Custom, Excise & Service Tax Tribunal
Sri Ponnusamy Caterers vs Service Tax - Chennai on 7 April, 2022
IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
CHENNAI
REGIONAL BENCH - COURT NO. III
Service Tax Appeal No. 591 of 2012
(Arising out of Order-in-Original No. 66/2012 dated 24.05.2012 passed by the
Commissioner of Service Tax, M.H.U. Complex, 692, Anna Salai, Nandanam,
Chennai - 600 035)
M/s. Sri Ponnusamy Caterers : Appellant
No. 3, 10th Street, Jothi Nagar,
Thiruvottiyur,
Chennai - 600 019
VERSUS
The Commissioner of Service Tax : Respondent
M.H.U. Complex, 692, Anna Salai, Nandanam, Chennai - 600 035 APPEARANCE:
Shri J. Shankarraman, Advocate for the Appellant Ms. K. Komathi, Authorized Representative for the Respondent CORAM:
HON'BLE MS. SULEKHA BEEVI C.S., MEMBER (JUDICIAL) HON'BLE MR. P. ANJANI KUMAR, MEMBER (TECHNICAL) FINAL ORDER NO. 40131 / 2022 DATE OF HEARING: 04.02.2022 DATE OF DECISION: 07.04.2022 Order : Per Hon'ble Ms. Sulekha Beevi C.S. Brief facts of the case are that the appellants are engaged in the business of providing Outdoor Catering Services to various industrial units situated in and around Chennai. They are registered with the Service Tax Commissionerate, Chennai under the category of „Outdoor Catering Services‟.2
Appeal. No.: ST/591/2012-DB
2. Scrutiny of their ST-3 returns revealed that they did not avail the abatement under Notification No. 01/2006-S.T. dated 01.03.2006 while discharging their Service Tax liability. It therefore appeared to the Department that Service Tax was paid only on the service portion and not on the entire gross value received by them. The appellant was addressed to clarify the factual position and they replied vide dated 11.02.2011 as under:
(a) Prior to 01.04.2007, they had entered into agreements with various corporate companies for supply of food only and they did not provide the activity of serving food. They discharged Sales Tax and Value-added Tax (VAT) on the food supplied by them and did not pay Service Tax prior to 01.04.2007 as they were not doing any service in connection with the activity of supply of food.
(b) After 01.04.2007, two separate agreements were entered into by the appellant with their customers: one for the sale of food and the other for serving of food. They discharged Sales Tax on the amount received for the sale of food and paid Service Tax on the amount received as service charges for serving the food. They have filed returns evidencing the payment of Service Tax on the amounts received as service charges.
(c) They have also stated that they have submitted documents on 28.05.2010 as called upon by the Department.
(d) The demand from 10.09.2004 is not sustainable in law as all their activities were known to the Department.
(e) However, they informed that without prejudice to their stand that sale of food is not chargeable to Service Tax, to avoid disputes at a later stage, they have paid an amount of Rs.19,20,486/- along with 3 Appeal. No.: ST/591/2012-DB interest of Rs.1,39,749/- on 08.02.20211 according to the liability worked out by them from October 2009 to December 2010.
3. After perusal of the above reply, the Department was of the view that prior to 01.04.2007 also the appellant has not only supplied food, but also rendered services in connection with the supply of food. That after 01.04.2007 they have not correctly arrived at the taxable value. A Show Cause Notice dated 11.04.2011 was issued to the appellant proposing to demand Service Tax to the tune of Rs.61,57,841/- for the period from October 2005 to December 2010 along with interest and also for imposing penalties. It was also proposed in the Show Cause Notice to appropriate the amount already paid by the appellant along with interest. After due process of law, the Original Authority vide order impugned herein confirmed the demand of Rs.61,57,841/- along with interest and imposed equal penalty under Section 78 of the Finance Act, 1994 besides imposing penalty of Rs.5,000/- under Section 77(2) of the Act for non- furnishing of correct details in the ST-3 returns. Aggrieved by such order, the appellant is now before the Tribunal.
4.1 Shri J. Shankarraman, Learned Counsel, appeared and argued on behalf of the appellant. He submitted that the appellant has been in the field of Hotel Industry and providing Outdoor Catering Services to various industrial units. They have obtained Service Tax registration with effect from June 2007. The appellant had been supplying food to major companies like M/s. TPL, MPL, Petro Araldite, etc. Based on the agreements entered with the companies, the appellant supplies / sells food as per specific requirements of their clients. They have discharged Sales Tax / VAT on the entire value of food supplied. He submitted that prior to April 2007, the appellant was only required to supply food and the activity of serving of food was then undertaken by some 4 Appeal. No.: ST/591/2012-DB other contractor. That after April 2007, the appellant entered into two separate agreements with their customers: one for the supply of food and the other for serving of food. The appellant paid Sales Tax / VAT on the value received for supply of food and also discharged Service Tax on the value received for serving the food. They filed half-yearly ST-3 returns showing the income received on the activity of serving of food. Copies of VAT returns for the periods 2005-06, 2006-07 and 2007-08 and copies of Profit and Loss Account / Balance-Sheet for these periods would indicate that the appellant had been discharging Service Tax on the value of the service charges received by them from their customers after April 2007. The Department has wrongly alleged that the appellant has not discharged Service Tax correctly as the appellants did not avail the abatement under Notification No. 01/2006-S.T. 4.2 It is submitted by the Learned Counsel for the appellant that in fact, as there were two separate contracts, the appellant did not avail the abatement under the said Notification. However, Service Tax has been discharged fully on the income received from the activity of serving food. He argued that the value of the food supplied cannot be subjected to Service Tax and even if the two agreements are treated as a single composite one, the entire transaction will not attract Service Tax as it involves the value of food also.
4.3.1 He submitted that the levy of Service tax and the levy of VAT are mutually exclusive, as has been held by the Hon‟ble Supreme Court in the case of M/s. Imagic Creative Pvt. Ltd. v. Commissioner of Commercial Taxes reported in 2008 (9) S.T.R. 337 (S.C.). The appellant having entered into separate agreements for the supply of food and for the activity of serving food, the value of food which has been subjected to Sales Tax / VAT cannot again be taken for calculating the Service Tax liability; hence, the question of demand of Service Tax does not 5 Appeal. No.: ST/591/2012-DB arise at all for the period after April 2007. He also relied upon the decisions in the cases of :
(i) M/s. Sky Gourmet Pvt. Ltd. v. Commr. of Service Tax, Bangalore [2009 (14) S.T.R. 777 (Tri. - Bang.)];
(ii) M/s. Daspalla Hotels Ltd. v. Commr. of C.Ex., Visakhapatnam [2010 (18) S.T.R. 75 (Tri. - Bang.)];
(iii) M/s. LSG Sky Chefs (India) Pvt. Ltd. v. Commr. of S.T., Bangalore [2010 (18) S.T.R. 37 (Tri. - Bang.)]; approved by the Hon‟ble Karnataka High Court in 2012 (27) S.T.R. 5 (Kar.); and
(iv) Commr. of S.T., Bangalore v. M/s. The Grand Ashok [2013 (31) S.T.R. 528 (Kar.)].
4.3.2 In addition, the Tribunal in the case of M/s. Goldline Hospitality Solutions Pvt. Ltd. v. Commissioner of G.S.T. and Central Excise, Chennai South Commissionerate reported in 2019-TIOL-1482-CESTAT- Mad had followed the above decisions of the Tribunal as well as the judgement of the Hon‟ble Karnataka High Court and allowed the appeal of the assessee therein, where the facts are similar.
4.3.3 It was further submitted that without admitting that Service Tax is liable to be paid on the value of food supplied, the Learned Counsel for the appellant pointed out that the appellant has to be given the benefit of Notification No. 12/2003-S.T. dated 20.06.2003 which exempts the value of food items.
