Kalsis Kitchenette Vs. Commissioner of Central Excise, Pune Iii - Court Judgment

SooperKanoon Citationsooperkanoon.com/943129
CourtCustoms Excise and Service Tax Appellate Tribunal CESTAT Mumbai
Decided OnSep-16-2010
Case Number Appeal No. ST/244/09 (Arising out of Order-in-Appeal No. PIII/VM/130/09 dated 30.7.09 passed by
Judge THE HONOURABLE MR. S.S. KANG, VICE PRESIDENT
AppellantKalsis Kitchenette
RespondentCommissioner of Central Excise, Pune Iii
Advocates:Mr Sadashiv S Hawaldar, Advocate, for Appellants. Mr Manish Mohan, S.D.R, for Respondents.
Excerpt:
per: s.s. kang 1. heard both sides. 2. the appellant has filed this appeal against imposition of penalty under section 78 of the finance act. the appellants are providing canteen service to national institute of bank management. show cause notice was issued to the appellant demanding service tax on account that the appellants were providing outdoor catering services and also for imposition of penalties. the appellants paid the amount of service tax alongwith interest and are not contesting the same. the adjudicating authority also imposed a penalty equal to confirmed demand under section 78 of the finance act. the appellants filed an appeal and the commissioner (appeals) dismissed their appeal. the contention of the appellants is that during the period of dispute the appellants were under a bona fide belief that they are not providing any taxable service. the contention is that they entered into an agreement with the institute and as per the agreement the institute has to provide water, electricity, kitchen equipment, crockery - cutlery, furniture, cooking gas/fuel etc and the appellants are only to prepare food and serve them. the contention is that now the tribunal in the case of rajeev kumar gupta vs commissioner of central excise, jaipur 2009 (16) str 26 held that mere preparation and serving food where the facility relating to maintenance of canteen including furniture, electricity, water etc is provided by the company does not fall under outdoor catering service. in view of the decision and as per the provision of section 80 of the finance act the appellants are not liable for penalty under section 78 of the act. 3. the contention of the revenue is that the appellants admitted their default and paid the amount of service tax alongwith interest. therefore as the appellants have not paid the amount of service tax hence liable for penalty under section 78 of the act. 4. i have gone through the agreement entered into between the appellant and the national institute of bank management. as per annexure iii of the agreement deals with duties and responsibilities of the catering agency for hostel canteens. as per the agreement, the national institute of bank management is to provide water, electricity, kitchen equipment, crockery cutlery etc, furniture, cooking gas/fuel. the appellants are only preparing and serving food. this issue is now settled by the tribunal in the case of rajeev kumar gupta (supra), the tribunal held as under: “we have carefully considered the submissions from both sides. in the present case, on perusal of the agreement, we find that the entire facilities relating to maintenance of canteen including furniture, utensils, and also gas, electricity have been provided by the company itself. the appellant has engaged himself merely in preparation and serving the goods items at the company premises. the above aspects have not been appreciated by the authorities below. the activities undertaken by the appellant cannot be held to fall under the category of outdoor catering service. the facts of the case in raj kumar jain cited supra are entirely different and hence the said decision cannot be applied to the facts of the present case.” 5. i find that as per the provisions of section 80 of the finance act, notwithstanding anything contained in the provisions of section 76, section 77 or section 78, no penalty shall be imposable on the assessee for any failure referred to in said provisions, if the assessee proves that there was reasonable cause for the said failure. 6. in this case, the penalty is imposed under section 78 of the finance act which provides for penalty in case service tax has not been paid by reasons of fraud, collusion, willful suppression of facts or contravention of any provisions of the chapter or the rules. in the present case the appellants are under bona fide belief that they are not providing outdoor catering service which is now strengthened by the decision of the tribunal in the case of rajeev kumar gupta (supra). the appellants are not challenging the demand and interest. therefore in view of the above decision of the tribunal and in view of the provisions of section 80 of the finance act, i find merit in the contention of the appellants. the penalty imposed under section 78 of the finance act is set aside and this appeal is allowed.
Judgment:

Per: S.S. Kang

1. Heard both sides.

2. The appellant has filed this appeal against imposition of penalty under Section 78 of the Finance Act. The appellants are providing canteen service to National Institute of Bank Management. Show Cause Notice was issued to the appellant demanding service tax on account that the appellants were providing outdoor catering services and also for imposition of penalties. The appellants paid the amount of service tax alongwith interest and are not contesting the same. The adjudicating authority also imposed a penalty equal to confirmed demand under Section 78 of the Finance Act. The appellants filed an appeal and the Commissioner (Appeals) dismissed their appeal. The contention of the appellants is that during the period of dispute the appellants were under a bona fide belief that they are not providing any taxable service. The contention is that they entered into an agreement with the Institute and as per the agreement the Institute has to provide water, electricity, kitchen equipment, crockery - cutlery, furniture, cooking gas/fuel etc and the appellants are only to prepare food and serve them. The contention is that now the Tribunal in the case of Rajeev Kumar Gupta vs Commissioner of Central Excise, Jaipur 2009 (16) STR 26 held that mere preparation and serving food where the facility relating to maintenance of canteen including furniture, electricity, water etc is provided by the company does not fall under outdoor catering service. In view of the decision and as per the provision of Section 80 of the Finance Act the appellants are not liable for penalty under Section 78 of the Act.

3. The contention of the Revenue is that the appellants admitted their default and paid the amount of service tax alongwith interest. Therefore as the appellants have not paid the amount of service tax hence liable for penalty under Section 78 of the Act.

4. I have gone through the agreement entered into between the appellant and the National Institute of Bank Management. As per Annexure III of the agreement deals with duties and responsibilities of the catering agency for hostel canteens. As per the agreement, the National Institute of Bank Management is to provide water, electricity, kitchen equipment, crockery cutlery etc, furniture, cooking gas/fuel. The appellants are only preparing and serving food. This issue is now settled by the Tribunal in the case of Rajeev Kumar Gupta (supra), the Tribunal held as under:

“We have carefully considered the submissions from both sides. In the present case, on perusal of the agreement, we find that the entire facilities relating to maintenance of canteen including furniture, utensils, and also gas, electricity have been provided by the company itself. The appellant has engaged himself merely in preparation and serving the goods items at the company premises. The above aspects have not been appreciated by the authorities below. The activities undertaken by the appellant cannot be held to fall under the category of outdoor catering service. The facts of the case in Raj Kumar Jain cited supra are entirely different and hence the said decision cannot be applied to the facts of the present case.”

5. I find that as per the provisions of Section 80 of the Finance Act, notwithstanding anything contained in the provisions of section 76, section 77 or section 78, no penalty shall be imposable on the assessee for any failure referred to in said provisions, if the assessee proves that there was reasonable cause for the said failure.

6. In this case, the penalty is imposed under Section 78 of the Finance Act which provides for penalty in case service tax has not been paid by reasons of fraud, collusion, willful suppression of facts or contravention of any provisions of the Chapter or the rules. In the present case the appellants are under bona fide belief that they are not providing outdoor catering service which is now strengthened by the decision of the Tribunal in the case of Rajeev Kumar Gupta (supra). The appellants are not challenging the demand and interest. Therefore in view of the above decision of the Tribunal and in view of the provisions of Section 80 of the Finance Act, I find merit in the contention of the appellants. The penalty imposed under Section 78 of the Finance Act is set aside and this appeal is allowed.