2025 (3) TMI 967 - AT - Service Tax

Canteen operator denied service tax exemption for outdoor catering services under Serial No. 19 of Notification 25/2012

Prashant Agrawal Caterers & Contractor Versus Commissioner of Central Goods And Service Tax, Excise And Customs, Bhopal

CESTAT New Delhi dismissed the appeal regarding service tax exemption for outdoor catering services. The appellant operated a canteen within an ... Benefit of Exemption - applicability of serial no 19 of notification no. 25/2012 dated 20-06-2012 - appellant is providing 'Outdoor Catering Services' within a hospital canteen - HELD THAT:- Admittedly, the appellant is running a canteen which is located in the Hospital and the said Hospital is having the facility of air-conditioning. The said canteen was an integral part of the hospital establishment, as in apparent from the agreement entered between the appellant and the hospital. The said mess was required for the purpose of providing meal and other eatables to the patients of the Hospital. This clause of the agreement makes it amply clear that the mess was an integral part of the hospital establishment only. A perusal of the notification makes it clear that such services are exempt only if no air conditioning or central hearing is provided. In the instant case, it is also noted that the learned counsel has submitted that the hospital was air-conditioned, and the mess being setup for in-patient services, would form a part of the hospital establishment only. The burden of proving the eligibility to an exemption notification rests on the taxpayer claiming the exemption. In the instant case, no positive evidence has been led by the learned counsel of the appellant that there was no air conditioning facility in the said mess. In fact, it has been submitted that hospital was air conditioned for the welfare to the patient especially the ICU patients. Consequently, the appellant does not qualify for the service tax exemption. Conclusion - The appellant's canteen, as part of an air-conditioned hospital, did not qualify for the service tax exemption under Serial No. 19 of N/N. 25/2012-ST. The appellant's failure to provide sufficient evidence to prove the absence of air-conditioning in the canteen led to the dismissal of the appeal. Appeal dismissed. ISSUES PRESENTED and CONSIDEREDThe core issue in this case was whether the appellant, engaged in providing 'Outdoor Catering Services' within a hospital canteen, was eligible for an exemption from service tax under Serial No. 19 of Notification No. 25/2012-ST dated 20.06.2012. This exemption applies to services related to serving food or beverages by establishments that do not have air-conditioning or central heating facilities. The appellant claimed this exemption, arguing that their service area lacked air-conditioning, despite the hospital's air-conditioning facilities.ISSUE-WISE DETAILED ANALYSISRelevant Legal Framework and PrecedentsThe legal framework centers around Notification No. 25/2012-ST, particularly Serial No. 19, which exempts services related to serving food or beverages by establishments without air-conditioning or central heating. The interpretation of exemption notifications is guided by the principle that such provisions must be construed strictly, as established in the precedent set by the Supreme Court in Commissioner of Customs (Import), Mumbai vs. Dilip Kumar & Company.Court's Interpretation and ReasoningThe Tribunal emphasized the principle of strict interpretation for exemption notifications. It noted that the appellant's canteen, being part of a hospital with air-conditioning facilities, did not qualify for the exemption under Serial No. 19. The Tribunal relied on the Supreme Court's ruling that ambiguities in exemption notifications should favor the Revenue.Key Evidence and FindingsThe appellant contended that the canteen area lacked air-conditioning, supported by an agreement specifying the provision of basic amenities like tube lights and ceiling fans. However, the Tribunal found that the appellant failed to provide sufficient evidence to prove the absence of air-conditioning in the canteen. The Tribunal noted the appellant's admission that the hospital, including the ICU, was air-conditioned for patient welfare.Application of Law to FactsThe Tribunal applied the principle of strict interpretation to the facts, concluding that the appellant's canteen, as part of an air-conditioned hospital, did not meet the exemption criteria. The Tribunal emphasized that the burden of proof rested on the appellant to demonstrate eligibility for the exemption, which they failed to do.Treatment of Competing ArgumentsThe appellant argued that the exemption should apply as the canteen itself lacked air-conditioning. The Tribunal, however, focused on the integral nature of the canteen within the hospital establishment, which had air-conditioning. The Tribunal dismissed the appellant's reliance on the agreement, finding it insufficient to establish the absence of air-conditioning.ConclusionsThe Tribunal concluded that the appellant did not qualify for the service tax exemption under Serial No. 19 of Notification No. 25/2012-ST. The appeal was dismissed, and the Tribunal upheld the Commissioner (Appeals)'s order confirming the service tax demand and penalty.SIGNIFICANT HOLDINGSPreserve verbatim quotes of crucial legal reasoningThe Tribunal cited the Supreme Court's decision in Commissioner of Customs (Import), Mumbai vs. Dilip Kumar & Company, emphasizing that 'every taxing statute including, charging, computation and exemption clause (at the threshold stage) should be interpreted strictly.' The Tribunal reiterated that 'in a situation where the tax exemption has to be interpreted, the benefit of doubt should go in favour of the revenue.'Core Principles EstablishedThe Tribunal reinforced the principle that exemption notifications must be interpreted strictly, with the burden of proof on the taxpayer claiming the exemption. It confirmed that ambiguities in exemption provisions should favor the Revenue, not the taxpayer.Final Determinations on Each IssueThe Tribunal determined that the appellant's canteen, as part of an air-conditioned hospital, did not qualify for the service tax exemption under Serial No. 19 of Notification No. 25/2012-ST. The appellant's failure to provide sufficient evidence to prove the absence of air-conditioning in the canteen led to the dismissal of the appeal. The Tribunal upheld the service tax demand and penalty imposed by the Commissioner (Appeals).