4.4 The Department alleges that the appellant has been doing the activity of serving food prior to April 2007 also. For this, the Department relies upon the agreement dated 05.06.2006 entered with M/s. Manali Petro Chemicals Ltd. („M/s. MPL‟ for short) It is argued by the Learned Counsel for the appellant that the appellant did not undertake any activity of serving food; in fact, M/s. MPL had entered into a separate agreement with M/s. Shanmugasundaram, a sole proprietorship concern, for 6 Appeal. No.: ST/591/2012-DB undertaking the activity of serving the food in the company premises. The said contractor had received a remuneration for the activity of serving food. When there is a separate contract entered with M/s. Shanmugasundaram, a sole proprietorship concern, for rendering the activity of serving food, the appellant cannot be saddled with the liability to pay Service Tax. It is also stated by him that the wordings in a single contract cannot be taken as the sole basis for holding that all the transactions of the appellant with various companies for the period prior to April 2007 included the activity of serving food also.
4.5 The Learned Counsel for the appellant argued on the ground of limitation also. He submitted that the appellant had taken registration in 2007 when they entered into contracts for undertaking the activity of serving food. That all details were disclosed in their returns; they have also submitted all documents when called upon to do so by the Department. The appellant has not wilfully suppressed or misstated any fact with the intent to evade payment of Service Tax. That the demand raised by invoking the extended period of limitation cannot sustain. Further, that the issue as to whether the appellant ought to have entered into a single contract and discharged Service Tax after availing the abatement in terms of Notification No. 01/2006-S.T. or as to whether the payment of Service Tax by entering into two separate contracts, for supply of food and for serving of food, is legally correct or not, is wholly an interpretational one.
4.6 He prayed that the appeal may be allowed.
5.1 Ms. K. Komathi, Learned Authorized Representative appeared on behalf of the respondent. She supported the findings in the impugned order. She adverted to the discussions in paragraph 6.0 of the order wherein the agreement entered with M/s. MPL dated 05.06.2006 is reproduced. The stipulations in the agreement show that 7 Appeal. No.: ST/591/2012-DB the appellant has to not only deliver the food items in the premises, but also has to undertake the activity of serving the food. Further, that the word used in the agreement to refer to the appellant is „caterer‟. That this would sufficiently imply that the appellant has been providing Outdoor Catering Services.
5.2 She argued that the appellant has bifurcated the activity of Outdoor Catering Services into two separate contracts and has paid Service Tax only on the amount received by them as service charges after April 2007. That prior to April 2007, though the agreements showed that the appellants have been doing the activity of serving food, they have not paid any Service Tax. Referring to the agreement between M/s. Shanmugasundaram and M/s. MPL, the Learned Authorized Representative for the respondent submitted that it has come out from evidence that M/s. Shanmugasundaram was acting on behalf of the appellant. The appellant is therefore liable to pay Service Tax on all the transactions rendered by them prior to 2007 also. She submitted that the correct manner of paying the Service Tax on Outdoor Catering Services would be to calculate the taxable value on the entire consideration received after availing the benefit under Notification No. 01/2006-S.T. 5.3 She prayed that the appeal may be dismissed.
6. Heard both sides.
7. The issue involved is as to whether the appellant is liable to pay Service Tax under Outdoor Catering Services for the period from October 2005 to December 2010.
8. For better appreciation, the relevant definitions are noticed as under:
(i) Section 65(105)(zzt) of the Finance Act, 1994 defines Outdoor Catering as any services 8 Appeal. No.: ST/591/2012-DB provided or to be provided to any person by an outdoor caterer;
(ii) As per Section 65(76)(a) of the said Act, „Outdoor Caterer‟ means "a caterer engaged in providing services in connection with catering at a place other than his own [but including a place provided by way of tenancy or otherwise by the person receiving such services;]"
(iii) Again as per Section 65(24) of the Act, "caterer" means "any person who supplies, either directly or indirectly, any food, edible preparations, alcoholic or non-alcoholic beverages or crockery and similar articles or accoutrements for any purpose or occasion;"
9.1 The issue prior to 01.04.2007 can be addressed first. According to the appellant, prior to 01.04.2007, they were not providing any activity of serving food to their customers. It is argued by the Learned Counsel for the appellant that the appellants were only supplying food and the activity of serving food was undertaken by some other contractor. In the Show Cause Notice, the agreement dated 05.06.2006 entered into by the appellant with M/s. Manali Petro Chemicals is extracted. Clauses (g) and (h) of the said agreement read as under:
"g] The caterer shall engage adequate number of daily workers and supervisors to render prompt and courtesy service during all the shifts. The total number of persons to be engaged daily should not be less than 54 (including 3 supervisors and excluding the Manager) and deployment of person to cater to various serving timings will be in accordance with Annexure-C. Persons engaged by the caterer to do jobs in canteen should be free from suffering infectious diseases or protracted 9 Appeal. No.: ST/591/2012-DB sickness and should subject themselves to medical check up periodically as may be required by the company.
h] The time of serving is essential and the caterer at the notified timings, without any delay shall serve meals, tiffin and snacks/coffee/tea."
