CESTAT AHMEDABAD: Appeal Allowed on Service Tax Demand for Factory Canteen Services

The Appellate Tribunal CESTAT AHMEDABAD allowed the appeal partially, waiving the penalty and dropping the service tax demand related to factories covered under the Factories Act. The Tribunal held that the appellant's services, involving maintaining canteens in factories, fell under the exemption of Sr. No. 19A of Notification No. 25/2012-ST, extending to any entity maintaining canteens in factories. The decision was based on the interpretation that the exemption covers services related to serving food in canteens maintained within factory premises, not limited to canteens run by factory owners.

---

---

Issues:
1. Interpretation of exemption under Sr. No. 19A of Notification No. 25/2012-ST.
2. Applicability of service tax on services provided by the appellant to factories.
3. Whether the benefit of exemption extends to the appellant maintaining canteens in factories.

Analysis:
1. The appeal challenged an Order-in-Appeal confirming a demand for service tax against the appellant for providing 'Outdoor Catering Services.' The dispute arose due to a variance in values between Form 26AS and ST-3 returns for 2015-16 and 2016-17. The appellant argued for exemption under Sr. No. 19A of Notification No. 25/2012-ST, claiming the nature of work involved maintaining canteens in factory premises, not outdoor catering. The Commissioner (Appeals) and the Adjudicating authority upheld the demand, leading to the appeal before the Tribunal.

2. The appellant contended that the services provided were akin to running and maintaining canteens in factories, falling under the exemption of Sr. No. 19A. They cited the Factories Act, 1948, which mandates canteen provision for factories with over 250 workers. The appellant argued that the exemption is based on the canteen's location within a factory, not on its operation. Judgments like M/s Bhimas Hotels Pvt. Ltd. and others were relied upon to support this claim. The appellant submitted ledgers and declarations from service recipients to prove coverage under the Factories Act.

3. The Tribunal analyzed the relevant notifications and found that Entry 19A exempts services related to serving food in canteens maintained in factories. It clarified that the exemption is not limited to canteens run by factory owners but extends to any entity maintaining canteens in factories. The language of the notification supports this interpretation. Considering the evidence submitted, the Tribunal held that the appellant's services were covered by the exemption and dropped the service tax demand related to factories covered under the Factories Act. The remaining demand was accepted by the appellant, leading to a partial allowance of the appeal with waiver of penalty.

This detailed analysis of the judgment highlights the key legal arguments, interpretations of relevant notifications, and the final decision reached by the Appellate Tribunal CESTAT AHMEDABAD.

---