The Bangalore Bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) set aside extended service tax demand on bed roll supply to Indian Railway Catering and Tourism Corporation (IRCTC) due to lack of suppression of fact by the appellant.
Rose Bed Rolls, the appellant provided linen/bed rolls to passengers in AC coaches for Indian Railways. The appellant had registered for service tax in 2006 under the categories of “Outdoor Catering and Dry Cleaning Service” but did not pay tax on the bed roll supply, believing it was not taxable.
A show-cause notice was issued on 29.07.2009, alleging that the appellant should have paid service tax on the bed roll supply. The demand for service tax covered financial years from 2004-2005 to 2007-2008.
Become PF & ESIC Pro: Basic to Advance Course – Enroll Today
Aggrieved, the appellant challenged the extended demand show cause notice before the CESTAT arguing that they provided bed rolls to passengers under the belief that this activity did not constitute a taxable service. They argued that the Ministry of Railways/IRCTC had previously indicated that no service tax was due on this activity. The counsel submitted the letter which confirmed the argument.
The appellant’s counsel claimed they had not deliberately withheld information or engaged in any fraudulent activity to evade tax. Instead, they argued that their understanding was based on an honest interpretation of the tax rules.
On the contrary, the department argued that the supply of bed rolls falls under “business auxiliary service,” supported by prior decisions from the Madras High Court and other similar rulings, and the appellant’s failure to remit service tax constituted grounds for invoking the extended period due to non-compliance.
Become PF & ESIC Pro: Basic to Advance Course – Enroll Today
The two-member bench comprising P.A. Augustian (Judicial Member) and Pullela Nageswara Rao (Technical Member ) observed that the service indeed fell under “business auxiliary service” making the appellant liable for service tax.
However, the tribunal found no evidence of suppression or fraud that justified the extended limitation. The tribunal highlighted that the issue was raised from an interpretation of complex legal provisions rather than intentional evasion. Therefore, the tribunal set aside the service tax demand and penalty imposed for the extended period due to a lack of justifiable grounds.
The tribunal remanded the matter to the adjudication authority to reassess the tax demand for the regular period only (up to one year before the show-cause notice issued on 04.01.2010) within three months.
Subscribe Taxscan Premium to view the JudgmentSupport our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates
