Relief to Taj SATS Air Catering, No Service Tax Leviable When VAT was paid on sale of food & beverages: CESTAT [Read Order]

The appellant challenged the Order-in-Original wherein the Commissioner confirmed the demand of service tax amounting to

Rs. 8,73,36,967/- along with interest and imposed penalties. The appellant, is registered with the Service Tax Department vide Registration No. AABCT4686PST002, and engaged in the business of airline catering which entails sale of food & beverages and provision of flight handling and hi-loader services to airlines companies. The Appellant charged separate considerations for the sale of food & beverages and provision of services to the airlines.

The appellant pays Value Added Tax on the sale of goods (food & beverages) and Service Tax on the amount charged for provision of services. The Appellant entered into an agreement with Airport Authority of India and Delhi

International Airport Private Limited whereby the lease granted to the Appellant for its works at airport premises was extended and the rights of AAl thereunder have been assigned to DIAL.

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The Appellant was required to pay annual lease rental to DIAL along with the royalty calculated in the manner set out in the agreement. Both these amounts were part of the consideration payable by the Appellant to DIAL for lease of premises at the airport. The said amount was recovered by DIAL by raising invoices on the Appellant, on which DIAL charged and paid appropriate Service Tax. Being cost incurred by the appellant in carrying out various transactions, the appellant recovered these charges from its customers.

An audit of the service tax records of the appellant was conducted by the office of Director General of Audit (Central Receipt), New Delhi, wherein the audit party alleged that there was a short payment of service tax of Rs. 1,68,60,879/- for the period 2004-05 to 2010-11 by the Appellant.

A show cause notice dated 24.10.2011 was issued to the Appellant for the period 2004-05 to 2010-11, wherein a demand of Rs. 1,68,60,879/- under Section 73A of the Act along with interest under Section 75 of the Act and penalties under Section 76, 77 and 78 of the Act were raised against the appellant. The said show cause notice also proposed to invoke extended period of limitation by alleging suppression on the part of the appellant.

Vide the impugned order-in-original, the Commissioner adjudicated all the said six SCNs and confirmed the demand of an amount of Rs. 8,73, 36,967/- along with interest under Section 75 of the Act by invoking extended period of limitation. The Commissioner also imposed penalty amounting to Rs. 70,47,609/-under Section 76, Rs. 10,000/-on each ST-3 return for the period 2004-05 to 2015-16 under Section 77 and Rs. 1,68,60.8/9/- under Section 78 of the Act.

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The Commissioner dropped demand of service tax amounting to Rs. 76,76,059/- for the period 2012-13 on the difference between taxable value as submitted vide the letter dated 23.05.3014 by the Appellant. Aggrieved by the said order-in-original, the appellant filed the present appeal.

Counsel for the appellant submitted that the impugned Order-in-Original is a non-speaking order and has been passed by the Commissioner without considering the submissions of appellant. He submitted that the impugned order-in-original was nothing but a mere replication of the allegations made in the SCNs without any independent analysis

The show cause notice has given any explanation as to how the Appellant had collected service tax from the airlines, in absence of any such charges or tax mentioned in the invoice raised by the Appellant on the Airlines with respect to food items and beverages. Learned counsel further submitted that demand of service tax under Section 73 and demand of an 'amount' under Section 73A are completely different and distinct proceedings.

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Demand under Section 73 can be raised on short payment of Service tax, whereas Section 73A is a forfeiture provision and can be invoked only in those cases wherein an amount has been recovered from any person which is either in excess of service tax liability or which was not required to be deposited. He further submitted that for a demand of an amount raised under Section 73A, demand of interest on such amount can be raised under Section 73B which has been specifically enacted for this purpose.

It was evident that the appellant had already discharged the applicable VAT with respect to AAI levy collected on food items sold by the appellant. Counsel further stated that the said SCNs has proceeded on the assumption that service tax had been collected by the Noticee on the royalty amount, ie. AAl levy, on all its transactions (i.e. sale of food & beverages and provision of services.

The SCNs had alleged that the Appellant had recovered service tax on AAI levy from its customers under all transactions, without referring to the invoices raised by the Appellant on its customers. Learned counsel stated that this allegation had been followed in the impugned order-in-original, wherein the Commissioner had confirmed the demand, without understanding the invoices for sale of food & beverages as well as for provision of services raised by the Appellant on its customers.

A two-member bench of Dr. Rachna Gupta, Member (Judicial) and Hemambika R. Priya, Member (Technical) observed that payments of service tax as also the VAT are mutually exclusive. Therefore, they should be held to be applicable having regard to the respective parameters of service tax and the sales tax as envisaged in a composite contract as contradistinguished from an indivisible contract.

While allowing the appeal, the Tribunal held that that the said demand has been raised on the transactions where VAT was paid by the appellant on sale of food and beverage.