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of <h1>Outdoor Catering Services: Goods Cost as Sale, Service Tax Exemption Granted</h1> <h3>Commissioner of Service tax Versus LSG SKY Chef India (P.) Ltd.</h3> Commissioner of Service tax Versus LSG SKY Chef India (P.) Ltd. - [2011] 32 STT 301 (Kar.) , 2012 (27) S.T.R. 5 (Kar.) , [2011] 46 VST 57 (Kar), 2017 (49) ... Issues:1. Whether the cost of goods supplied in outdoor catering service should be treated as sale of goods or charged to service tax.2. Whether the assessee is liable to pay service tax on the gross amount realized from outdoor catering services provided.3. Whether the assessee is eligible for exemption under Notification No. 12/2003.4. Whether the contract for outdoor catering is a composite contract for service and sale, and how the liability for service tax and sales tax should be determined.Issue 1:The appeal concerns the treatment of the cost of goods supplied in outdoor catering service as either sale of goods or subject to service tax. The Tribunal held that the cost of goods supplied should be treated as sale of goods, following the precedent set by the Supreme Court in Bharat Sanchar Nigam Ltd. v. Union of India [2006] 3 STT 245. The revenue, however, contested this decision.Issue 2:The dispute revolves around the service tax liability of the assessee on the gross amount collected from clients for outdoor catering services provided. The assessing authority found that the assessee had not paid service tax on the correct value of taxable services as per section 67 of the Finance Act, 1994. The Tribunal ruled in favor of the assessee, allowing them to benefit from Notification No. 12/2003 and exempting them from the service tax liability on the value of goods sold.Issue 3:The assessee claimed exemption under Notification No. 12/2003, dated 20-6-2003, arguing that they were eligible for exemption in respect of the value of food and beverages served to Airlines on payment of VAT. The assessing authority rejected this claim, deeming it legally unsustainable. However, the Tribunal granted the assessee the benefit of the notification, leading to the revenue's appeal.Issue 4:The contract for outdoor catering was analyzed as a composite contract involving both service and sale aspects. The Division Bench concluded that the State Legislature could levy sales tax on the value of food articles, while the service rendered by the assessee, including transportation costs, constituted the service aspect liable for service tax. The Court emphasized the need for a bifurcation between the sale of goods and services provided in outdoor catering contracts, declaring it a composite contract subject to separate tax liabilities for service and sales aspects.This judgment delves into the intricate details of service tax liability in the context of outdoor catering services, highlighting the complexities of determining tax obligations in composite contracts involving both goods and services. The legal analysis provided by the Tribunal and the Division Bench offers clarity on the treatment of the cost of goods supplied, eligibility for exemptions, and the bifurcation of tax liabilities in such contracts. The decision underscores the importance of differentiating between the sale of goods and services rendered to ensure accurate tax assessments in line with relevant legal provisions and notifications.
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