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2025 (5) TMI 1023 - AT - Service TaxLevy of service tax - gross receipts reflecting in Form-26AS of the Appellant for the Financial Year 2014-15 2015-16 2016-17 - correct method for determination of taxable value of catering services under the Service Tax (Determination of Value) Rules 2006 specifically Rule 2C - exemption claimed under the Mega Exemption Notification for catering services provided to premier medical institutions such as SGPGIMS and KGMU - HELD THAT - The Appellant is providing Catering Services to various hospitals and other establishments and the same has been taxed on the gross value of the receipts as shown in Form-26AS which is not correct. The Appellant is entitled to the exemption of 40% and thereafter taxable value has to be arrived and charged to service tax under the head of Outdoor Catering Services . Accordingly the service tax liability would be Rs.6, 44, 227/- against which an amount of Rs.6, 06, 214/- has already been paid and directed to be appropriated in the impugned Order-in-Appeal. Further it has been consistently held by the Tribunal that calculation of demand on the gross value reflecting in Form-26AS is not the correct method of arriving at the taxable value. There are no ingredient of misstatement suppression of facts etc. since catering services provided by the Appellant to the premier medical institutions is exempt from service tax vide Entry No.09(a) of the Mega exemption Notification No.25/2012-ST dated 20.06.2012 as amended by Notification No.06/2014-ST dated 11.07.2014 Entry No.09(b) . This is a fact on record that though the Appellant got himself registered in the Service Tax Department but in the absence of proper guidance was filing NIL ST-3 Returns whereas the Appellant should have mentioned the gross receipts and claim of exemption in the ST-3 Returns which could have avoided the entire proceedings - the Appellant has not only provided the catering services to SGPGI and KGMU but has also provided services to various others institutions/establishments and have also paid service tax on those services. The Appellant is directed pay the balance amount of service tax i.e. difference of Rs. 6, 44, 227/- Rs.6, 06, 214/- alongwith applicable interest. The demand of service tax is confined to Rs.6, 44, 227/-. Penalty imposed under Section 78 is set aside. Conclusion - i) Taxable value for catering services must be determined as per Rule 2C of the Service Tax (Determination of Value) Rules 2006 and not on gross receipts. ii) Exemptions under Mega Exemption Notifications apply to catering services provided to specified premier medical institutions. iii) Penalties require a finding of misstatement or suppression which was absent here; thus penalties cannot be sustained. Appeal allowed in part.
1. ISSUES PRESENTED and CONSIDERED
The core legal questions considered by the Tribunal are:
2. ISSUE-WISE DETAILED ANALYSIS Issue 1: Validity of Service Tax Demand Based on Gross Receipts in Form-26AS Legal Framework and Precedents: The Service Tax (Determination of Value) Rules, 2006, particularly Rule 2C, govern the valuation of catering services for service tax purposes. It prescribes that the taxable value is a specified percentage of the total amount charged for supply of food or drink as part of restaurant or outdoor catering services, rather than the entire gross receipts. Court's Interpretation and Reasoning: The Tribunal observed that the Appellant's service tax liability was incorrectly computed on the gross receipts as reflected in Form-26AS. The Tribunal referred to Rule 2C which mandates that only a portion of the total amount charged (40% for restaurant services and 60% for outdoor catering) is taxable as service portion. The Tribunal emphasized that the gross receipts cannot be the basis for service tax demand without applying the prescribed percentage. Key Evidence and Findings: The Appellant provided a reconciliation chart and work orders. However, the Commissioner (Appeals) noted discrepancies in the work orders, especially regarding the quantum of services for SGPGI. Despite this, the Tribunal accepted that the taxable value must be determined in accordance with Rule 2C. Application of Law to Facts: The Tribunal applied Rule 2C to the Appellant's receipts and computed the taxable value accordingly, reducing the demand from the gross amount to the prescribed percentage of the total amount charged. Treatment of Competing Arguments: The Revenue's contention that the entire gross receipts are taxable was rejected. The Tribunal also noted that the Appellant had paid service tax on certain services, indicating some compliance. Conclusions: The demand based on gross receipts was held incorrect. The taxable value must be computed as per Rule 2C, resulting in a reduced service tax liability of Rs.6,44,227/-. Issue 2: Applicability of Exemption for Catering Services to Premier Medical Institutions Legal Framework and Precedents: The Mega Exemption Notification No. 25/2012-ST and its amendment No. 06/2014-ST provide exemption for catering services to certain medical institutions under Entry No. 09(a) and 09(b). Court's Interpretation and Reasoning: The Tribunal recognized that catering services provided to SGPGIMS and KGMU are exempt from service tax under the said notifications. The Appellant's failure to disclose gross receipts and claim exemption in the ST-3 returns was attributed to lack of proper guidance rather than deliberate concealment. Key Evidence and Findings: The Appellant's registration with the Service Tax Department and filing of NIL returns contrasted with the actual receipt of catering service payments. The work orders and reconciliation chart showed services to exempted institutions and others. Application of Law to Facts: The Tribunal held that exemption applies to catering services to the premier medical institutions, but not to other establishments where service tax is payable. Treatment of Competing Arguments: The Revenue argued suppression of facts and misstatement, but the Tribunal found no ingredient of misstatement or suppression, attributing errors to lack of guidance. Conclusions: The exemption is valid for services to specified medical institutions, and the Appellant should have claimed it properly in returns. Issue 3: Validity of Penalties and Late Fees Imposed Legal Framework and Precedents: Penalties were imposed under Sections 77(1)(c), 77(1)(d), 77(2), 78 of the Finance Act, 1994, and late fees under Rule 7C read with Section 70. Court's Interpretation and Reasoning: The Commissioner (Appeals) had vacated penalties under Sections 77 and late fees but upheld penalty under Section 78. The Tribunal further set aside the penalty under Section 78. Key Evidence and Findings: The absence of misstatement or suppression and the Appellant's partial compliance influenced the Tribunal's decision to relieve the Appellant from penalties. Application of Law to Facts: The Tribunal balanced the facts, recognizing the Appellant's failure to properly disclose but no willful evasion or fraud. Treatment of Competing Arguments: The Revenue's insistence on penalties was rejected in view of the Appellant's conduct and lack of malafide intent. Conclusions: Penalties and late fees except the service tax demand itself were set aside. Issue 4: Appropriateness of Demand and Payment Adjustment Legal Framework and Precedents: Appropriation of amounts paid towards service tax liability is governed by the provisions of the Finance Act and relevant rules. Court's Interpretation and Reasoning: The Tribunal directed that the amount already paid by the Appellant (Rs.6,06,214/-) be appropriated against the revised demand of Rs.6,44,227/-, with the balance payable along with applicable interest. Key Evidence and Findings: The reconciliation chart and payment records supported the appropriateness of partial payment adjustment. Application of Law to Facts: The Tribunal ensured that the Appellant's payments were credited appropriately to avoid double recovery. Treatment of Competing Arguments: No contrary arguments on appropriation were noted. Conclusions: The balance service tax demand is confirmed with direction for payment of difference and interest. 3. SIGNIFICANT HOLDINGS "The Appellant is entitled to the exemption of 40% and thereafter, taxable value has to be arrived and charged to service tax under the head of 'Outdoor Catering Services'." "The calculation of demand on the gross value reflecting in Form-26AS is not the correct method of arriving at the taxable value." "I do not find any ingredient of misstatement, suppression of facts etc. since catering services provided by the Appellant to the premier medical institutions is exempt from service tax vide Entry No.09(a) of the Mega exemption Notification." "Penalty imposed under Section 78 is set aside." Core principles established include:
Final determinations:
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