CESTAT,
Chennai Bench
Premier
Garments Processing
v.
Commissioner
of Service tax
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
Section 65, read with section 86 of the Finance Act, 1994 – Business auxiliary service – Period July, 2003 to September, 2006 – Assessee was engaged in activity of providing bedrolls on behalf of railways, to passengers travelling in AC2 tier and 3 tier couches 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 assessee 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 AC2 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]
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 collected Rs. 20 per bedroll directly from them. In adjudication, the Commissioner confirmed the demand on the assessee for period July, 2003 to September, 2006 on finding that assessee 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 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 lakhs for the purpose of section 35F of the Central Excise Act. [Para 4]
To enable the interested foreign enterprises, venturing into business deals with India, to get to know in advance the attendant Indian income –tax implications of its intended business deals, the concept of advance ruling was introduced. This write-up is close study of the subject scheme and highlights certain areas or points / aspects which call for a careful scrutiny. By way of conclusion, the author opines that the subject scheme calls for reconsideration and that to bring cheer by rendering life simpler to the people who are committed to making their fair and proper contribution to the exchequer a new draft code should be finalized and implemented, as promised by the Finance Minister in last Press Information.