2026-VIL-1732-CESTAT-CHE-ST
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SERVICE TAX CESTAT Cases

Service Tax – Show cause notice – Specification of statutory category – Outdoor Catering Service under Section 65(105)(zzt) of the Finance Act, 1994 – Appellant, registered for providing outdoor caterer's service, operated an on-site mess at the premises of the service recipient and did not pay service tax claiming exemption under Notification No. 22/2006-ST, which was alleged in audit to be ineligible, and the demand was confirmed with interest and penalties and upheld in appeal – Appellant contended that the show cause notices failed to specify the statutory category and that the lower appellate authority expanded the scope of the dispute by referring to a canteen – Whether the show cause notices were vitiated – HELD – The test is whether the notice disclosed the essential factual and legal foundation of the charge so that the assessee could reasonably defend itself. The Appellant was registered for providing outdoor caterer's service, and the charge was that it did not pay tax claiming the benefit of an ineligible exemption notification. The notice disclosed the foundation of the charge. The word canteen occurred only in the analysis of the submissions and did not expand the scope of the dispute – Contention rejected - Service Tax – Outdoor Catering Service – Sections 65(24), 65(76a) and 65(105)(zzt) of the Finance Act, 1994 – Continuous operation of mess at premises of service recipient – Appellant supplied food and beverages at the Staff College under an agreement, with consideration comprising collections from trainees and employees and subsidy from the service recipient – Appellant contended that continuous supply is not for a purpose or occasion, that the premises became its own place of business, that the trainees and employees were the recipients, and that the amount was the sale value of food – Whether the activity constitutes outdoor catering service – HELD – An outdoor caterer provides catering services at a place other than his own. Continuous operation of the mess does not make the premises the Appellant's own, as they continued to belong to and be provided by the Staff College. The contract was entered into with the Staff College, which provided the premises and subsidised the food, so that the Appellant was the service provider and the Staff College was the service recipient. The trainees and employees were merely the ultimate beneficiaries. The consideration cannot, merely because it was referable to food supplied, be treated as sale of goods, and service tax on outdoor catering is distinct from VAT on sale of food and beverages – The activity is taxable as outdoor catering service - Service Tax – Exemption – Notification No. 22/2006-ST – Services provided to the Reserve Bank of India – Appellant claimed exemption for outdoor catering services and relied on a certificate issued by the Staff College – Whether the benefit of the notification is available – HELD – The notification exempted services provided to the Reserve Bank of India only where it was liable to pay the service tax under Section 68(2) of the Finance Act, 1994 read with Rule 2 of the Service Tax Rules, 1994. Outdoor catering was not a service in respect of which the Reserve Bank of India was made liable under Section 68(2), so the condition was not satisfied. Rendering service to its establishment or payment of subsidies cannot dispense with the express condition, and the certificate cannot confer an exemption contrary to the statutory conditions – Denial of the benefit of the notification is upheld - Service Tax – Extended period of limitation – Proviso to Section 73(1) of the Finance Act, 1994 – Bona fide belief of non-taxability based on exemption notification and certificate – First show cause notice invoked the extended period, whereas the subsequent notice was issued within the normal period – Department alleged that the Appellant did not disclose its claim of exemption and the non-payment came to light only during audit – Whether the extended period can be invoked – HELD – Where taxability admits of two plausible views, extended limitation cannot be invoked in the absence of a positive and blameworthy act evidencing intent to evade. The bona fide belief of the Appellant, founded on the notification and the certificate, was not without basis, and the divergent views of the High Court and the Tribunal establish the interpretative nature of the issue. As no suppression or intention to evade is established, the demand is confined to the normal period – Demand beyond the normal period is set aside and the demand for the normal period is sustained - Service Tax – Penalty – Sections 76, 77 and 78 of the Finance Act, 1994 – Whether penalties are sustainable when the allegation of misdeclaration and the circumstances for invoking the extended period are not established – HELD – As these are not established, the requisite ingredients for penalty under Sections 76, 77 and 78 are absent – Penalties set aside - Service Tax – Interest and valuation – Section 75 and Section 67(2) of the Finance Act, 1994 – Appellant contended that gross receipts should be treated as cum-tax and that, absent principal liability, no interest arises – Whether interest is payable and cum-tax benefit is admissible – HELD – Once the liability for the normal period is sustained, interest under Section 75 follows as a statutory consequence of delayed payment. The Appellant is entitled to the benefit of Section 67(2) where the gross amount charged is inclusive of service tax, and the duty needs to be re-worked out – Interest is upheld on the surviving liability, the matter is remanded to the original authority only to re-quantify the demand and interest within 90 days, and the appeal is partly allowed.
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