The Customs, Excise and Service Tax Tribunal (CESTAT) has ruled that cleaning of railway coaches not a commercial activity and quashed the service demand.
Assessees in the present case are engaged in providing various taxable services mainly in pursuance of contractual arrangements with Indian Railways and Catering Tourism Corporation Limited (IRCTC).
After the completion of audit work the Revenue noticed that the Assessees are not discharging service tax on certain activities which they received consideration including cleaning services. Accordingly penalties under Section 65 (24b) of the Finance Act, 1994 were imposed under various categories while confirming the tax liabilities.
Revenue contended that railway coaches are either standing on platform or running on the track and the same are to be considered as object on the premises for Indian railway holding railway coaches and contracts constituents of capital assets and machinery of Indian railway, the original authority held cleaning of such railway coaches will be considered as cleaning of commercial premises.
After analyzing the above narrated facts deeply President Justice (Dr.) Satish Chandra and Technical Member B. Ravichandran observed that “the tax liability with reference to service rendered to railway/railway passengers has been a subject of substantial litigation. In fact, the Railways resisted the service tax applicability by repeated representations to the Ministry of Finance”.
The Tribunal further held that “the contested service tax liability on the categories mentioned above are not sustainable for the reasons recorded therein. The coaches are rolling stock of railways. They are for transport mode and cannot fall under the commercial object of industrial building, factory, plant or machinery etc. the interpretation of the original authority is far fetched and not sustainable in view of the plain meaning of the statutory definition for tax entry”.
While concluding the issue the Tribunal has quashed the service tax demand raised by the revenue.