By TIOL News Service

MUMBAI, JULY 24, 2018: THE following are the findings of the Commissioner(A) while upholding the order-in-original confirming the service tax demand on the appellant assessee who was providing canteen facilities to the factory workmen –

6.4. On perusal of the show-cause notices, impugned order-in-original and Grounds of appeals submitted by the appellant, the moot question is whether service tax is payable on the amounts recovered by the appellant from their employees on account of catering services provided to the employees of the appellant. According to my view, the said act amounts to Service in terms of clause (44) of Section 65B of the Act, as it involves receipt of consideration. Further, the said service finds a place in the list of ‘Declared Service' in terms of section 66E(e) of the Act, ibid. Moreover, these activities are also not covered in the ‘Negative List' or Mega Exemption so as to be exempted from payment of service tax. Here, in this case, the employer is obliged to carry out an act (obligation to do an act) for its employees as mandated under Factories Act, 1948. Accordingly, the employer becomes the service provider and the employees become the service receiver. Therefore, the said activity becomes taxable and is subjected to the payment of service tax.

6.5 According to my view, the appellant's contention about the exemption available to canteen services will not hold goods in the present case. The consideration recovered by the appellants is taxable under the definition of ‘service'. The said exemptions are in a different context and thus have no relevance with the present case. Also, the said activity also fails to find a place in the ‘negative list'. Further, in view of the discussions above, I hold that the appellant's act of recovering consideration from its employees for providing them canteen services falls under the definition of the term – ‘service'. As per clause (44) of Section 65B of Chapter V of the Finance Act, 1994, and as per clause (e) of Section 66E of the Act, the said activity finds place in the list of ‘Declared Service'. Therefore, these services becomes taxable and liable for payment of service tax accordingly. In view of the above discussions, I hold the impugned order-in-original as legal and proper .

The appellant is, therefore, before the CESTAT issue and submits that they out sourced and received catering services from outdoor caterers and in-turn made the same available to their workmen; that there is no dispute that the service tax on the catering facilities received from outdoor caterer has been paid and no credit of the same is taken by the appellant; that in terms of labour agreement with the workmen, appellant got certain amount from the workmen for providing these facilities in the canteen located in the factory premises. It is emphasized that since service tax has been paid on the entire amount of the charges towards outward catering, if they are asked to pay the service tax again in respect of the amounts collected from their workmen, it would amount to double taxation. Reliance is placed on the Larger Bench decision in Vijay Sharma & Co. - 2010-TIOL-1215-CESTAT-DEL-LB in this regard. The appellant further submits that notification 25/2012-ST was amended by notification 14/2013-ST to insert clause 19A which reads - "19A. Services provided in relation to serving of food or beverages by a canteen maintained in a factory covered under the Factories Act, 1948 (63 of 1948), having the facility of air-conditioning or central air-heating at any time during the year."

And, thereby exemption was provided from payment of service tax in such a situation as at present. Consequently, the demand of service tax does not arise.

The appellant also cited the recent decision of the Authority for Advance Ruling - 2018-TIOL-01-AAR-GST wherein in para 8 it has been observed thus:-

8. It is true that in the pre-GST period, vide Sl No. 19 and 19Aof Notification No. 25/2012 ST dated 20.60.2012 as amended by Notification No. 14/2013-Service Tax dated 22.10.2013 the 'services provided in relation to serving of food or beverages by a canteen maintained in a factory covered under the Factories Act, 1948 (63 of 1948), including a canteen having the facility of air-conditioning or central air-heating at any time during the year' was exempted from service tax. But, there is no similar provision under the GST laws.

The AR reiterated the order of the Commissioner(A).

The Bench considered the elaborate submissions and in the matter of the conclusion arrived at by the Commissioner(A) in paragraph 6.5 (supra) observed –

“7. I am clearly not in a position to appreciate what has been stated therein. Commissioner (Appeals) states that appellant's act of recovering consideration from its employees for providing canteen services falls under the definition of the term – Service. Since it is the finding Commissioner (Appeals) that the activity undertaken by the appellant is a canteen service, then how can he deny the exemption that has been given in respect of the said taxable service. No cogent or even an iota of reason is coming for not allowing the benefit of exemption under notification no. 25/2012-ST dated 20.06.2012 as amended by the notification no. 14/2013-ST dated 22.10.2013."

The appeal was allowed with consequential relief.

(See 2018-TIOL-2260-CESTAT-MUM)