Sale of Sweet Boxes Not Service Taxable; RCM Demand and Penalties Quashed Under Section 65B(44)(b)

The CESTAT Kolkata held that the sale of sweet boxes constituted a pure sale of goods, not liable to service tax under outdoor catering services, and set aside the demand of Rs. 56,159. Service tax demand under RCM for manpower supply services was also set aside, as the service provider had already paid the tax, avoiding double taxation. Service tax confirmed on directors' remuneration was quashed, as salary paid to directors as employees falls outside the definition of service under Section 65B(44)(b). The disallowance of CENVAT credit on maintenance services was reversed, recognizing the appellant's entitlement under CENVAT Credit Rules. Penalties imposed were also set aside due to the unsustainable tax demands. The appeal was allowed in full, with all demands and penalties quashed.

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ISSUES:

Whether the sale of sweet boxes by a registered outdoor catering service provider constitutes a taxable outdoor catering service or a pure sale of goods exempt from service tax.Whether service tax under reverse charge mechanism (RCM) is payable on legal services and goods transportation agency (GTA) services received by the appellant, considering prior voluntary payment.Whether service tax under RCM is payable on manpower supply services when the service provider has charged and paid service tax.Whether remuneration paid to directors, who are also employees of the company with TDS deducted under the salary head, is liable to service tax under RCM.Whether CENVAT credit availed on input services from a welfare association related to rented immovable property is admissible despite differences in billing and registered addresses.Whether CENVAT credit can be denied on the ground that service tax was not paid by the service provider under RCM.Whether penalties imposed for non-payment of service tax and irregular CENVAT credit are sustainable where demands are set aside.

RULINGS / HOLDINGS:

The sale of sweet boxes is a transaction of sale of goods with no element of service involved; hence, it does not constitute outdoor catering service and is not liable to service tax. The mere registration as an outdoor catering service provider does not render all transactions taxable under that service.Service tax under RCM on legal services and GTA services has been voluntarily discharged by the appellant and appropriated; thus, those demands are upheld as satisfied.Demand of service tax under RCM on manpower supply services is unsustainable where the service provider has charged and deposited service tax, as demanding tax again from the recipient constitutes "double taxation".Remuneration paid to directors as salary, with TDS deducted under section 192 of the Income Tax Act and Form 16 issued, is not a taxable service under Section 65B(44)(b) of the Finance Act, 1994, as provision of service by an employee to the employer during employment is excluded from the definition of service.CENVAT credit availed on input services received in the course or furtherance of renting immovable property business is admissible despite differences in billing and registered addresses, with no violation of Rule 9 of CENVAT Credit Rules, 2004.CENVAT credit cannot be denied merely because service tax was not paid by the service provider under RCM, provided the tax has been paid and proper invoices are available.Penalties imposed for non-payment of service tax and irregular CENVAT credit are not sustainable where the underlying demands have been set aside.

RATIONALE:

The Court applied the definition of outdoor catering service under Section 65(105)(zzt) and Rule 2C of Service Tax (Determination of Value) Rules, 2006, emphasizing the "element of personalized service" as essential to constitute outdoor catering service, relying on precedents including Tamil Nadu Kalyana Mandapam Association and Hotel Priya decisions.Regarding RCM liabilities, the Court relied on established jurisprudence and CBEC Circular F. No. 341/18/2004-TRU (Pt.) dated 17-12-2004, which prohibits double taxation when service tax has already been paid by the service provider.The exclusion of services provided by an employee to the employer from the definition of service under Section 65B(44)(b) of the Finance Act, 1994, was applied, supported by CBEC Circular No. 115/9/2009-ST clarifying that salaries paid to directors in their capacity as employees are outside the scope of service tax.CENVAT Credit Rules, 2004, specifically Rule 9, were interpreted to allow credit where input services are used in the course or furtherance of business, notwithstanding procedural irregularities such as address mismatches, following precedents like Figment Global Solutions and Shalimar Paints.The Court recognized that penalties cannot stand where the foundational tax demands are invalidated, adhering to principles of natural justice and statutory mandates.

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