ST - Cleaning Service - Train coaches are rolling stock; cannot fall under category of commercial objects - Demand unsustainable: CESTAT
By TIOL News Service
NEW DELHI, MAR 01, 2018: THE appellants are engaged in providing various services in pursuance of contractual arrangements with Indian Railways and Catering Tourism Corporation Limited (IRCTC).
Revenue entertained a view that the appellants are not discharging Service Tax on certain activities undertaken and considerations received therefor.
Proceedings were initiated by way of issuance of demand notices covering the period April, 2005 to March, 2011.
The allegations in both the notices were confirmed thereby resulting in service tax demand of Rs.97,55,397/- and penalties.
Tax demand under certain categories were accepted by the appellant but they have contested the demand raised under the following categories -
+ Cleaning Service
+ Supply of Bedrolls to passengers
+ Outdoor Catering
+ Supply of newspapers to passengers in Rajdhani trains
Upon considering the submissions made, the Bench observed as follows -
Cleaning Services
++ The appellants were engaged in cleaning of railway coaches and toilets in the said coaches.
++ "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…
++ 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.
Supply of BedRolls to Passengers
++ 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.
++ BSS is a generic service providing support to business of commerce of the service receiver.
++ In M/s Foodworld Railways and Institutional Caterers - 2014-TIOL-2284-CESTAT-DEL 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.
Outdoor Catering Service
++ 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.
++ The jurisdictional authority can verify the documents to satisfy the correctness of quantification of tax liability as claimed by the appellant.
Supply of newspaper to passengers
++ 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.
++ 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.
++ 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.
Limitation& Penalty
++ 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.
++ 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.
++ 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.
The appeals were disposed of.
(See 2018-TIOL-686-CESTAT-DEL)
