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Outdoor Catering Services [Sec 65(105)(zzt)]
Effective upto 30th June, 2012
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Landmark Service Tax Judment -  Outdoor Catering Services

INTRODUCED: With Effect From 1st August 1997

Earlier Outdoor Catering Service was introduced on 01-08-1997, but remained in force only for short time, i.e. it was treated as taxable service only up to 01-06-1998 as later on exempted vide Notification No. 49/98 dated 02-06-1998.

Then by Finance Act 2004, the Outdoor Catering Service was again made taxable w.e.f. 10-09-2004.

 
Contents
Scope
Exemption
Relevant Notifications / Circulars
Landmark Judgements
Accounting Code
Service Tax 00440051
Interest  00440052
Penalty 00441308
 
DEFINITION:

According to Section 65 (105) (zzt), any service provided or to be provided to any person, by an outdoor caterer is a ‘taxable service’.

According to Section 65 (76a), “outdoor caterer” means a caterer engaged in providing services in connection with catering at a place other than his own, but including a place provided by way of tenancy or otherwise by the person receiving such services.

According to Section 65 (24), “caterer” means any person who supplies, either directly or indirectly, any food, edible preparations, alcoholic or non-alcoholic beverages or crockery and similar articles or accoutrements for any purpose or occasion.

 
SCOPE:
TOP

Catering services provided by a caterer at a place other than his own place is taxable as ''Outdoor Catering service' It is also clarified that in case a café, hotels, restaurants etc. delivers food to home and no charge, other than that for the cost of the foods, is charged (i.e. free home delivery) no Service Tax is leviable.

Prior to 16-6-2005, outdoor caterer was defined as a caterer providing catering services "at a place other than his own". Doubts were expressed about the scope of the term "at a place other than his own" where the caterer provides catering service from a premises provided by the recipient of the service, on rent. In such cases, whether the place is to be treated as the place owned by the caterer and therefore the services are not subject to Service Tax or the place is to be treated as not owned by the caterer and therefore subject the services to Service Tax. To remove the doubt, the present definition of "outdoor caterer" has been modified so as to provide that "outdoor caterer" includes caterer engaged in providing services in connection with catering at a place provided by way of tenancy or otherwise by the person receiving such services.

 
SERVICE TAX EXEMPTIONS:
TOP

(a) Small service providers whose aggregate value of taxable services rendered in the previous year has not exceeded the limit of Rs. 10,00,000/-  (Service Tax Notification No. 08/2008-S.T., dated 01.03.2008)

(b) Services provided to the United Nations or International Organisations

(c) Services provided to Special Economic Zones (SEZ) units (including unit under construction) and SEZ developers

(d) Services which are exported as per ‘Export of Services’ Rules

(e) Services provided for official or personal use of foreign diplomatic missions and family members of diplomatic missions.

(f)  Services provided by Reserve Bank of India

(g) Out of total value of service provided proportionate value of goods and material provided by the Service Provider

 
SERVICE SPECIFIC EXEMPTION:

1) The part of taxable value received prior to 10-09-2004 is exempted from Service Tax,

2) 50% abatement is available for Outdoor Catering Service when bill includes charges for supply of food. Thus effective rate of Service Tax levy is 50%

 
RELEVANT SERVICE TAX NOTIFICATIONS:
TOP
Service Tax Notification No. 01/2006-S.T., dated 01-03-2006, Abatement Notification.
Service Tax Notification No. 18/2004-S.T., dated 10-09-2004, Exemption Notification.
 
RELEVANT SERVICE TAX CIRCULARS/INSTRUCTIONS/TRADE NOTICES:
Service Tax Circular No. 80/10/2004 dated 17-09-2004
Service Tax CBEC Instruction Letter (File No. B1/6/2005-TRU) dated 27-07-2005
 
 
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Case Laws Related

  • STO 2013 CESTAT 1102
  • Outdoor Catering Service: Demand: Stay: Applicants paid VAT on 100% value: Based on earlier decision, unconditional stay granted on the prime facie merits.

  • STO 2012 CESTAT 961
  • Outdoor Catering: Considering the fact that short paid service tax is Rs.50,000/- only and in 3 years, the penalty under Section 76 set aside.

  • STO 2012 CESTAT 875
  • Outdoor Catering: Commissioner confirmed demands for services provided within the jurisdiction of other Commissionerates: Matter remanded for proper quantification of demand.

  • STO 2012 CESTAT 814
  • Outdoor Catering Service: Demand: Stay: Biscuits, Potato Chips, etc sold by the appellants on board mail/express trains to passengers on the basis of license issued by IRCTC, value of goods sold on MRP basis not includible while claiming abetment under Notification No. 1/2006 : Stay granted.

  • STO 2012 CESTAT 221
  • Outdoor Catering Service: Services provided within the premises of institution exempted: Interpretation of notification created bonafide belief for the appellants, hence, penalty cannot be imposed. 

  • STO 2011 CESTAT 139
  • Service Tax: Outdoor Catering Services: Input Services: Cenvat Credit: The issue as to whether service tax paid on catering services used for providing food in the canteen to the employees in the factory premises is admissible or not is settled by the decisions of Hon'ble Gujarat High Court and Hon'ble Mumbai High Court. Accordingly, stay petitions are allowed and appeals are also allowed with consequential relief to the appellants. (para 2)

  • STO 2010 CESTAT 579
  • Service Tax: ‘Outdoor catering services' during the period 10.9.04 to 31.12.05: Scope and liability: The plea of the assessees that they only supplied food items to their customers' office and that such delivery is not subject to service tax, as per para 11.4 of Ministry of Finance Circular No. 80/10/2004-ST dt. 17.9.2004 is not tenable. The claim for the benefit of exemption under Notification No.12/03-ST dt. 20.6.03 is also not acceptable in the absence of indication of value of goods and materials sold in the documents issued for providing taxable service. As regards claim of 50% exemption provided in Notification No. 20/2004-ST dt. 10.9.2004, which has been denied on the ground that the expression “food” means “a substantial and satisfying meal”, and hence wherever the service provider has supplied items other than meals, the condition stipulated in the notification is not satisfied, a perusal of the bills shows that they have been issued for meals also such as breakfast/lunch/dinner. Therefore, the claim to the benefit of this notification is required to be examined with reference to the bills of the assessees. (Para 5,6).

    Appeal disposed off.

  • STO 2010 CESTAT 536
  • Service Tax: Cenvat Credit: Outdoor Catering Service: . When the specific Cenvat Credit Rules are examined in the context of the rule making powers under the Act and in the context of the guidelines laid down by the Hon’ble Supreme Court in its decisions such as in the case of Maruti Suzuki (supra), one comes to a clear conclusion that outdoor catering service cannot be considered to be an eligible input service for grant of credit in respect of the finished excisable goods manufactured by the respondents.(para 19)

    Service Tax: Scope of “Input Service”: It has been held by the Tribunal in the case of KBACE Tech Pvt. Ltd. v. Commissioner of Central Excise & Service Tax, Bangalore - STO 2010 CESTAT 86 in the context of interpreting the Cenvat Credit Rules, 2004 that the rule making authority can frame rules covering lesser area than what it is empowered to do under the statute but cannot go beyond limits provided under the statute and make rules covering a greater area. Hence, the scope of Rule 2(l) defining ‘input service’ including its inclusive part that covers “services relating to activities relating to business” has to be interpreted with reference to Section 37(2)(xviaa) of the Act. The relevant rule making power under Section 37(2)(xvia) for granting credit of duty paid on goods (inputs) and the power under Section 37(2)(xviaa) for granting credit of tax paid on taxable services (input services) are similar and both use the same expression “used in, or in relation to, the manufacture of excisable goods”.

    Service Tax: Cenvat Credit: Penalty: The impugned orders passed by the lower appellate authorities are set aside and restore the original orders by upholding the demand of service tax and interest. As regards penalties imposed in the orders passed by the original authorities, the same are set aside in the circumstances of these cases considering the nature of dispute involved. (para 21)

  • STO 2010 CESTAT 125
  • Outdoor Catering Service: Input Service Credit: Credit of Service Tax paid on the outdoor catering services by the canteen located in the factory premises is available to the assessee.

  • STO 2010 CESTAT 19
  • Input Service: Outdoor Catering Service: The outdoor catering service towards which Service Tax is paid and involved in maintaining canteen in the factory is input service.

  • STO 2010 CESTAT 60
  • Service Tax: Catering Service: No service but sale of goods: It has been the stand of the assessees throughout the proceedings that that they had not provided any catering service but only sold LPG cylinders to the clients, who had booked the Kalyana Mandapam for functions weddings etc. during the period in dispute. The Revenue has not controverted this claim. Therefore, I proceed on the basis that there was a sale of LPG cylinders and, therefore, the Commissioner (Appeals) has rightly extended the benefit in terms of Notification No.12/2003. The impugned order is upheld and the appeal is rejected. The cross objection is only in the nature of comments/reply to the Revenue's appeal and is accordingly dismissed. (para 2,3)

  • STO 2009 CESTAT 1699
  • Service Tax: Outdoor Catering Service: Activity of supplying food on board to the flights of Air India: Taxable value: The present appellants are similarly placed as M/s. LSG Sky Chefs (India) Pvt. Ltd and M/s. The Grand Ashok, whose cases have been decided earlier holding that that once sales tax is leviable on the supply of food, service tax cannot be levied on the same and thus they are entitled to the benefit of Notification No. 12/03 dated: 20/06/03. In this case also, food items are being supplied under the contract and VAT/Sales Tax is being paid on the same. Hence, following the ratio of the cited decisions, the present appellants are also entitled to the benefit of Notification No. 12/03. However, since the lower authority has not examined Notification No. 12/03, matter remanded to him for a fresh decision.(Para 6).

    Appeal allowed by way of remand.

  • STO 2009 CESTAT 1660
  • Service Tax: Outdoor Catering Services: Activity of preparation and supply of meals and snacks to various Airlines, packing and handling of food, loading and transportation of food trolleys; storage, handling and setup of catering equipments; storage and handling of dry stores and other recycling items; cleaning of equipment, handling of waste, cabin service, and laundry services: Scope and liability on food items: The appellants did not pay service tax on account of provision of meals/food items to the Airlines. The dispute involved has been decided in favour of the appellants for an earlier period vide Final Order No. 24/2009 dated 16.01.2009 as reported in 2009-TIOL-1125-CESTAT-BANG wherein this Bench had found that the appellant had paid service tax on the value charged from the Airlines in terms of the contract excluding amount due to the supply of food; the amount which represented the cost of the food items. The appellants had paid sales tax on food items to the State Government. Once sales tax is leviable on the supply of food, service ax cannot be levied on the same. In this connection, decision of this Bench in the case of M/s Idea Mobile Communications Ltd. vs. CCE, Trivandrum - STO 2006 CESTAT 456 wherein the Tribunal has held that no service tax is payable when sales tax has already been paid. In the above decision, the Tribunal relied on the Apex Court's decision in the case of BSNL Vs. UOI - STO 2006 SC 19 The Tribunal had also relied on the judgment of the Hon'ble Apex Court in the case of Imagic Creative Pvt. Ltd, Vs. CCT STO 2008 SC 5 (Para 3,4).

    Appeals allowed.

  • STO 2009 CESTAT 808
  • Service Tax: Running a canteen in a Factory: Outdoor catering service : Penalty u/s 78: The only reason for invocation of Section 78 by Commissioner (Appeals) is that ignorance of law is no excuse. This itself means that the applicant was ignorent about his tax liabilities. If that -be so, the provisions of Section 80 would come into play. The appellant was entertaining a genuine belief that running of a canteen in a factory would not be covered by the expression `outdoor caterer'. The appellants submission that the payment of tax by the appellant was available as input credit to the factory and was reimbursable to them, in which case there could be no intention on the part of the applicant not to deposit the tax. All these factors point out to the bonafide belief being entertained by the appellant. As such this is a fit case to invoke the provisions of Section 80 of the Finance Act, in which case no penalty would be imposable under Section 78.(Para 6).

    Appeal disposed off.

  • STO 2009 CESTAT 799
  • Supply of Food for consideration is deemed to be Sale: It is very clear from the Article 366 (29A) (f) that a tax on the supply of goods being food or any article for human consumption where such supply of service, is for cash, deferred payment and other valuable services and that supply of any goods shall be deemed to be a sale.

