BRIEF facts of the case are that the applicants are issuing meal and
gift vouchers to corporate clients.
This
is how the voucher system works - The assessee is in the business of issuing
meal/gift coupon vouchers. The assessee has large number of
affiliates.These affiliates are different business
entities such as restaurants, eating places and other establishments who have
agreed to accept the vouchers of the assessee as payment for goods or services
provided by them. The assessee entered into an agreement with such affiliates.
After
providing goods or services to the user, these meal/gift vouchers are presented
to the assessee by the affiliates who, after deducting
certain amounts as service charge , make payment for the face value of
the vouchers.
The
assessee approaches various customers who are
generally in business, public and private organizations,and who wish to make
benefits in kind available to the employees. The assessee entered into
agreement with such customers. The customers as per their requirement purchase
the meal vouchers from the assessee. The assessee charges in
addition to the face value of the meal vouchers certain amount as service
charges as also delivery charges.The customers, in turn, distribute such meal
vouchers to their employees as per the terms of the employment.
The
employeesuse such vouchers for purchase of food from one of the affiliates.
These vouchers are not honoured by the business establishment in general but
only by the affiliates of the assessee. Thus the user has no option but to
purchase the goods and other services from one of the affiliates of the
assessee. One of the advantages of this system is that such meal vouchers are
considered as fringe benefit for employees. The value of such vouchers is
therefore, not taxable in the hands of user under the Income Tax law. For the
customer it becomes expenditure and this helps in saving taxes. Similar to the
meal vouchers, the assessee also issues gift vouchers which can be used for
purchase in book shops, music shops and other departmental shops which are their
affiliates.
The adjudicating authority dropped
the proceedings relating to the service charges collected from the
customers but confirmed the demand relating to the
service charges collected from affiliates.
Against the confirmed demand, the
applicant had sought a Stay from the Tribunal on the ground that the said
definition of Business Auxiliary Services as being enumerated in section 65(19)
of the Finance Act, 1994 is not applicable as they are not promoting
or marketing and, at the most, the services rendered by them may
be covered under Section 65(33A) ["credit card, debit card, charge
card or other payment card service"] or 65(104C)
["support services of business or commerce"] of the
Finance Act, 1994, both of which were introduced with effect from 01.05.2006
and they have already taken service tax registration under section 65(104C) and
were discharging service tax liability from 1.5.2006.
Reliance was placed in this regard
on the decisions in TrumacEngg. - 2008-TIOL-198-CESTAT-AHM
and Cameo Corporation Service - 2008-TIOL-1084-CESTAT-MAD .
The
Bench after considering the submissions observed that the very same services as
has been provided by the applicant is included in the ‘Business Support
Services' and has been introduced with effect from 1.5.2006 under sub-section
104C of Section 65 of the Finance Act, 1994. Finding strong force in the
submission that once specific services are introduced as taxable from a
particular date then the same could not get covered in earlier services, as held
by the Tribunal in the case of TrumacEngg , the Bench observed that the
applicant has made out a prima facie case for waiver of pre-deposit of
the amounts involved.
Accordingly, the application for
waiver of pre-deposit of the amounts involved was allowed and recovery thereof
stayed till disposal of the appeal. See 2008-TIOL-1860-CESTAT-MUM.
But
that is an old story - Fortunes fluctuate and one
cannot presume the direction in which way the appeal would travel merely because
the stay application was allowed.
The
appeal was heard recently along with the appeal filed by the Revenue against the
dropped portion of the demand and proportionate penalty on the confirmed amount.
And
the Bench after going through the definition of BAS w.e.f 10.09.2004 observed -
Whether Sodexho Meal
Vouchers promote sale of goods/services? -
+ In the present situation, user/employee does not purchase the meal vouchers. It is his employer who purchases such meal vouchers from assessee. User employee has no say in this process. When a user/employee gets such meal vouchers from his employer (assessee's customer), the user has to look the list of affiliates and thereafter approach one of the affiliates of the assessee to buy goods and services. The user cannot approach any other entity or business establishment but to limit himself to the affiliates of the assessee. In our view, such a scheme/restrictions viz. purchase of vouchers by employer and purchaser of goods and services by employee from affiliates itself promotes the sale of goods and services of the affiliates and therefore meal vouchers of the assessee definitely helps in promoting sale of goods and services of assesses affiliates.
The assessee, therefore, are
providing business auxiliary service to its affiliates.
Whether Sodexho Meal
vouchers are similar to credit/debit cards? -
+ Credit/debit card are nothing but substitute of carrying the cash by an individual. The credit/debit card holder directly pays to the bank and the bank in turn pays the amount to the shop and establishment. Thus, in case of credit/debit card, the user has wide option to go practically to any business establishment and buy any goods or service. In the case of assessee' voucher, user is constrained to go and buy goods/services from the assessee's affiliates. In case of credit/debit card, card holder pays to the bank. Further in case of voucher, it is not the user who pays to the assessee but it is the employer of the user who pays to the assessee. Further, it is common that certain percentage of vouchers purchased by customers and in turn given to user/employee are never used (due to expiry date or user has forgotten to use such vouchers etc.) but appellant still gets and retain value of such vouchers. In credit/debit card, card holder pays only for the goods & services purchased. Moreover, when a user presents such meal vouchers to an affiliate and if value of goods and services availed in less than the value of vouchers, he does not get refund and excess amount is retained by affiliates. No such thing happens in credit/debit card. In India, the above voucher system is used mainly to save tax.
Therefore, meal voucher cannot
be compared with credit/debit cards and cannot be called a payment system which
is true for the debit/credit card. Vouchers are definitely not substitute for
carrying cash as is the case with credit/debit card. In fact, in real life value
of such meal vouchers is limited to two thousand per month per employee.
On
the submission by the appellant that they are paying service tax under Business
Support service with effect from 1.5.2006 and, therefore, it cannot be covered
under any other entry, the Bench observed that since it has held that services
provided by the appellant are covered under BAS and at the relevant time BSS was
not in existence, it is unnecessary to go into any further discussion on this
issue.
The
Bench also distinguished the case laws cited by the appellant and also upheld
invocation of extended period of limitation. In the matter of imposition of
penalty, the CESTAT observed that since no attempt was made by the assessee to
ascertain their tax liability from the department before the investigation
started, there is no reason to hold that the assessee had bonafide belief and
accordingly held that penalty was correctly imposed.
In
the matter of the Revenue appeal against the dropped portion of the demand
pertaining to the service charges collected from the customers , the Bench
observed that the SCN itself invoked clause (vi) of the definition of BAS and
which the appellant was put to notice and, therefore, coverage under clause (iv)
cannot be raised before the Tribunal. Inasmuch as by holding that the
adjudicating authority was not expected to expand the scope of the SCN, the
Revenue appeal was rejected.
So
also, the CESTAT held that the adjudicating authority appeared to have missed
the amount of Education Cess while imposing penalty under section 78 and,
therefore, the Revenue appeal was allowed to the said extent.
The
appeal filed by the assessee was dismissed
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