Custom, Excise & Service Tax Tribunal
Maryadit vs Mumbai Ii on 29 July, 2016
IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
WEST ZONAL BENCH AT MUMBAI
APPEAL NOS: ST/346/2012 & ST/86247/2014
[Arising out of Orders-in-Original Nos: 31/ST/SB/2011-12 dated 28/02/2012 passed by the Commissioner (TAR), Mumbai & No. 11/ST/RN/CMR/MII/13-14 dated 31/12/2013passed by the Commissioner of Central Excise, Mumbai II.]
For approval and signature:
Honble Shri M V Ravindran, Member (Judicial)
Honble Shri C J Mathew, Member (Technical)
1.
Whether Press Reporters may be allowed to see the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982?
:
No
2.
Whether it should be released under Rule 27 of CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?
:
No
3.
Whether Their Lordships wish to see the fair copy of the Order?
:
Seen
4.
Whether Order is to be circulated to the Departmental authorities?
:
Yes
Larsen & Toubro Grahak Sahakari Sausthan
Maryadit
Appellant
versus
Commissioner of Service Tax
Mumbai II
Respondent
Appearance:
Shri Prakash Shah, Advocate for the appellant Shri D Nagvenkar, Addl. Commissioner (AR) for the respondent CORAM:
Honble Shri M V Ravindran, Member (Judicial) Honble Shri C J Mathew, Member (Technical) Date of hearing: 29/07/2016 Date of decision: 29/11/2016 ORDER NO: ____________________________ Per: C J Mathew:
Vide the impugned order-in-original no. 31/ST/SB/2011-12 dated 28/02/2012 of Commissioner (TAR), Mumbai adjudicated demands in three show cause notices dated 8th December 2009 for ` 3,12,00,022/- for the period from 16th June 2005 to 31st March 2009, dated 19th October 2010 for ` 76,92,214/- for the period from 1st April 2009 to 31st March 2010 and dated 5th October 2011 for ` 1,79,01,649/- for the period from 01st April 2010 to 31st March 2011. A further show cause notice was issued on 18th October 2012 demanding ` 2,70,10,395/- for the period from 1st April 2011 to 31st March 2012 which was adjudicated vide order-in-original no. 11/ST/RN/CMR/MII/13-14 dated 31st December 2013 by Commissioner of Central Excise, Mumbai II. In computing the demand, tax was charged on the total receipts obtained by the appellant from M/s Larsen &Toubro after providing for abatement of 50% in accordance with notification no. 1/2006 dated 01/03/2006. It appears that the total receipts comprised the billings for food at the pre-fixed prices, subsidy allowed by M/s Larsen Toubro and the amount compensated by M/s Larsen & Toubro for loss sustained by the appellant.
2. Briefly the facts are that the appellant is cooperative society registered on 29th May 1953 under Bombay Societies Act, 1925 and now functioning under the successor statute, the Maharashtra Co-operative Housing Societies Act, 1960. The membership of appellant-society comprises directors, officials and employees of M/s Larsen & Toubro besides M/s Larsen & Toubro itself and has been incorporated to operate the canteen at the Powai premises of M/s Larsen & Toubro. Section 46 of Factories Act, 1948 empowers the State Governments to frame rules for operation of canteens in establishments employing more than 250 persons and this canteen has been established accordingly. Proceedings were initiated to recover tax from the appellant as provider of outdoor catering service.
3. The adjudicating authority confirmed the demands on the ground that the appellant received consideration from M/s Larsen & Toubro for undertaking activities which fall within the definition of section 65(105)(zzt) which is any service provided or to be provided to any person, by an outdoor caterer.