    Sales Tax vs. Service Tax: Once the sale tax has already been discharged by them, they cannot be asked to pay service tax on the same value. This is very clear from several decisions of the Tribunal. The appellant is not liable to pay the differential duty. Hence all the penalties are set aside. Thus, appeal allowed with consequential relief.

  • STO 2009 CESTAT 756
  • Sales Tax Vs. Service Tax: Once the appellants are paying sales tax on a portion of the value of the contract, then, simultaneously, we cannot demand service tax on them as they are mutually exclusive.

  • STO 2008 CESTAT 294
  • Outdoor Caterer: Premises of EID Perry cannot be treated as premises of appellants, therefore, appellant is required to pay service tax under the head 'outdoor catering service' for the period from 10.9.2004 along with interest at the applicable rates, they are entitled for the requantification of tax by treating the assessable value as including service tax. Since it is a case of technical interpretation. Section 80 invoked and penalty set aside.

  • STO 2008 CESTAT 21
  • Outdoor Caterer : A caterer engaged in providing the services in connection with catering at a place other than his own comes within the definition of ‘outdoor caterer’.  Not entitled for waiver.

  • STO 2008 CESTAT 135
  • Cenvat credit : Catering service cannot be treated as an activity relating to business and even if it is obligatory on the part of the assessees/respondents as per the requirement of the Factories Act, 1948, to provide a canteen, this does not automatically lead to the conclusion that a catering service relates to business activity. It is in the nature of welfare activity and not an activity relating to business. Not considered as input service.

  • STO 2007 CESTAT 1305
  • Stay: Broadcasting Service: Inner part of section 65(14) is applicable only where the broadcasting agency or organization has its Head Office situate in any place outside India during the period of dispute. It is claimed by the appellants, neither they nor the broadcasting company had any office outside India. Prima facie case made out.

  • STO 2006 Ker 695
  • Service Tax: Catering Service: Sub-s. (24) of S. 65 specifically says, "caterer" means any person who supplies, either directly or indirectly, any food, edible preparations, alcoholic or non-alcoholic beverages or crockery and similar articles or accoutrements of any purpose or occasion. "Outdoor caterer" means a caterer engaged in providing services in connection with catering at a place other than his own but including a place provided by way of tenancy or otherwise by the person receiving such services. Petitioner is admittedly engaged in the supply of foods and beverages to aircrafts for service to the passengers on board. (para 4)

  • STO 2005 CESTAT 135
  • Broadcasting Agency Service: Predeposit: In view of earlier orders, the application for waiver of pre-deposit of service tax and penalties is allowed. Treating applicants as broadcasting agencies, prior to 16-7-01 when service tax became specifically leviable on broadcasting services.

  • STO 2005 Ker 353
  • Service Tax : Outdoor Catering Services : Sales or Service : The "purpose" or "occasion" referred to in the definition clause extracted above, refers to the customer. There is nothing to indicate in the definition clause that such "purpose" or "occasion" should be rare of occasional and should not be frequent or even regular. Service of food and beverages to passengers during flight is the purpose for which air companies take the supplies from the petitioner. The petitioner admittedly supplies the items on board flights. So much so the activity of the petitioner squarely falls within the definition clause contained in section 65(76A) read with section 65(24). Since service of food and beverages by the caterers to aircraft amounts to sale of goods as well as rendering of service, both service tax and sales tax under the impugned provisions can be levied on the very same transaction. (para 5)

    Service Tax: Outdoor Catering Services: Notification No. 20 of 2004-ST (F. No. B2/8/2004-TRU), dated September 10, 2004 grants exemption on Service tax at 50 per cent, of the value of service rendered by outdoor caterers. Probably, in the estimate of the Government 50 per cent, of the charges is attributable to supply of goods eligible for exemption and balance charges collected are attributable to essentially service rendered by the outdoor caterer. (para 6)

  • STO 2004 SC 124
  • Mandap Keeper Service : Whether in the given case taxable services are rendered or not is a matter of interpretation of the statute and for adjudication under the provisions of the statute and does not affect the vires of the legislation and/or the legislative competence of Parliament. In fact, a wide range of services are included in the definition of taxable services as far as Mandap-Keepers are concerned. The said definition includes services provided "in relation to use of Mandap in any manner" and includes "the facilities provided to the client in relation to such use" and also the services "rendered as a caterer".

