2018 (6) TMI 787 - AT - Service Tax

Business Auxiliary Service - appellants herein were providing bed rolls to upper class railway passengers of Southern Railways as per contracts awarded to them by the latter - Department took the view that the said activity would be in the nature of a customer care service provider on behalf of the Railways - whether the appellant by performing these services namely supply of bed rolls to passengers travelling in A/c III Tiers and in other higher classes and charges thereof collected by appellant from railways will fall under the mischief of Customer Care Service provided to the Railways as taxable under Business Auxiliary Service ? Held that - The Railways are indubitably the client of the appellant since they perform the said customer care service on behalf of the railways. In the event the activities carried out by the appellant will definitely come within the scope of Customer Care Services provided on behalf of the client and hence will be exigible to service tax under Business Auxiliary Service as defined under Section 65 (19) of the Finance Act 1994. Demand upheld - appeal dismissed - decided against appellant.

Summary

Issues Involved:
1. Classification of the activity of supplying bed rolls to railway passengers under "Business Auxiliary Service" (BAS).
2. Applicability of Section 99 of the Finance Act, 2013 for exemption from service tax.
3. Interpretation of "Customer Care Service" under Section 65(19) of the Finance Act, 1994.
4. Validity of time-barred appeals and compliance with procedural requirements.

Issue-wise Detailed Analysis:

1. Classification of the Activity under "Business Auxiliary Service":
The primary issue in these appeals was whether the activity of supplying bed rolls to upper-class railway passengers constituted "Business Auxiliary Service" (BAS) under Section 65(19) of the Finance Act, 1994. The Department's view was that this activity was a customer care service provided on behalf of the Railways and hence taxable under BAS. The Tribunal examined the definition of BAS, specifically the clause related to "customer care service provided on behalf of the client." It was determined that the appellant's activity of supplying bed rolls to upper-class passengers, a service outsourced by the Railways, fell within the ambit of customer care service. The Tribunal noted that the Railways provided this service as a customer care initiative for upper-class passengers, who paid higher ticket prices, and the appellant performed this service on behalf of the Railways. Therefore, the activity was rightly classified under BAS.

2. Applicability of Section 99 of the Finance Act, 2013:
The appellant contended that even if their services were taxable, they would be exempted under Section 99 of the Finance Act, 2013, which exempted taxable services provided by Indian Railways during the period prior to 1.10.2012. However, the Tribunal rejected this contention, clarifying that the exemption applied to services directly provided by the Railways, not to services outsourced to third parties like the appellant. Since the appellant provided the service on behalf of the Railways, the exemption under Section 99 did not apply.

3. Interpretation of "Customer Care Service":
The Tribunal addressed the appellant's argument that their activity did not constitute "customer care service" because it did not involve professional or technical expertise. The Tribunal disagreed, stating that customer care service does not necessarily require technical or professional expertise. It emphasized that customer care involves providing assistance and support to customers to ensure their satisfaction, which the appellant did by supplying bed rolls to upper-class passengers on behalf of the Railways. The Tribunal also highlighted the Railways' Vision and Mission Statements, which emphasized customer focus and care, supporting the classification of the appellant's activity as customer care service.

4. Validity of Time-barred Appeals and Compliance with Procedural Requirements:
The Tribunal also dealt with procedural issues related to the timeliness of the appeals. The Hon'ble High Court had previously directed the Tribunal to take up the appeals and dispose of them on merits, noting that the service of notice was not properly effected, and the appeals were filed within the permissible time. The Tribunal complied with the High Court's directions and proceeded to hear the appeals on merits.

Conclusion:
The Tribunal concluded that the appellant's activity of supplying bed rolls to upper-class railway passengers constituted "customer care service" under "Business Auxiliary Service" as defined in Section 65(19) of the Finance Act, 1994. The exemption under Section 99 of the Finance Act, 2013, did not apply to the appellant's services. The appeals were dismissed, and the impugned orders were upheld, confirming the service tax liability.