2015 (9) TMI 1330 - AT - Service Tax

Waiver of pre deposit - Outdoor catering service - SEZ - Denial of exemption claim - Non renewal of contracts for a particular period - Held that - On perusal of agreements, bills, invoices, prima facie appellants are entitled for exemption under above notification. We also find that sale of food in food courts is not covered under catering services but falls under restaurant services. On perusal of the contract, we find that appellants are running food courts either in office premises and other places where the foods are supplied and charges are collected from individual persons and the levy of service tax was introduced on restaurants services extending to all A/C restaurants w.e.f. 1.7.2012. Regarding demand made on unbilled revenue, we find from the Chartered Accountant certificate though it was reflected in balance sheet as per accounting standard, the amount was realised only in the next financial year and during the relevant period the service tax is to be paid only on realisation of amount. Therefore, we are of the considered view that in respect of demands on supplies to SEZ, food courts and unbilled revenue, appellant prima facie has made out a case for waiver of predeposit. - Partial stay granted.

Issues:
1. Confirmation of service tax demand under outdoor catering service and imposition of penalty with interest.
2. Inclusion of various factors in the tax demand: supplies to SEZ, income from food courts, bad debts, unbilled revenue.
3. Dispute over renewal of contracts for supplies to SEZ and eligibility for exemption.
4. Classification of sale of food in food courts under catering or restaurant services.
5. Treatment of unbilled revenue in the balance sheet for service tax purposes.
6. Handling of bad debts in relation to service tax liability.

Analysis:
1. The Commissioner confirmed a substantial service tax demand under outdoor catering service and levied a penalty along with interest. The Appellant, registered for service tax, argued that they were compliant and provided documents supporting their case. The adjudicating authority included various factors in the demand, such as supplies to SEZ, income from food courts, bad debts, and unbilled revenue.

2. The Appellant contended that the submission of contracts was not mandatory under service tax rules, and invoices sufficed for outdoor catering services. They claimed exemption under specific notifications for supplies to SEZ. The Appellant also argued against the imposition of service tax on food court sales, citing a distinction from catering services.

3. The dispute revolved around the non-renewal of contracts for supplies to SEZ and the consequent denial of exemption benefits. The Tribunal observed that the agreements, bills, and invoices indicated the Appellant's eligibility for exemption under relevant notifications. It was noted that the service tax on supplies to SEZ was not applicable due to the lack of contract renewals.

4. Regarding the classification of food court sales, the Tribunal determined that they fell under restaurant services, not catering. The Appellant's operation of food courts in various locations collecting charges from individuals aligned with the service tax regulations applicable to restaurant services.

5. The treatment of unbilled revenue in the balance sheet raised concerns about the significant variation in the amounts. The Tribunal acknowledged the Chartered Accountant's certification but emphasized that service tax was only payable upon realization of the amount during the relevant period.

6. In addressing bad debts, the Tribunal noted that the adjudicating authority had allowed exemptions up to a certain period. However, for the remaining disputed period, a predeposit was ordered. The Appellant was directed to make a specific deposit within a stipulated timeframe to avoid further penalties and stay the recovery process during the appeal period.

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