  • STO 2004 CESTAT 138
  • Service Tax: 'Taxable service' as defined under Section 65(72): Broadcasting Services: Scope and Liability: Finance Act, 2002 made amendments to the provisions relating to broadcasting with retrospective effect from 16th July, 2001. Meaning given to the word "disseminate" in all the dictionaries referred by the appellants would clearly show that unless the information or knowledge reaches the receiving end dissemination will not be complete. Meaning given to the word "dissemination" in Indian Edition 2001 the New Oxford Dictionary is 'spread or disperse (something especially information) widely'. Therefore, when the television programme and advertisements in the form of signals are encrypted and beamed from outside India and telecast outside India but are received in India through decoders by Multi System Operators and Cable TV operators, it would come within the meaning of definition of "broadcasting" under Section 2(c) of Prasar Bharati Corporation Act, 1990. Under the amended definition, the word "broadcasting" includes programme selection, scheduling or presentation of sound or visual matter on a radio or a television channel that is intented for public listening or viewing, as the case may. In the case of broadcasting agency or organisation, having its head office situated in any place outside India, the activity of selling of time slots or obtaining sponsorships for broadcasting of any programme or collecting the broadcasting charges on behalf of the said agency or organisation, by its branch office or subsidiary or representative in India or any agent appointed in India or by any person who acts on its behalf in any manner are also brought under net of the term "broadcasting". The appellants are engaged in the activity of selling of time slots or obtaining sponsorships for broadcasting of any programme and are collecting broadcasting charges on behalf of ATL/EXPAND/STAR. The entire amount paid by the advertiser/sponsorer to ATL/Expand/Star has to be treated as value of Taxable Service. (Para 9,10).

    Appeal disposed off.

  • STO 2001 Mad 215
  • Service Tax: Constitutional validity of the service tax levied on mandap-keeper and the services provided by the outdoor caterer: Scope: In so far as the services provide by the "mandap keeper", the said services which were provided for in Finance Act, 1977 were continued in Finance Act No. 2/98 which was brought into with effect from 16-10-1998. However, the services provided by the outdoor caterer, who was defined under Sec. 65(24) came to be deleted form the list of "taxable services". In the amended Act Sec. 65(48) defined the term "taxable services" whereas in the earlier Act those services were defined under Sec. 65(41) and the services provided by the outdoor caterer was defined by Sec. 65(41)(n). Both those provisions, viz. Sec. 65(24) and Sec. 65(41)(n) were deleted. With the result, the said services remained taxable only during the period when the earlier Act was in force. Thus, the period during which the said tax remained on the statute book is only between July, 1997 and July, 1998.(Para 3). On what items should the legislature impose a tax is for the legislature to decide. In fact, it is a wide "discretion" on the part of the legislature and the Courts have always recognised such "discretion"in the legislature. In the judgment of Tamil Nadu Kalyana Mandapam Owners' Association, the challenge to the provisions was negatived regarding "mandap keeper", viz. Sec. 65(48)(m) and 67(1) under Art. 14 of the Constitution of India. In paragraph 42 of that judgment the cases of Mafatlal Industries v. Union of India [1997 (89) E.L.T. 247 (S.C) = 1997 (5) SCC 536] as also the reported judgment in 1981 (4) SCC 675 (R.K. Garg v. Union of India) were dealt with.(Para 10). In the decision reported 1973 (4) SCC 225 (Kesavananda Bharati v. State of Kerala), the observations are :

    "In exercising the power of judicial review, the Courts cannot be oblivious of the practical needs of the Government. The door has to be left open for trial and error. Constitutional law like other mortal contrivances has to take some chances. Opportunity must be allowed for vindicating reasonable belief by experience."

    Therefore, the impugned provisions particularly Sec. 65(24), Sec. 65(41)(n) and Sec. 67(m) of the Service Tax Act are not in any way arbitrary or discriminatory.(Para 10).

    Vagueness of law: There is no any such deformity in the law. The provisions are clear that the gross charges are to be taken into consideration while assessing the service tax. There is no vagueness. The same view was taken in the aforementioned Tamil Nadu Kalyana Mandapam Owners' Association case. The charge which has to be paid by the assessee is to be fully covered by the gross charge in respect of the services provided. There would be no arbitrariness on this account.(Para 11).

    W.P. dismissed.

     
     

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