1. These two appeals are on similar disputes and are considered together.
A) Appeal No. ST/55322/2013
2. This appeal is against order dated 16.10.2012 of Commissioner of Central Excise, Raipur. The appellants are engaged in providing various taxable services, mainly in pursuance of contractual arrangements with Indian Railways and Catering Tourism Corporation Limited (IRCTC). After conducting audit of the accounts of the appellant, the Revenue entertained a view that they are not discharging Service Tax on certain activities undertaken/considerations received. Accordingly, proceedings were initiated against them to demand Service Tax which was not paid for the period April, 2005 to March, 2011, by way of issue of two SCNs. Both the notices were adjudicated resulting in the present impugned order. The original authority confirmed tax liability under various categories and also imposed penalties under Section 76, 77 and 78 of the Finance Act, 1994. A total tax demand of Rs. 97,55,397/- was confirmed against the appellant. The tax d
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emands were under various categories and some were admitted and paid by the appellant. The appellants contested only 5 components of the demand confirmed in the impugned order.
3. We have heard both the ld. Counsel for the appellant and the ld. AR for the Revenue and perused the appeal record including the impugned order. We take up the disputed activities for tax liability one by one.
i) Cleaning Services (Rs. 3,09,194/-)
The appellants were engaged in cleaning of railway coaches and toilets in the said coaches. The original authority confirmed tax liability under cleaning service. Section 65(195)(zzzd) read with Section 65(24b) of the Finance Act, 1994 is relevant in the tax levy. The "cleaning activity" is defined as cleaning, including, specialized cleaning services, such as, disinfecting, ex-terminating or sterilizing of objects or premises of (i) Commercial or industrial building and premises thereof; or (ii) factory, plant or machinery, tank or reservoir of such commercial or industrial buildings and premises thereof, but does not include such services in relation to agriculture, horticulture, animal husbandry or dairying. 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 coaches are rolling stock of railways. They are for transport mode and cannot fall under the commercial object of industrial building, factory, plant or machinery, etc. 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.
ii) Supply of Bed Rolls to Passengers of Railways (Rs. 14,87,724/-)
We note that the original authority confirmed service tax liability on the consideration received by the appellant from IRCTC for supply of bed rolls to the travelling passengers in AC coaches. This matter has already come up before the Tribunal in various cases. It has been held that such activities cannot be taxed under Business Support Service. We note that the board's clarification dated 23.02.2009 is relevant in this regard. BSS is a generic service providing support to business of commerce of the service receiver. In M/s. Food world Railways and Institutional Caterers TIOL 2284 Cestat-Delhi and in Shri R.C. Goyal Final Order No. 55661-55665/2017 dated 02.08.2017, 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. The demand confirmed under BSS for such activity is not sustainable.
iii) Outdoor Catering Service (Rs. 16,94,320/-)
The service tax liability confirmed under this heading is mainly contested on the correctness of quantification. The appellants contested that the bill raised by them to IRCTC is inclusive of VAT. VAT is to be excluded to arrive at taxable value for service tax. The appellant pleaded that though the bill was raised for gross amount, IRCTC paid amount after deducting said VAT. The appellant paid service tax on the amount so received. In other words, the tax is paid on received amount not on billed amount which included element of VAT. We are in agreement with the claim of the appellant. The jurisdictional authority can verify the documents to satisfy the correctness of quantification of tax liability as claimed by the appellant.
iv) Supply of newspaper to passengers in Rajdhani train (Rs. 2,37,841/-)
The appellants supplied newspapers to the passengers in selected trains. It is part of their overall contracts involving supply of food, refreshment, etc. The original authority held that supply of newspapers is in relation to outdoor catering, as such, the same is liable to be taxed as part of outdoor catering service. He relied on the principle of classification of taxable service in terms of Section 65 clause 2 sub-clause (b) of the Finance Act, 1994. We note that the original authority grossly erred in considering supply of newspaper as part of outdoor catering service. In fact, the amount attributable to supply of newspaper is clearly identified, though a part of composite contract with the IRCTC Rs. 2/- per passenger has been earmarked for supply of newspaper. We note that when there are identified specific activities, though part of a general contract involving both taxable and non-taxable activity, it is not proper to invoke the provisions of Section 65 to decide classification. The said provision is applicable when there were composite services with combination of different services. Supply of newspaper is an activity with a specific consideration identified in the contract. First of all, the original authority should have identified whether such supply of newspaper is a taxable activity, then the question of deciding the combination of multiple taxable services should have been dealt with. In the present case, 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. Accordingly, the tax liability cannot be sustained on this dispute.
4. The appellants contested the demands of limitation as well as for imposition of penalties. The original authority justified the demand for extended period on the ground that the appellants contravened the provisions of Finance Act and Rules with an intention to evade payment of duty. We note that the tax liability with reference to service rendered to railway/railway passengers has been a subject of substantial litigation. In fact, the Railways resisted the service tax applicability by repeated representations to the Ministry of Finance. Hon'ble Delhi High Court, while examining of dispute between IRCTC and Government of NCT Delhi-2010 (20) STR 437 Delhi, held that for supply of goods in the Indian railways, there is no element of service tax at all. The Hon'ble Delhi High Court interpreted the provisions of VAT and Service Tax under outdoor catering service. The Board, vide their circular dated 01.08.2006, clarified about the tax liability and quantification of value with reference to catering service provided by IRCTC.
5. Having considered the submissions made by the appellants and the impugned order, we find that the contested service tax liability on the categories mentioned above are not sustainable for the reasons recorded therein. 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. On the same reasons, the penalties imposed on the appellant are also set-aside. As already observed in this order, factual verifications with supported documents, wherever the claim of the appellants are allowed on legal principles, can be made by the jurisdictional service tax authorities. With this observation, the appeal is allowed.
(B) Appeal No. ST/58124/2013
6. In this appeal also, the dispute is substantially on the points discussed above. Ratio and finding recorded in the above appeal will be applicable for the same disputes in the present appeal also.
7. Other than above points, we note that there is a demand for Rs. 11,47,291/- under the category of renting of immoveable property service. The appellants are not contesting the tax liability. They only requested for waiver of penalty invoking provisions of Section 80. The original authority declined to waive penalty on the ground that the appellants have not paid the Service Tax within the time mention under Section 80(2). We note that though the said sub-section was basically with reference to renting of immovable property service, the main Section 80 is still available to the appellant considering that the tax liability under renting of immoveable service was subject matter of various disputes, amendments, including retrospective amendment. As such, the penalty imposed on this service is waived invoking provisions of Section 80.
8. A short payment of Rs. 1,99,255/- was confirmed under Business Auxiliary Service. The appellants submitted that by a clerical mistake, they have shown the consideration under BAS, which in fact, is a Tour Operators Service. The appellants only filed copy of ST-3 return along with details of bill realized during the relevant period. From this, we are unable to infer the correctness of the claim of the appellants. No supporting evidence has been presented before the original authority or even before us. As such, we are not able to accept the claim of the appellant against the demand.
9. The appellants have not contested their tax liability under renting of immoveable property service and IPR service. The tax liability has been paid with interest.
10. In view of above findings, the appeals filed by the appellants are allowed to the extent mentioned above