2008 (5) TMI 101 - AT - Service Tax

Appellant-hotel - service tax liability on the amount received by way of sale of food & beverages to airlines valuation revenue plea is that Notification 30/97 provides for abatement of only 50% - held that when the actual cost of food and beverage is available, there is no need for paying service tax for the amounts received on account of their sale especially when sales tax has also been paid - waiver of pre-deposit of the entire tax demanded, interest and penalties granted

Summary

Issues involved:
Recovery of Service Tax on sale of food items to airlines; waiver of pre-deposit; correct valuation for service tax; benefit of notifications and exemptions; applicability of service tax on catering services; invocation of extended period of limitation; penalty and interest provisions.

Analysis:
1. Recovery of Service Tax on sale of food items to airlines:
The appellant, a Hotel Industry catering to airlines, faced a demand for Service Tax on the sale of food items to airlines. The appellant contended that they were already paying Service Tax for handling and transportation charges. The issue revolved around whether the supply of food items to airlines should attract Service Tax, given that the appellant was already paying sales tax on the food items sold.

2. Waiver of pre-deposit:
The appellant sought a waiver of pre-deposit based on a previous Stay Order in a similar case. The Tribunal considered the Stay Order and found the demand of Service Tax to be similar. Consequently, the Tribunal granted a waiver of pre-deposit and stayed the recovery proceedings until the appeal's disposal.

3. Correct valuation for service tax:
The appellant argued that the supply of food as part of any service should be treated as a sale, subject to sales tax. They relied on various decisions to support their claim that when sales tax has been paid, no additional service tax should be levied. The appellant also highlighted the separate invoicing for goods and services provided, indicating the payment of relevant taxes.

4. Benefit of notifications and exemptions:
The appellant claimed entitlement to various notifications and exemptions, such as deduction of the value of goods and materials sold, abatement of miscellaneous expenses, and the benefit of treating the amount received from customers as inclusive of Service Tax payable. They supported their arguments with references to relevant decisions and notifications.

5. Applicability of service tax on catering services:
The appellant contended that their activities, including supply of food and beverages to airlines, did not fall under the definition of an outdoor caterer service as per the Act. They emphasized their compliance with relevant tax regulations and the distinction between goods sold and services provided.

6. Invocation of extended period of limitation, penalty, and interest provisions:
The appellant challenged the invocation of an extended period of limitation for the show cause notice, arguing that there was no intent to evade service tax. They also highlighted provisions under the Act for waiver of penalties in case of reasonable cause for any failure to comply. The Tribunal considered these arguments and ordered the waiver of penalties and interest.

In conclusion, the Tribunal found in favor of the appellant, granting a waiver of pre-deposit and staying the recovery proceedings. The decision was based on the analysis of various legal provisions, notifications, and precedents cited by the appellant, supporting their contention that no additional Service Tax should be levied on the sale of food items to airlines. The case was scheduled for a detailed hearing to address the substantial amount involved.