, and they paid VAT on such sales. The Revenue argued that the abatement could be availed only after including the value of all meal items in the services, a principle allegedly not followed by the appellant, justifying the confirmed demand.

4. Upon considering both arguments, the Tribunal acknowledged that the sale of packaged items like biscuits, cakes, potato chips at MRP prices on trains constituted a distinct activity from serving meals. The Tribunal accepted the appellant's contention that such sales were not subject to service tax, especially after allowing the 50% abatement. The Revenue failed to rebut the appellant's claim that the difference in financial statements and the value of services was due to these sales. Consequently, the Tribunal granted a waiver of pre-deposit for the admitted appeal and stayed the collection of dues pending the appeal process.