Premier Garment Process Vs Commissioner of Central Excise (Madras High Court)
Madras High Court held that service of supply of bed rolls alone for the passengers travelling in AC compartments to Railways cannot be construed as services provided by the Railways and hence service tax is duly payable on the same.
Facts-
The case of the appellant before this Court was that, by virtue of the Finance Act, 2013, a specific exemption has been granted in the form of Section 99 of the said Act which exempts service provided by the Railways both in terms of Section 66 as stood prior to 1st July 2012 and in terms of tax payable under section 66B w.e.f. 01.07.2012 till 30.06.2017.
Conclusion-
Prior to the 01.07.2012, the appellant was liable to pay tax service provider as “Business Auxiliary Service” as defined under section 65(19) of the Finance Act, 1994. Accordingly, the appellant was liable to pay tax, as the service provided by the appellant squarely falls within the ambit of Clause (iii) of section 65(19) of Finance Act, 1994 i.e. any customer care service provided on behalf of the client.
For the period after 01.07.2012, the service provided by the appellant fall within the definition of ‘service’ as under Section 65(b)(44) of the Finance Act 1994 w.e.f. 01.07.2012.
Held that the service provided by the appellant to the Railways cannot be construed as the service provided by the Railways. What is provided by the appellant is the service of supply of bed rolls alone for the passengers travelling in AC compartments. Therefore, the appellant cannot claim any exemption in terms of the aforesaid provisions of the Finance Act, 2013.
FULL TEXT OF THE JUDGMENT/ORDER OF MADRAS HIGH COURT
By this common order, all the four appeals are disposed of. In these appeals, the appellant has challenged the impugned common order of the Customs, Excise & Service Tax Appellate Tribunal, as it stood then in final Order No.41401-41404/2018 dated 12.02.2018 in ST/157/2007, ST/3 & 4/2012 and ST/41856/2014 respectively.
2. The relevant portion of the impugned order of the Appellate Tribunal is extracted below for proper understanding.
The crux of these appeals is whether the appellant by performing these services namely, supply of bed rolls to passengers travelling in A/c III Tiers and in other higher classes and charges thereof collected by appellant from railways, will fall under the mischief of “Customer Care Service” provided to the railways as taxable under “Business Auxiliary service”.
6.4 No definition of “Customer Care” has been given in Section 65(19) or for that matter anywhere else in the Finance Act, 1994. as per the Oxford Dictionary, “Customer Care’ is defined as “assistance and support provided by a company to those people who buy or use its products or services”.
Customer Care service is also often explained as “provision of service to customers, before, during and after a purchase”, as the process of looking after customers to best ensure their satisfaction with the business and its goods and services. The underlining motive to provide customer care services is the desire to maintain ongoing client relationship and loyalty. The railways provide bed rolls to the upper class passengers who undisputedly have to shell out considerable more ticket price as compared to second class passengers, to ensure their comfort, as a customer initiative. In our view, the appellant when performing its activities and providing these services of supply of bed rolls, free of charge to the upper class passengers, on behalf of Railways, they are surely providing the customer care service as desired by the Railways and on behalf of the Railways.
6.5. Ld. Advocate has sought to argue that they are not providing the service on behalf of a “client”. He has contended that client is an individual, corporation etc. that employs a professional to advise or assist it in the professional line of work; that they are only supplying bed rolls involving only laundering and labour work, hence appellants are not a professional or a technical person. We are unable to agree with the Ltd.Advocate on this point. It is not that parameters of every customer care activity involves technical or professional expertise. Ltd. Advocate has also argued that “Customer Care Service provided on behalf of client” will cover only business transactions, more particularly of goods coupled with services; that on sale of goods or services, the customer is having right to ask for technical / professional services for rectification of any deficiency which would alone mean “Customer Care Service”. This argument also does not wash. On the other hand, in he present era, there are customer cares which would be required even for services rendered and to say that customer care will be required only in sale of goods is definitely a misconception.
6.6 Another argument of the Ld.Advocate is that no customer care to passengers would be possible since railway transportation service is a public transport and there is absolutely no personal relationship with these passengers. Hence passengers are not customers of railways and only when repeated dealings are existing, one can be called “customer”. We find that the Ld.Advocate is once again laboring under a misbelief. We find that the Vision Statement of the Indian Railways as found on their website reads as follows:-
Vision Statement
Indian Railways shall provide safe, efficient, affordable, customer-focused and environmentally sustainable integrated transportation solutions. It shall be a modern vehicle of inclusive growth, connecting regions, communities, ports and centres of industry, commerce, tourism and pilgrimage across the country (emphasis added)
The Mission Statement of the Railways is also worthy of reproduction as under:-
Mission
Indian Railways aims to be the engine for India’s economic growth and development by being safe, financially viable, environment-friendly and caring for its customers and employees. (emphasis supplied)
The vision and Mission Statements thus indicate that Railways are inter alia, customer focused and to care for customers who are none other than their passengers. The supply of bed rolls to upper class passengers is one such endeavour of the railways to provide customer care to tis passengers.
6.7 Viewed in this light the Railways are indubitably the “client” of the appellant since they perform the said customer care service on behalf of the railways. In the event, the activities carried out by the appellant will definitely come within Section 65(105) (zzzq) read with Section 65 (104c) of the Finance Act, 1994. In the Doon’s caterers case, the appeal was allowed because even though the proceedings sought to demand service liability from the appellants therein under Support Services, the commissioner (Appeals) went beyond the scope of SCN and held the services as falling under BAS.
6.10 On the other hand, as found by the Tribunal in he case of RC Goel Vs CCE New Delhi [2017(5) GSTL 324 (Tri.Del.)] also relied upon the appellant, although department sought to bring this services under BSS, the Tribunal took the view that such services are more appropriately classifiable under ‘Business Auxiliary Service’ under the category of ‘Customer Care Services provided on behalf of the client’.
7. We do not find any merit in the appeal and therefore, do lnot find any grounds to interfere with the impugned orders.
8. All appeals are dismissed.
3. The appellant herein was issued with four different show cause notices and suffered adverse orders in the hands of the Original Authority as detailed below:
