2007 (9) TMI 663 - AT - Service Tax

Summary

Issues involved: Service tax liability on providing bedrolls to railway passengers, classification of service as 'business auxiliary service' u/s 65(19) of the Finance Act, 1994, imposition of penalties.

Summary:

Service Tax Liability on Providing Bedrolls to Railway Passengers:
The Commissioner demanded service tax of over Rs. 73 lakhs along with education cess from the appellants for the period July 2003 to September 2006 for providing bedrolls to passengers traveling in AC 2 tier and 3 tier coaches of specified trains. The appellants collected Rs. 20 per bedroll from the railways for the service and were also permitted to collect Rs. 20 per bedroll directly from first-class passengers. The Commissioner found that the appellants were rendering 'Business Auxiliary Service' in the category of 'customer care service provided on behalf of the client' u/s 65(19) of the Finance Act, 1994. The appellants argued that they were only providing a 'hire service' and not a 'business auxiliary service' to the railway passengers. The revenue contended that the appellants failed to exclude their service from the purview of 'customer care service provided on behalf of the client'.

Classification of Service as 'Business Auxiliary Service' u/s 65(19) of the Finance Act, 1994:
The Tribunal noted that the service provided by the appellants to AC-2 tier/3 tier passengers could be considered a 'customer care service' as the passengers were customers of the railways and were rewarded for the services rendered by the appellants. However, regarding the service to first-class passengers, where the appellants received consideration directly from the passengers, the revenue needed to establish that it also fell under 'customer care service provided on behalf of the client'. The appellants claimed they were serving the railways out of limited financial resources.

Imposition of Penalties:
After considering all aspects, the Tribunal directed the appellants to pre-deposit Rs. 20,00,000 for the purpose of section 35F of the Central Excise Act within 8 weeks.

Conclusion:
The Tribunal upheld the demand for service tax on providing bedrolls to railway passengers, pending the pre-deposit of the specified amount by the appellants.