2018 (2) TMI 1412 - AT - Service Tax

Contractual arrangements with Indian Railways and Catering Tourism Corporation Limited (IRCTC) - Revenue entertained a view that they are not discharging Service Tax on certain activities undertaken/considerations received - Cleaning Services - Held that - It is clear that cleaning is with reference to objects or premises of commercial or industrial building, factory and premises thereof. The original authority gave a reason that railway coaches are either standing on platform or running on the track and the same are to be considered as object on the premises for Indian railway holding railway coaches and contracts constituents of capital assets and machinery of Indian railway, the original authority held cleaning of such railway coaches will be considered as cleaning of commercial premises - the interpretation of the original authority is far fetched and not sustainable in view of the plain meaning of the statutory definition for tax entry. Supply of Bed Rolls to Passengers of Railways - Held that - In M/s Foodworld Railways and Institutional Caterers 2014 (12) TMI 662 - CESTAT NEW DELHI , the Tribunal held that such services cannot be considered as BSS. It is more appropriately classifiable under Business Auxiliary Service as it is essentially a customer care service provided on behalf of the client - demand not sustainable. Outdoor Catering Service - Held that - the tax is paid on received amount not on billed amount which included element of VAT - The jurisdictional authority can verify the documents to satisfy the correctness of quantification of tax liability as claimed by the appellant - matter on remand. Supply of newspaper to passengers in Rajdhani train - Held that - the original authority upheld the tax liability on the consideration received for supply of newspaper only on the ground that it is part of a composite contract of catering and on board service. We note that the reasoning adopted by the original authority to consider the supply of newspaper as part of their catering service is not sustainable - tax liability do not sustain. Extended period - penalty - Held that - The demand for extended period also cannot be sustained in respect of cases where service tax liability was affirmed in connection with service to Railways/IRCTC - the penalties imposed on the appellant are also set-aside. Appeal allowed in part.

Issues:
1. Disputed tax liability under various categories including cleaning services, supply of bed rolls, outdoor catering service, and supply of newspapers.
2. Contention regarding quantification of tax liability and exclusion of VAT.
3. Dispute over the classification of services under Business Support Service and Business Auxiliary Service.
4. Demand for extended period and imposition of penalties.
5. Waiver of penalty under Section 80 for renting of immovable property service.
6. Short payment under Business Auxiliary Service and Tour Operators Service.

Analysis:
1. Cleaning Services: The original authority confirmed tax liability under cleaning services for cleaning railway coaches and toilets. However, the Tribunal found the interpretation of the original authority to be incorrect as it did not align with the statutory definition for tax entry. The Tribunal ruled in favor of the appellant, stating that cleaning railway coaches does not fall under commercial or industrial building premises, thus the tax liability was not sustainable.

2. Supply of Bed Rolls: The original authority confirmed service tax liability on the consideration received for supplying bed rolls to passengers in AC coaches. The Tribunal referred to previous cases and held that such activities cannot be taxed under Business Support Service. The demand confirmed under Business Support Service was deemed unsustainable and more appropriately classifiable under Business Auxiliary Service.

3. Outdoor Catering Service: The tax liability confirmed under this heading was contested mainly on the quantification correctness. The appellants argued that the bill raised included VAT, which should be excluded to determine the taxable value for service tax. The Tribunal agreed with the appellant's claim, stating that the tax should be paid on the received amount, excluding VAT.

4. Supply of Newspaper: The original authority considered the supply of newspapers as part of outdoor catering service, leading to tax liability. However, the Tribunal found this reasoning to be flawed as the supply of newspapers was a specific activity with a separate consideration in the contract. The tax liability on this dispute was deemed unsustainable.

5. Extended Period and Penalties: The demand for an extended period and penalties imposed were set aside by the Tribunal, stating that the contested service tax liabilities were not sustainable. The penalties imposed on the appellant were also overturned based on the same reasons.

6. Waiver of Penalty: The appellants requested a waiver of penalty under Section 80 for renting of immovable property service, which was declined by the original authority. However, the Tribunal waived the penalty, considering the various disputes and amendments related to the tax liability under renting of immovable property service.

7. Short Payment: A short payment was confirmed under Business Auxiliary Service, with the appellants claiming it was a clerical mistake and should be classified as Tour Operators Service. The Tribunal found insufficient evidence to accept the appellant's claim, leading to the rejection of the appeal.

8. Conclusion: The appeals filed by the appellants were allowed to the extent mentioned above, with the Tribunal ruling in favor of the appellants on various disputed tax liabilities and penalties.

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