Supply Of Bed Rolls Kits Amounts To Supplying Services To IRCTC, Chargeable To Service Tax: CESTAT

The two-member bench of Ramesh Nair (Judicial Member) and P.Anjani Kumar (Technical Member) observed that the supply of bedroll kits to passengers for and on behalf of IRCTC is in the nature of a "customer care service". Therefore, the services are appropriately classifiable under business auxiliary services.

The appellant/assessee is in the business of providing catering service and supply of Bedroll kits in various Train of Indian Railway as per the licence/contracts provided by IRCTC. The assessee provided the services of "Outdoor Catering Services" and "Business Auxiliary Service".

Intelligence gathered revealed that they are involved in evasion of service tax by way of providing taxable services but not paying appropriate amounts of service tax. Therefore, the appellant was asked to furnish a balance sheet, ST-3 returns, sales ledger, etc. for the period 2003-04 to 2007-08.

It was found that the assessee had been providing services for the supply of bedroll kits to the passengers of trains on behalf of IRCTC and had not paid the service tax. The service bedroll kits supplied to the passengers on behalf of IRCTC are squarely covered under the clause no. (ii) of the definition of "Business Auxiliary Service" as defined under Section 65 (19) of the Finance Act 1994.

The appellant submitted that the Commissioner had erred in confirming the service tax demand on bed roll kits by considering them as taxable services under the category of Business Auxiliary Service. IRCTC is a Govt. of India Enterprise. It had categorically written to the Assistant Commissioner, Anti-Evasion, in response to its letter that service tax is not applicable on work providing bed rolls as "customer care service" under the category of "Business Auxiliary Service". It was independent work and has not been included as a taxable service in the Act.

The appellant contended that it was granted a licence to merely supply the bedroll. The consideration depends on the number of bedrolls supplied. This agreement for supply cannot be equated with the provision of any service. Also, the terms of the agreement with IRCTC also do not specify anything that they are required to provide any customer care service.

The appellant submitted that the appellant was filing periodic returns regularly and providing all the information as demanded by the department. They have not suppressed any information with the intent to evade payment of service tax. The appellant was under the bona fide belief that service tax was not payable on the supply of bedrolls and hence not paid. The service tax was not charged on the bills raised by IRCTC. The IRCTC also stated that no service tax was payable on the supply of bedrolls.

The issue raised was whether the appellant was liable to pay service tax on the supply of bedroll kits to the passengers in trains under the head "business auxiliary services".

The CESTAT observed that the appellant has supplied bedroll kits to passengers in the air-conditioned class and other classes on behalf of IRCTC. As per the contract with IRCTC, the appellant has to compulsorily provide the bedroll kit to passengers on demand. For the services, a monthly bill was raised by the appellant to IRCTC. The appellant for the services needs not to charge the passengers. The services have been rendered by the appellant to the passengers on behalf of IRCTC. The services rendered by the appellant for and on behalf of IRCTC to passengers are in the nature of a "customer care service". Therefore, the services are appropriately classifiable under "business auxiliary services" under the category of "Customer care services" provided on behalf of the client under Section 65(11) of the Finance Act, 1994.

Case Title: Hakamichand D & Sons Versus C.S.T.-Service Tax - Ahmedabad

Citation: Service Tax Appeal No. 259 of 2010

Dated: 06.05.2022

Counsel For Appellant: Chartered Accountant Nilesh V Suchak

Counsel For Respondent: Superintendent (Authorized Representative) J.A Patel

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