2009 (8) TMI 479 - AT - Service Tax

Outdoor caterers- The appellants are engaged in the business of preparation and supply of meals and snacks to various Airlines. They are also engaged in packing and handling of food, loading and transportation of food trolleys; storage, handling and setup of catering equipments; storage and handling of dry stores and other recycling items; cleaning of equipment, handling of waste, cabin service, and laundry services. The provision of food items is undertaken after entering into contracts with respective Airlines. The appellants are registered with the department as provider of services under the category of Outdoor Catering Services and discharge service tax liability on the entire amounts collected towards handling charges, delivery charges, hi-lift charges, and bond handling charges. The appellants did not pay service tax on account of provision of meals/food items to the Airlines. In the light of the decision of LSG Sky Chefs (India) (P.) Ltd. v. CST 2009 -TMI - 33134 - CESTAT BANGLORE, held that- once the appellants paid sales tax on a portion of the value of the contract, then, simultaneously service tax could not be demanded as they were mutually exclusive. Thus, we vacate the impugned demands of service tax and penalties and allow these appeals.

Summary

Issues:
- Dispute over service tax liability for provision of meals/food items to Airlines.
- Applicability of sales tax/VAT on sale of food items.
- Interpretation of Constitutional provisions regarding tax on supply of goods as part of services.
- Precedents regarding payment of service tax when sales tax has already been paid.
- Exclusivity of sales tax and service tax in composite contracts.

Analysis:
1. The appeals were filed against impugned orders regarding service tax liability for providing meals and snacks to Airlines. The appellants were engaged in various services related to catering for Airlines, including food provision. They paid service tax on handling charges but did not pay on meals supplied. The dispute concerned demands confirmed against the appellants for the value of food items supplied to Airlines during specific periods.

2. The Tribunal examined previous case law, particularly LSG Sky Chefs (India) (P.) Ltd. v. CST, where it was held that service tax cannot be levied on food items if sales tax has already been paid. The Tribunal cited Constitutional provisions and judgments like Idea Mobile Communications Ltd. v. CCE and Imagic Creative (P.) Ltd. v. CCT to establish that sales tax and service tax are mutually exclusive in composite contracts. If sales tax is paid on a portion of the contract value, service tax cannot be demanded on the same amount.

3. Following the precedent set in LSG Sky Chefs (India) (P.) Ltd.'s case, the Tribunal vacated the demands for service tax and penalties in the current appeals. It was concluded that once sales tax was paid on food items supplied, service tax could not be imposed simultaneously. Therefore, the impugned demands for service tax and penalties were overturned, aligning with the principles of exclusivity between sales tax and service tax in composite contracts.