CESTAT, CHENNAI BENCH

Premier Garments Processing

v.

Commissioner of Service Tax, Chennai

P.G. Chacko, Judicial Member and P. Karthikeyan, Technical Member

Stay Order No. 981 of 2007

Application No. S/PD/109 of 2007

Appeal No. S/157 of 2007

September 26, 2007

BUSINESS AUXILIARY SERVICE

Section 65, read with section 86 of the Finance Act, 1994 - Business auxiliary service - Period from July, 2003 to September, 2006 - Assessee was engaged in activity of providing bedrolls, on behalf of railways, to passengers travelling in AC-2 tier and 3 tier coaches of specified trains - It used to collect Rs. 20 per bedroll from railways for above service - In respect of first class passengers it was permitted to collect Rs. 20 per bedroll directly from them - Service tax was demanded from assessee on finding that it was rendering ‘Business auxiliary service’ in category of ‘customer care service provided on behalf of client’ - Whether prima facie service rendered by assessee on behalf of railway administration to AC-2 tier/3 tier passengers was in nature of a ‘customer care service’ inasmuch as, admittedly, passengers were customers of railways and for services rendered by assessee, it was rewarded by railways - Held, yes - Whether in regard to services rendered by assessee to first class passengers, revenue had yet to establish that it was a ‘customer care service provided on behalf of client’ and, therefore, assessee was to be directed to pre-deposit part of demand - Held, yes [Paras 3 and 4]

>> Facts

The assessee was engaged in the activity of providing bedrolls, on behalf of railways, to passengers travelling in AC-2 tier and 3 tier coaches of specified trains. It used to collect Rs. 20 per bedroll from the railways for the above service. In respect of first class passengers, it was permitted to collect Rs. 20 per bedroll directly from them. In adjudication, the Commissioner confirmed the demand of service tax against the assessee for period July, 2003 to September, 2006 on finding that it was rendering ‘Business auxiliary service’ in the category of ‘customer care service provided on behalf of the client’ under section 65(19). Penalty was also imposed upon assessee.

On appeal :

>> Held

Prima facie, the service rendered by the assessee on behalf of the railway administration to AC-2 tier/3 tier passengers in the specified trains was in the nature of a ‘customer care service’ inasmuch as, admittedly, passengers were customers of the railways and for services rendered by the assessee it was rewarded by the railways. However, in regard to services rendered by the assessee to the first class passengers, it was receiving consideration directly from passengers albeit at rate prescribed by the railways. In respect of this part of the service in question, the revenue was yet to establish that it was ‘customer care service provided on behalf of the client’. No plea of financial hardships was found in the instant application. However, the assessee had submitted that it had been serving the railways out of its limited financial resources. [Para 3]

Therefore, the assessee was to be directed pre-deposit an amount of Rs. 20 lakh for the purpose of section 35F of the Central Excise Act, 1944. [Para 4]