Section 65(76a) defines outdoor caterer as 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.
and caterer as defined under section 65(24) of the Act is 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
4. It is the contention of the Learned Counsel that the appellant is a co-operative society comprising of employees of M/s Larsen & Toubro who are the beneficiaries of the canteen which is statutorily mandated under labour laws. It is also his contention that the appellant-society, comprising as it does of the beneficiaries, is excluded from tax owing to the principle of mutuality. It is also contended that the food supplied are subject to VAT liability and is, therefore, not liable to tax under Finance Act, 1994. Further it is claimed that the employees pay individually for their food, admittedly at agreed rates, and which is not the practice in the outdoor catering industry that services the person who hires the outdoor caterer. Learned Counsel for appellant placed reliance on the decision of the Tribunal in Rajeev Kumar Gupta v. Commissioner of Central Excise, Jaipur [2009 (16) STR 26 (Tri.-Del.)], Indian Coffee Workers Co-op. Society Ltd v. Commissioner of Central Excise, Allahabad [2014 (33) STR 266 (Tr.-Del.)], and Indian Coffee Workers Co-op. Society Ltd v. Commissioner of Central Excise & Service Tax, Allahabad [2014-TIOL-499-HC-ALL-ST]. Learned Counsel for the appellant also relies upon the decision of Karnataka High Court in Commissioner of Service Tax, Bangalore v. LSG Sky Chef India Pvt Ltd [2012 (27) STR 5 (Kar.)]. On behalf of appellant, a copy of tax invoice dated 31st March 2012 showing the manner in which payment is made to the appellant by M/s Larsen & Toubro was also submitted.
5. Learned Authorised Representative reiterates the contents of the impugned orders and drew our attention to the provisions of Maharashtra Co-operative Societies Act, 1960 which defines (9) Consumers society means a society the object of which is
(a) the procurement, production or processing, and distribution of goods to, or the performance of other services for, its members as also other customers and
(b) the distribution among its members and customers, in the proportion prescribed by rules or by the bylaws of the society, of the profits accruing from such procurement, production or processing, and distribution; indicating that the appellant is debarred from claiming exemption on the ground of mutuality.
6. We have gone through the records very carefully and find that the said activity sought to be taxed by Revenue is the performance of the statutory function that falls within the responsibility of M/s Larsen & Toubro, Powai in its capacity as an employer under the Factories Act, 1948. It would appear that, considering the need for employee satisfaction in the matter of culinary service and to decentralize this operation, M/s Larsen & Toubro found it advantageous to establish a co-operative society comprising of employees, as also the company itself, for operating the canteen. Like all canteens, rates of food and other articles are fixed by negotiations between the company and its employees; such negotiations may provide for non-cash remuneration to its employees in the form of subsidy of food. Effectively, the consideration for the meal consumed by the employees is paid in tandem by the consumer and the employer. The totality of such consideration may not be sufficient to pay for the operational cost of the canteen and, in the present case, the deficit is made good by M/s Larsen & Toubro. In addition, space, equipment and access to utilities, such as electricity and water, are provided by M/s Larsen & Toubro. From the above it would appear that the appellant performs an activity on behalf of M/s Larsen & Toubro for commercial or other reasons. This would naturally make the appellant a provider of service and
7. The appellant provides food to employees of M/s Larsen & Toubro and it is the capacity of canteen operator that this service is rendered. The status of the appellant as a society of employees is irrelevant to the performance of this activity. Notwithstanding the existence of such a co-operative society, the obligation under Factories Act, 1948 devolves on M/s Larsen & Toubro. It can be inferred that the canteen is being operated on behalf of M/s Larsen & Toubro. Whether the foods articles are provided free of cost or at subsidized rates or at market prices is a matter of labour-employer negotiations. It is clear that without the approval and concurrence of M/s Larsen & Toubro, the appellant could not engage in the activity of running the canteen. Nor can the appellant decide on rates of food articles or the composition of the individuals who are served in the canteen. The activity of the appellant is a consequence of the obligation of M/s Larsen & Toubro to its employees and is, therefore, but a service.
8. It remains to be seen if such service is taxable as outdoor catering service. The primary difference between a caterer and an outdoor catering service is that the latter operates from a premise other than its own. It is not the case of the appellant that service is rendered from its own premises. Further, there is no dispute that the appellant is in the business of catering because it is specialized in supply of food and beverages in the canteen premises belonging to M/s Larsen & Toubro. Therefore, it would appear that all the requirements for taxability in accordance with section 65 (105) (zzt) of Finance Act, 1994 is in place.
