2025 (7) TMI 1411 - AT - Service Tax

Levy of service tax - sale of sweet boxes - Levy of service tax under the category of Manpower supply services received from various providers - Service tax confirmed on the remuneration paid to Four directors - Disallowance of CENVAT Credit availed by the appellant on the invoice - Reversal of Cenvat credit - disallowance on the ground that service tax was not paid by M/s Sonu Services under RCM - levy of penalties. Levy of service tax - sale of sweet boxes - HELD THAT - It is found that the supply of sweet boxes is a transaction of sale of goods and no element of service involved in the said transaction. The dominant nature of the transaction was sale only and no services amenities etc. were offered to the customers along with the sale of sweet boxes. The mere fact that the Appellant is registered as an outdoor catering service provider cannot be the reason to conclude that all transactions undertaken by them would be taxable under outdoor catering service. It is found that when the sweet boxes were delivered as per customer order It is a sale of goods and the said transaction cannot be treated as outdoor catering service simply because the seller is registered under that category. The copy of the sample invoices submitted by the appellant is perused. The invoices clearly indicate that the transaction was a sale. Accordingly no service tax is liable to be paid on a transaction which is a pure sale - the demand of service tax Rs.56, 159/- confirmed on the sale of sweet boxes is not sustainable. Levy of service tax under the category of Manpower supply services received from various providers - HELD THAT - The service tax has been collected and paid by the service provider M/s. Sonu Services even though legally service receiver is liable to pay service tax on RCM basis. On such services. However it is observed that demanding service tax again from the recipient under RCM would amount to double taxation. This view has been held by Tribunal Bangalore in the case of Kerala Ceramics Ltd. v. CCE 2024 (5) TMI 868 - CESTAT BANGALORE - the service tax cannot be demanded again from the appellant under RCM as the service tax in this case has already been paid by the service provider M/s. Sonu Services. Thus the demand of service tax confirmed in the impugned order on this count is not sustainable and the same is set aside. Service tax confirmed on the remuneration paid to Four directors - remuneration has been paid to the directors as salary and on such amount TDS was also deducted under the salary head under section 192 of the Income Tax Act 1961 Form 16 was being issued to such directors - HELD THAT - It is observed that the service provided by Director as an employee to the employer is not liable to pay service tax as per Section 65B (44) of the Finance Act 1994. As per the sub clause (b) of sub-Section (44) of Section 65 of Finance Act 1994 it is clear that provision of any service by an employee to the employer during the course of his employment does not fall under the definition of service. In the present case it is found that the Directors to whom the salary was paid by the appellant are employees of the Company. Thus the Directors in the capacity of employees provided service to the employer i.e. present appellant Company. Therefore the service provided by the Directors to the appellant Company is in the course of their employment is out of the purview of service in terms of Section 65B(44) (b) of the Finance Act 1994 - CBEC has also clarified the issue vide Circular No. 115/9/2009-ST dated 31.07.2009 wherein it has been clarified that any salary paid to the Directors of the Company is outside the scope of service - thus any salary paid to the Directors of the Company for the service rendered by him as an employee of the company is outside the scope of service - no service tax would be leviable on such amount - the demand of service tax on this count is not sustainable and is set aside. Disallowance of CENVAT Credit of Rs.21, 250/- availed by the appellant on the invoices raised by M/s Anandlok Welfare Association - HELD THAT - The said Association has raised the invoices for maintenance services provided in respect of the flat owned by the Appellant at 227 AJC Bose Road Kolkata-700020. The said property is given on rent to M/s Corporation Bank for which the Appellant pays service tax as a provider of renting of immovable property service. It is found that the department has not disputed payment of Service tax on the said property even though the address is different than that of the Appellant s registration. However at the time of availment of credit the department has denied the credit on the ground that the address wherefrom the services were provided is different. In this regard the input services were received by the Appellant in the course or furtherance of its renting an immovable property business. Hence there is no violation of Rule 9 of CENVAT Credit Rules 2004. Thus the appellant is eligible for the credit availed by them on the basis of the said invoices and hence the impugned order dialling the Cenvat credit on the above ground is set aside. Reversal of Cenvat credit - disallowance on the ground that service tax was not paid by M/s Sonu Services under RCM - HELD THAT - The stand of the department is not sustainable. Once service tax is paid and the appellant has received it proper invoice evidencing payment of the tax CENVAT credit is available whether service tax is paid by service provider or recipient. Levy of penalties - HELD THAT - It is found that penalties have been imposed as the appellant has not paid service tax on certain services. Also some Cenvat credit availed by the appellant has been disallowed as irregular. In view of the above findings the demand of service tax has not sustained and the same has been set aside. The Cenvat credit availed has also been held as eligible. Thus no penalty imposable on the appellant as the demands have been set aside. Appeal disposed off.

Summary

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.