2016 (12) TMI 1000 - AT - Service Tax

Nature of activity - outdoor catering service being provided by the cooperative society - operation of the activity from a premise other than its own - some portion of the cost is met by the employer and remaining by the employees directly - benefit of abatement under N/N. 1/2006 dated 01/03/2006 - Held that - the appellant has been engaged to render a service on behalf of the employer and compensated for by the employer with some portion of the cost. The appellant cannot escape the liability of tax in view of the provision of service which is taxable under the Finance Act, 1994. Time limitation - Held that - the appellant has been rendering the service for long and also happens to be a co-operative society which could not have been unaware of the legal provisions of taxation. It cannot also claim to have lacked knowledge inasmuch as M/s Larsen & Toubro is also one of the members of the society - period of limitation invoked. Appeal rejected - decided against appellant.

Issues:
1. Tax liability on outdoor catering service provided by a cooperative society to employees of a company.
2. Applicability of mutuality principle and VAT liability exemption.
3. Interpretation of relevant legal definitions and provisions.
4. Taxability under the Finance Act, 1994.
5. Claim of demand being barred by limitation of time.

Analysis:

Issue 1: Tax liability on outdoor catering service
The judgment revolves around the tax liability of a cooperative society providing outdoor catering service to employees of a company. The appellant contended that being a cooperative society of the company's employees, they are excluded from tax under the mutuality principle. However, the Tribunal found that the society was engaged in providing a service on behalf of the company, making it a taxable activity under the Finance Act, 1994.

Issue 2: Mutuality principle and VAT exemption
The appellant argued for exemption based on the mutuality principle and VAT liability. The Tribunal held that the appellant's status as a cooperative society did not exempt them from tax, as the service provided was commercial in nature, not falling under the mutuality principle. Additionally, the Tribunal noted that VAT liability did not preclude tax under the Finance Act, 1994.

Issue 3: Interpretation of legal definitions
The judgment analyzed legal definitions such as 'outdoor caterer' and 'caterer' under relevant sections of the Act to determine the applicability of tax. The Tribunal interpreted these definitions to establish that the appellant fell within the scope of providing outdoor catering service, thereby subjecting them to tax liability.

Issue 4: Taxability under the Finance Act, 1994
The Tribunal assessed the appellant's activities against the provisions of the Finance Act, 1994, particularly section 65(105)(zzt), to ascertain the taxability of the service provided. It concluded that the appellant met the criteria for tax liability as an outdoor catering service provider.

Issue 5: Limitation of time for demand
The appellant claimed that the demand was time-barred due to a genuine belief of non-taxability, citing a legal precedent. However, the Tribunal rejected this argument, stating that the appellant, being aware of the legal provisions and a member of the company, could not claim ignorance. The demand was upheld, and the appeal was rejected.

Overall, the judgment clarified the tax liability of the cooperative society for outdoor catering service, emphasizing the commercial nature of the activity and dismissing claims of exemption based on mutuality and VAT liability. The decision highlighted the importance of complying with tax provisions and rejected the plea of limitation of time for the demand.

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