9.2 The above clauses would show that the appellant was engaged for providing the activity of serving the food as well. It is the case of the appellant that even though the agreement contained such clauses, they were only supplying the food and the activity of serving the food was undertaken by another contractor namely, M/s. Shanmugasundaram.
10. The agreement entered by M/s.
Shanmugasundaram, which is a sole proprietorship concern, dated 26.05.2006 is also produced along with the appeal memorandum. In the said agreement, M/s. Shanmugasundaram is referred to as „contractor‟. Annexure-I to this contract gives the description of the service that has to be rendered by the contractor. The nature of these services are to serve food items, snacks and beverages to the employees of the company at the dining hall on exchange of coupons for the same, to serve food items to contract workmen in the contract workmen dining hall, to properly clean and maintain water coolers, food plates, tumblers, etc. This contract would show that M/s. Shanmugasundaram was undertaking the activity of serving food in the company premises. Although in the agreement entered with the appellant, they are referred to as „caterer‟, the agreement does not anywhere specifically stipulate the responsibility of serving food.
11. The sole agreement of the appellant with M/s. Manali Petro Chemicals has been relied by the Department to hold that the appellant has been undertaking the activity of serving food prior to April 2007. As there is a separate agreement entered by the 10 Appeal. No.: ST/591/2012-DB company with another person viz. M/s.
Shanmugasundaram for serving the food, we are of the considered opinion that on the probability of facts, the argument put forward by the appellant that the activity of serving food was done by another contractor, appears to be more tenable and acceptable.
12. Now, we shall address the dispute for the period after 01.04.2007. Admittedly, the appellant has been filing returns and paying Service Tax after 2007. The appellant has entered into two separate contracts and has been discharging Service Tax on the income received under the agreement for rendering the services. They have been paying Sales Tax / VAT on the amounts received for the supply of food. The case of the Department is that the value of these two contracts has to be clubbed together and after giving the abatement of 50% in terms of Notification No. 01/2006-S.T. dated 01.03.2006 the appellant has to discharge its Service Tax liability.
13.1 The levy of Service Tax under Outdoor Catering Services would be attracted only if the activity involved serving of food and not mere sale of food. In Commr. of Service Tax, Pune-I v. M/s. Bindras Hospitality Service Pvt. Ltd. reported in 2020 (42) G.S.T.L. 217 (Tri. - Mumbai) it was held that sale of cooked food to the employees at the counters would not be taxable under Outdoor Catering Services. The relevant part of the order reads as under:
"3. On examination of the case records, we find that the respondent had installed point of sales machines/Bradma machines at the counters from where the cooked food is sold to the employees of the corporate house and that for selling the food items, the respondent had paid appropriate VAT amount levied under the local State Act. It also transpires that the respondent had not separately claimed any charges either from the corporate or from their employees towards provision of any service. Thus, analyzing the factual matrix of the case and also the statutory 11 Appeal. No.: ST/591/2012-DB provisions, the Learned Adjudicating Authority has recorded specific finding that service tax is not payable on the foods sold by the respondent to its consumers directly. On going through the averments made by Revenue in the appeal memorandum, we do not find any justifiable reason or ground to accept the submissions that service tax liability should be fastened on the respondent for providing the taxable service of outdoor catering service.
4. In view of above, we do not find any infirmity in the impugned order, insofar as it has dropped the proposals in the show cause notice for confirmation of service tax demand under the taxable category of outdoor catering service. Accordingly, the appeal filed by Revenue is dismissed."
