Tribunal upholds service tax on bedrolls & food sales, waives penalties.

The Tribunal confirmed service tax liability on the supply of bedrolls and sale of food and beverages within the normal limitation period, along with applicable interest. However, service tax on cleaning services was set aside. All penalties under various sections of the Finance Act were waived, and the appeals by both the assessee and the department were disposed of accordingly.

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Issues Involved:
1. Service tax liability on supply of bedrolls under 'Business Auxiliary Services'.
2. Service tax liability on cleaning of toilets and compartments under 'Cleaning Services'.
3. Service tax liability on sale of food and beverages under 'Outdoor Caterer's Services'.
4. Interest chargeable under Section 75 of the Finance Act, 1994.
5. Invocation of extended period of limitation for the first demand.
6. Imposition of penalty under Section 78 of the Finance Act, 1994.
7. Imposition of penalty under Section 77(1) of the Finance Act, 1994 for failure to take registration.
8. Imposition of penalty under Section 77(2) of the Finance Act, 1994 for failure to file ST-3 returns.

Detailed Analysis:

(a) Supply of Bedrolls under 'Business Auxiliary Services':
The appellant conceded that the supply of bedrolls to passengers is chargeable to service tax under 'Business Auxiliary Services' as per Section 65(19) read with Section 65(105)(zzb) of the Finance Act, 1994. Therefore, the appellant is liable to pay service tax on the supply of bedrolls.

(b) Cleaning of Toilets and Compartments:
The Revenue argued that cleaning services are taxable under 'Cleaning Services' as per Section 65(24b) read with Section 65(105)(zzzd) of the Finance Act, 1994. The appellant contended that the services rendered in railway compartments do not fall under 'commercial or industrial buildings or premises'. The Tribunal referenced the case of R.K. Refreshments & Enterprises Pvt. Ltd., which held that railway coaches are rolling stock and not commercial premises. Consequently, the Tribunal concluded that cleaning services rendered in railway coaches are not taxable under 'Cleaning Services'.

(c) Outdoor Catering Services:
The appellant argued that the sale of food and beverages should be subject to VAT, not service tax, citing the Delhi High Court's judgment in the IRCTC case. However, the Tribunal found that the appellant's arrangement with IRCTC, where they sell food items and remit part of the proceeds to IRCTC, constitutes a service. The Tribunal referenced the Allahabad High Court's judgment in Indian Coffee Workers’ Co-op Society Limited and the Kerala High Court's judgment in Saj Flight Services Pvt. Ltd., holding that such activities are taxable under 'Outdoor Catering Services'.

(d) Interest Chargeable:
The Tribunal confirmed that interest is chargeable on the demands under Section 75 of the Finance Act, 1994, wherever the service tax demand is upheld.

(e) Extended Period of Limitation:
The Tribunal examined whether the extended period of limitation under proviso to Section 73(1) of the Finance Act, 1994, could be invoked. The Tribunal found that the appellant had cooperated with the investigation and provided all requested information. Therefore, the allegation of wilful misstatement or suppression of facts was not substantiated, and the extended period of limitation could not be invoked.

(f) Penalty under Section 78:
The Tribunal found that the imposition of penalty under Section 78, based on the same grounds as the extended period of limitation, was not justified due to the lack of evidence of wilful misstatement or suppression of facts.

(g) Penalty under Section 77(1):
The Tribunal noted that penalties under Section 77(1) require evidence of fraud, collusion, wilful misstatement, or suppression of facts, which were not established. The appellant's cooperation during the investigation and their belief that they were not liable for service tax justified the waiver of penalties.

(h) Penalty under Section 77(2):
Similarly, the Tribunal found that the appellant's failure to file ST-3 returns was due to their belief that they were not liable for service tax, and thus, penalties under Section 77(2) were also waived.

Conclusion:
- Service tax on supply of bedrolls and sale of food and beverages is confirmed within the normal period of limitation along with applicable interest.
- Service tax on cleaning services is set aside.
- All penalties are set aside invoking the provisions of Section 80 of the Finance Act, 1994.
- The appeals filed by the assessee and the department are disposed of accordingly.

(Pronounced in open court on 26.03.2019)

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