2026-VIL-1802-CESTAT-BLR-ST
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SERVICE TAX CESTAT Cases

Service Tax - Taxability of supply of food within hospital premises as Outdoor Catering Service - Appellant supplied food to patients, their relatives, doctors and staff of a hospital from premises provided by the hospital, paid VAT on the sales treating them as sale of goods, and was not registered with the service tax authorities - SCN was issued for the period from March 2006 to September 2010 and the demand was confirmed with penalties - Appellant contended that payment of VAT indicates a sale of goods and that service tax is not leviable on such a transaction - Respondent contended that the activity was a catering arrangement and that payment of VAT does not bar levy of service tax on the service aspect - Whether the activity is classifiable as Outdoor Catering Service and whether payment of VAT bars the demand of service tax - HELD - Outdoor caterer under Section 65(76a) means a caterer providing services in connection with catering at a place other than his own, including a place provided by the person receiving such services, and caterer under Section 65(24) includes any person who supplies food directly or indirectly. The definition was expanded to cover all types of canteen contractors with effect from 16.06.2005 and it is admitted that the Appellant supplied food from the hospital premises, so the plea that the activity is only sale of food is not tenable. Payment of VAT shows only that the goods component suffered VAT, and as statutory abatements on the value of goods were already extended, the demand pertains only to the service portion. The exemption earlier available to outdoor caterers in medical establishments was rescinded with effect from 01.03.2006 - The activity is classifiable as Outdoor Catering Service and the Appellant is liable to pay service tax for the normal period - Invocation of extended period of limitation and imposition of penalty on an unregistered outdoor caterer - Demand for the entire period was confirmed by invoking the extended period along with penalties - Respondent contended that failure to register and file returns amounts to suppression with intent to evade tax - Whether the extended period is invocable and whether penalties are sustainable - HELD - The entire demand was made on the basis of the records maintained by the Appellant. Following the Hon'ble Supreme Court, mere failure to declare facts does not amount to wilful suppression, and the extended period cannot be invoked unless the omission is deliberate to escape payment of duty with intention to evade proved. Penalty is not imposable where non-payment is on account of reasonable cause under Section 80 of the Finance Act, 1994 - The extended period and penalties are unsustainable, the demand is confirmed only for the normal period with interest as applicable, and all penalties are set aside.
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