13.2 In M/s. Sky Gourmet Pvt. Ltd. v. Commissioner of Service Tax, Bangalore reported in 2009 (14) S.T.R. 777 (Tri. - Bangalore), the Tribunal observed as under:
"4. On a very careful consideration of the issue, we find that the appellants are registered under the category of „Outdoor Catering Services‟. Though in their appeal, they made a point that they would not be liable to service tax under the category of „Outdoor Catering Services‟, when the argument was before this Bench that approach had been given up and they were mainly urging the point that they would be entitled for benefit of exemption Notification No. 12/2003-S.T. It is seen that the appellants had already discharged service tax liability on the gross receipt excluding the cost of the food, beverages, etc. This is not in dispute. As regards the legal position with regard to the exclusion of the cost of food and beverages, we have to go first to the Constitutional amendment, the 46th amendment of Constitution of India wherein Article 366(29A) was introduced. The said Article is reproduced herein below :
"(29A) "tax on the sale or purchase of goods" includes -
(a) a tax on the transfer, otherwise than in pursuance of a contract, of property in any goods for cash, deferred payment or other valuable consideration.
(b) a tax on the transfer of property in goods (whether as goods or in some other form) involved in the execution of a works contract.
(c) a tax on the delivery of goods on hire-purchase or any system of payment of instalments.
(d) a tax on the transfer of the right to use any goods for any purpose (whether or not for a specified 12 Appeal. No.: ST/591/2012-DB period) for cash, deferred payment or other valuable consideration.
(e) a tax on the supply of goods by any unincorporated association or body of persons to a member thereof for cash, deferred payment or other valuable consideration.
(f) a tax on the supply, by way of or as part of any service or in any other manner whatsoever, of goods, being food or any other article for human consumption or any drink (whether or not intoxicating), where such supply of service, is for cash, deferred payment or other valuable consideration, and such transfer, delivery or supply of any goods shall be deemed to be a sale of those goods by the person making the transfer, delivery or supply and a purchase of those goods by the person to whom such transfer, delivery or supply is made."
It is very clear from the Article 366(29A)(f) that a tax on the supply of goods being food or any article for human consumption where such supply of service, is for cash, deferred payment and other valuable services and that supply of any goods shall be deemed to be a sale. We also noted that the decision of the Hon‟ble Supreme Court in the case of BSNL v. Union of India (supra). It is very clear that Article 366(29A) specifically provides a legal fiction in respect of catering contracts where the contracts can be divisible into two components, i.e. service portion and sale of goods portion. As far as the sale of goods portion is concerned, it is very clear that VAT or sale tax has already been discharged by the appellants. Once the sale tax has already been discharged by them, they cannot be asked to pay service tax on the same value. This is very clear from several decisions of the Tribunal."
13.3 In M/s. Ambuj Hotels & Real Estate Pvt. Ltd. v. Commr. of Cus., C.Ex. & S.T., Allahabad reported in 2019 (24) G.S.T.L. 389 (Tri. - Allahabad) it was held :
"6. The second issue relates to the sale of packed confectionary items to the passengers. The Learned Advocate explains that the said items are not served to each and every passenger, but are being sold by them to the passengers, who ask for the same. The same are being sold at the MRP printed on the items and they are paying VAT on the said items. The sale of the said items does not amount to providing of any service and the same is simplicitorly sale which attract VAT and the same stands paid by them."13
Appeal. No.: ST/591/2012-DB
14. When the value of food items have already been subjected to Sales Tax / VAT, we do not think that it is correct to levy Service Tax on the said amount again. The Tribunal in the case of M/s. Goldline Hospitality Solutions Pvt. Ltd. (supra) had occasion to consider a similar issue. After taking note of various decisions on similar issues, the Tribunal held that when Sales Tax / VAT has been discharged on the value of food items, the demand of Service Tax cannot be raised again by clubbing such value along with the service charges.
15. After appreciating the facts of the case as well as the decisions cited supra, we are of the considered opinion that the demand cannot sustain.
16. The impugned order is therefore set aside.
17. The appeal is allowed with consequential reliefs, if any, as per law.
(Order pronounced in the open court on 07.04.2022) Sd/-
(SULEKHA BEEVI C.S.) MEMBER (JUDICIAL) Sd/-
(P. ANJANI KUMAR) MEMBER (TECHNICAL) Sdd