2018 (7) TMI 1061 - AT - Service Tax

Serving of food/beverages in the Canteen of the Factory - benefit of N/N. 25/2012-ST as amended by N/N. 14/2013-ST dated 22/10/2013 - Interpretation of Statute - scope to those canteens maintained by and run by the factory themselves - intent in the Entry No.19A of the mega exemption Notification. Held that - The Adjudicating Authority has sought to whittle down the scope to those canteens maintained by and run by the factory themselves . The words in the Notification do not support this view inasmuch as the Notification uses the phrase canteen maintained in a factory and not maintained by and/or run by a factory . If the intent of the Notification were to be as interpreted in the impugned Order-in-Original, then the wording in the Notification should have been maintained by and/or run by the factory - a narrow interpretation of SI. No.19A of the Notification, based on the fact that an outdoor caterer is maintaining the canteen, is neither warranted nor contemplated in the Notification. Maintaining canteen for employees is a statutory requirement under the Factories Act for certain category of factory and outsourcing the same is not barred under the Act ibid and Rules made thereunder. In the circumstances, if the Notification is interpreted to mean that exemption will be available only when the canteen is run by factory, such interpretation will be doing violence to the language of the Statute and in fact will amount to adding words in the Notification which is not permitted under established law. Exemption under N/N. 14/2013-ST - Section 66F(1) of the Act - It is also alleged that the main service i.e. canteen service is exempted under the Notification No.14/2013-ST and not the outdoor catering services which is used to provide such service - Held that - It emanates from the facts that the appellant is entering into agreement with factories for providing catering services in their canteens, for the employees as per rates agreed upon for not only supplies but also serving of food and beverages - Even if such services are considered as OUTDOOR CATERING, those have been used for providing services in relation to serving food and beverages in a canteen. The services provided by the appellant is covered by Entry No.19A of the Negative List and exempted from payment of Service Tax - appeal allowed - decided in favor of appellant.

Summary

Issues:
Entitlement of exemption under Notification No.25/2012-ST as amended by Notification No.14/2013-ST for services provided in relation to serving food or beverages by a canteen maintained in a factory, when prepared and served by a separate agency.

Analysis:
The main dispute in this case revolves around the interpretation of the exemption Notification regarding services provided in relation to serving food or beverages by a canteen maintained in a factory under the Factories Act, 1948. The department's contention is that the canteen should be run by the factories themselves, while the appellant argues that services provided in relation to serving food and beverages from a canteen by a separate agency should still be eligible for exemption. It is established that the canteen is being run in a factory as required by the Factories Act, even though the food and beverages are prepared and served by an external agency.

The interpretation of Entry No.19A of the mega exemption Notification is crucial. Entry No.19A specifically includes services of food and beverages by a canteen maintained in a factory covered under the Factories Act, 1948. The wording of the Notification does not support the narrow view that the canteens must be maintained and run by the factories themselves. The focus is on canteens maintained in factories, not necessarily run by them. Therefore, limiting the exemption based on who maintains the canteen is not in line with the Notification's language or intent.

Furthermore, the appellant's agreements with factories for the supply of food and beverages to employees, along with the facilities provided by the factories, constitute outdoor catering services. However, outsourcing canteen services is not prohibited under the Factories Act. Interpreting the Notification to require canteens to be run by the factories directly would distort the statutory requirements and lead to taxing services received by factory employees, which is not the intention of the Notification.

The provisions of Section 66F(1) of the Act are also considered, emphasizing that the main service of canteen service is exempted under the Notification, not the outdoor catering services used to provide such service. Definitions from the Finance Act, 1994 are utilized to clarify terms like "caterer" and "outdoor caterer," supporting the argument that the services provided by the appellant fall under the exemption of Entry No.19A of the Negative List, thus exempting them from Service Tax. Consequently, the appeal is allowed, and the impugned order is set aside.