2009 (1) TMI 119 - AT - Service Tax

Appellants not liable for Service Tax on airline food & beverages under Notification No. 12/2003.

The Grand Ashok Versus Commissioner of Service Tax, Bangalore

The Grand Ashok Versus Commissioner of Service Tax, Bangalore - [2009] 19 STT 435 (BANG. - CESTAT), 2009 (92) RLT 73 (CESTAT - Ban.) , 2009 (15) S.T.R. ... Issues:1. Whether the appellants are liable to pay Service Tax on in-flight catering services.2. Whether the appellants are entitled to abatement towards the cost of food and beverages supplied.3. Whether the appellants can be charged Service Tax on the cost of food and beverages supplied to airlines.4. Whether the appellants are justified in their belief regarding Service Tax liability on food and beverages supplied.5. Whether penalties and longer period invocation are warranted.Issue 1: Liability for Service Tax on In-Flight Catering ServicesThe appellants argued that their primary activity is the sale of goods, making them exempt from Service Tax. They relied on the Northern Indian Caterers case to support their claim. However, the Commissioner found them liable under the category of 'Outdoor Caterer Services'. The Tribunal noted the various activities undertaken by the appellants in providing catering services and concluded that they fall under the taxable category. The appellants' argument that they should not be liable for Service Tax was rejected based on legal precedents and the Commissioner's findings.Issue 2: Entitlement to AbatementThe appellants contended that they should receive abatement towards the cost of food and beverages supplied. However, the Commissioner did not accept this claim. The Tribunal observed that the Commissioner's decision was based on legal interpretations and previous court rulings, including the Kerala High Court's decision. The appellants were not granted abatement as per the impugned order.Issue 3: Service Tax on Food and Beverages Supplied to AirlinesThe appellants questioned the inclusion of the cost of food and beverages supplied to airlines in computing Service Tax liability. They argued that since they paid VAT on these items, Service Tax should not apply. The Tribunal referenced the Imagic Creative case, where the Supreme Court clarified that Service Tax and VAT are mutually exclusive. It was determined that Service Tax cannot be charged on the cost of food and beverages supplied to airlines, as these costs are separable and identifiable.Issue 4: Justification of Belief Regarding Service Tax LiabilityThe appellants claimed they were under a bona fide belief that they were not liable for Service Tax on food and beverages supplied to airlines. The Tribunal considered this argument and found that the appellants' belief was reasonable. They had been discharging Service Tax on handling and transportation charges, indicating a good faith effort to comply with tax obligations.Issue 5: Penalties and Longer Period InvocationThe appellants argued against the imposition of penalties and the invocation of a longer period for tax assessment. The Tribunal agreed with the appellants, noting that their belief regarding Service Tax liability on food and beverages supplied was justified. Consequently, penalties and longer period invocation were deemed unwarranted, and the appeal was allowed with consequential relief.In conclusion, the Tribunal ruled in favor of the appellants, finding no merit in the impugned order. The appellants were not liable for Service Tax on the cost of food and beverages supplied to airlines, were entitled to the benefit of Notification No. 12/2003, and penalties were deemed unjustified.