2022 (2) TMI 140 - AT - Service Tax

Taxability/non-taxability - business of sale of packed food and beverages on board the trains run by Indian Railways besides sale of packed food items/beverages at stalls at railway stations - unjust enrichment - applicability of the ruling of Hon ble Delhi High Court in INDIAN RAILWAYS CATERING AND TOURISM CORPORATION LTD. VERSUS GOVT OF NCT OF DELHI AND ORS 2010 (7) TMI 989 - DELHI HIGH COURT - HELD THAT - In the case of IRCTC they were supplying food under contract to the railways through their agent or sub-contractors, for which they were being paid by the Indian railways. Further Indian railways are paying to IRCTC out of the consolidated ticket value collected by them from the passengers which does not contain any breakup of the amount towards travel charges and food charges. Whereas in the facts of the present case, the appellant is a licensed vendor who were entitled to sell food on the trains and at the stations. The assessee is paying license fee to the railways for such entitlement to sell such packed food and are further paying service tax separately on the license fee. The staff or hawkers of the respondent assesee move in the trains or at the station offering food for sale to the passengers. The passengers are under no obligation to buy food from the respondent. Thus, it is found that the transaction between the respondent assessee and the passenger who purchases the food is a simple sale transaction of food involving no element of service. In the present case, there is no element of service involved in the sale of food by the respondent assessee to the passengers. Further, it is found that the law has been clarified and declared by Hon ble Delhi High Court in the case of IRCTC and accordingly, the respondent assessee is rightly entitled the refund of the service tax paid under erroneous advice, subject to passing the test of unjust enrichment. The pendency of appeals of the service tax department as well as M/S INDIAN RAILWAYS CATE. TOUR. CORP. LTD. VERSUS GOVT. OF NCT OF DELHI ORS. 2011 (10) TMI 762 - SC ORDER before Hon ble Supreme Court have got no bearing in the facts and circumstances of the present case. In the facts of the present case, no machinery provision was also there for bifurcation of the transaction into service portion and sale portion, for levy of service tax. Rule 2C was introduced in the Service Tax Determination of Valuation Rules, 2006 with effect from 1 July, 2012 vide Notification No. 24/2012-ST, which has provided for mode of bifurcation by allowing abatement for the sale portion in the case of service of food in a restaurant or in the course of outdoor catering. Even under Rule 2C, the activity of the respondent assessee is not covered. Commissioner (Appeals) have without examining the issue of unjust enrichment and without giving proper opportunity of hearing and to lead evidence on the issue of unjust enrichment, have simply made a bald allegation that the assessee did not lead evidence before him, by a non-speaking order. He also did not indicate if the assessments have been modified - the respondent assessee is also directed to appear before the Commissioner (Appeals) within a period of 60 days from the date of receipt of copy of this order along with evidence as regards unjust enrichment and evidence regarding assessments being modified in appeal and seek opportunity of hearing. The appeal is allowed by way of remand.

Summary

Issues Involved:
1. Taxability of the sale of packed food and beverages under service tax.
2. Applicability of the doctrine of unjust enrichment.
3. Applicability of the Delhi High Court judgment in the IRCTC case to the respondent.
4. Refund eligibility under the Finance Act, 1994.
5. Impact of pending appeals before the Supreme Court on the current case.

Detailed Analysis:

A. Taxability of the Sale of Packed Food and Beverages:
The central issue is whether the activity of selling packed food and beverages by the respondent on board trains and at railway stations is subject to service tax. The Commissioner (Appeals) relied on the Delhi High Court judgment in the IRCTC case, which held that the transaction of supplying food and beverages on board trains is purely a sale of goods and not a service. The High Court determined that the element of service in such transactions is incidental and minimal. Consequently, the sale of food and beverages does not attract service tax under the provisions of the Finance Act, 1994.

B. Doctrine of Unjust Enrichment:
The Assistant Commissioner of Service Tax initially rejected the refund claim on the grounds of unjust enrichment, stating that the respondent did not reflect the service tax amount as recoverable in their balance sheets and did not provide sufficient documentary evidence to support their claim of having borne the service tax themselves. The Commissioner (Appeals) also noted the lack of documentary evidence from the respondent to substantiate their claim that the service tax was not passed on to consumers. The Tribunal remanded the case to the Commissioner (Appeals) to re-examine the issue of unjust enrichment, giving the respondent an opportunity to present supporting evidence.

C. Applicability of the Delhi High Court Judgment in the IRCTC Case:
The Tribunal held that the facts of the current case are even more favorable to the respondent than those in the IRCTC case. The respondent sells food directly to passengers without any obligation for passengers to purchase, making it a simple sale transaction with no element of service. Thus, the Delhi High Court's ruling in the IRCTC case, which declared such transactions as purely sales and not services, is applicable. The pending appeals before the Supreme Court regarding the IRCTC case do not affect the applicability of this judgment to the respondent's case.

D. Refund Eligibility Under the Finance Act, 1994:
The Tribunal noted that the Finance Act, 1994, and the Service Tax (Determination of Value) Rules, 2006, did not provide a mechanism for determining the value of the service component in such transactions before the introduction of Rule 2C on July 1, 2012. Therefore, the respondent's transaction of selling food does not attract service tax, and they are entitled to a refund of the service tax paid under erroneous advice, subject to the test of unjust enrichment.

E. Impact of Pending Appeals Before the Supreme Court:
The Tribunal clarified that the pending appeals before the Supreme Court in the IRCTC case do not impact the current case. The Delhi High Court's judgment in the IRCTC case remains applicable, and the respondent is entitled to rely on it for their refund claim.

Conclusion:
The Tribunal allowed the appeal by way of remand, directing the Commissioner (Appeals) to re-examine the issue of unjust enrichment and the eligibility of the refund claim. The respondent is to be given a reasonable opportunity to present evidence supporting their claim. The Commissioner (Appeals) is expected to pass a new order considering all aspects within three months from the respondent's appearance for the hearing. The appeal is thus allowed by way of remand.