By TIOL News Service

NEW DELHI, AUG 16, 2017: INDIAN Railways Catering and Tourism Corporation Ltd. (IRCTC) owned by the Ministry of Railways is responsible for organizing the catering and hospitality services on board the trains. They act as a licensing authority of Indian Railways to arrange for private entrepreneurs to undertake various onboard activities relating to the services to be provided on board the trains.

The appellant was awarded licence by IRCTC to supply food and bedrolls to passengers in certain trains and also for cleaning of the coaches and toilets in those trains. For cleaning of coaches and toilets, the appellant received an amount from IRCTC on per coach basis. For supplying bedrolls to non-AC coaches, the appellant was charging a specified amount from the passengers, 12% of which was being paid to IRCTC as licence fee and the balance was being retained by them. In respect of AC coaches, the appellant were receiving a specified amount per bedroll from IRCTC.

The Department was of the view that the appellants are providing "Support services of business or commerce" taxable and liable to pay service tax on the amount received by them from IRCTC.

The period of dispute is April 2006 to September 2011.

SCNs were issued and the same were confirmed by the lower authorities along with penalty and interest.

In appeal before the CESTAT, the appellant submitted that as per section 65Aof FA, 1994, the most specific description shall be preferred to sub-clauses providing a more general description and, therefore, the service provided by the appellant does not get covered under the category of Business Support Service; that they have neither provided any infrastructural service to IRCTC nor are maintaining the stock of bedrolls belonging to IRCTC and did not maintain any customer relationship on behalf of IRCTC; that the activity may be classifiable under the category of "supply of tangible goods" 65(105) (zzzzj) as the appellant is supplying bedrolls (goods).

The AR supported the order of the lower authorities.

After extracting the definition of "Support Services", the Bench observed -

"10. …, we are of the view that the supply of bedrolls as well as cleaning of coaches and toilets of trains are not covered within the meaning of support services of business or commerce. The services have been rendered by the appellant to the passengers on behalf of IRCTC / Indian Railways. We are of the view that such services are more appropriately classifiable under business auxiliary services under the category of "Customer care services provided on behalf of the client under section 65(11) of the Finance Act 1994". Since the show cause notice as well as the impugned orders have classified the services under business support services, these orders cannot be sustained and are required to be set aside."

The impugned orders were set aside and the appeals were allowed.

(See 2017-TIOL-2931-CESTAT-DEL)