9. Learned Counsel claims that recipient of service is the individual employee who pays for the food or article. As we have noted above, the individual makes part payment for the food which is an ingredient of the wage negotiation with employer meeting the subsidy agreed upon. Mere payment of some portion of the cost does not render the activity as a commercial transaction between appellant and the consumer. On the claim of mutuality, we are of the opinion that the society and its membership is not germane to the contract between M/s Larsen & Toubro and the appellant for engaging the latter as a caterer of food and drink in the canteen at Powai campus.
10. In re Rajeev Kumar Gupta, the Tribunal has held that 5.?We have carefully considered the submissions from both sides. In the present case, on perusal of the agreement, we find that the entire facilities relating to maintenance of canteen including furniture, utensils, and also gas, electricity have been provided by the company itself. The appellant has engaged himself merely in preparation and serving the food items at the company premises. The above aspects have not been appreciated by the authorities below. The activities undertaken by the appellant cannot be held to fall under the category of outdoor catering service. The facts of the case in Raj Kumar Jain cited supra are entirely different and hence the said decision can not be applied to the facts of the present case. In the present matter, appellant is an independent entity which does not have bear any loss on account of the rates which are not within its commercial decision. It cannot, therefore, claim to have been engaged merely to cook and serve.
11. In re Indian Coffee Workers Co-op. Society Ltd, wherein the issue was decided in the context of the provider of the service being an independent entity engaged by employees to cater to their food requirements, it was held that:
10.?Consequently, on a plain and literal construction of the provisions of Section 65(105)(zzt) read with the definitions of the expressions caterer and outdoor caterer as contained in clauses (24) and (76a), it is evident that the assessee is subject to the levy of Service Tax. The assessee provides to any person, to wit, NTPC or LANCO, the service of an outdoor caterer. In our view, there is a fundamental fallacy in the submission of the assessee that it should be held not to fall within the definition of the expression outdoor caterer on the ground that the food, edibles or beverages are provided not to NTPC or LANCO but to their employees, customers and guests. That, in our view, begs the question. The taxable catering service cannot, in our view, be confused with who has actually consumed the food, edibles and beverages which are supplied by the assessee. Taxability or the charge of tax does not depend on whether and to what extent the person engaging the service consumes the edibles and beverages supplied, wholly or in part. What is material is whether the service of an outdoor caterer is provided to another person and once it is, as in the present case, the charge of tax is attracted.
12. In Alfa Laval (India) Ltd Employees Co-Operative Consumers Society v. Commissioner of Central Excise [Final Order no. A/1332/15/STB dated 28th May 2015] this Tribunal has held that co-operative societies which have been contracted by the companies are also provider of catering service and therefore, liable to service tax.
13. It is clear from the enunciation of the factual matrix that the appellant has been engaged to render a service on behalf of the employer and compensated for by the employer with some portion of the cost. The appellant cannot escape the liability of tax in view of the provision of service which is taxable under the Finance Act, 1994.
14. Appellant claims that the demand is barred by limitation of time because there was a bonafide belief of non-taxability. Reliance was placed on the decision in Larsen & Toubro Ltd v. Commissioner of Central Excise, Pune II [2007 (211) ELT 513 (SC)]. We do not believe that the circumstances present in the case decided upon by the Honble Supreme Court is relevant to the present proceedings because the appellant has been rendering the service for long and also happens to be a co-operative society which could not have been unaware of the legal provisions of taxation. It cannot also claim to have lacked knowledge inasmuch as M/s Larsen & Toubro is also one of the members of the society. We find that the appellant has been given the benefit of abatement in the computation of the tax. Consequently, we find no reason to interfere with the impugned order.
15. The appeals are rejected.
(Pronounced in Court on 29/11/2016) (M V Ravindran) Member (Judicial) (C J Mathew) Member (Technical) */as 10 11