CESTAT Mumbai Rules in Favor of Sodexo, Citing Redundancy in Service Tax Categorization Post-2012
In a significant judgment, the Customs Excise and Service Tax Appellate Tribunal (CESTAT) Mumbai, presided over by Dr. Suvendu Kumar Pati, ruled in favor of Sodexo India Services Pvt Ltd, setting aside a demand for service tax amounting to Rs. 11,75,531, along with interest and penalties. The case revolved around the payment of service tax under a wrong category but within the stipulated timeframe and before the issuance of the show cause notice.
The dispute arose from an audit conducted by CERA for the years 2013 to 2016, which discovered that Sodexo had discharged its service tax liabilities under the heading 'Business Auxiliary Services' instead of 'Management and Business Consultation Services.' The audit also noted a short payment of service tax on expenses incurred in foreign currency during 2014 to 2016. Despite paying the service tax under BAS, Sodexo was issued a show-cause-cum-demand notice in 2019, which led to unsuccessful attempts before the Adjudicating Authority and Commissioner (Appeals), ultimately bringing the case to CESTAT.
Advocate Arun Jain, representing Sodexo, argued that the service tax liability had been discharged under the Reverse Charge Mechanism, which was more than the differential duty demanded. He emphasized that the payment of tax under a wrong heading should not necessitate a second payment, especially when the revenue suffered no loss, and Sodexo was eligible for Cenvat credit. The Tribunal agreed with Sodexo's counsel, highlighting the redundancy of service description in ST-3 Returns post-2012 due to the introduction of the Negative List, which rendered specific service categorization unnecessary.
CESTAT referenced precedents, including Commissioner of Service Tax, New Delhi v. Air Charter Services P Ltd., which established that tax paid under an incorrect category could be considered as discharge of liability under the correct category. The Tribunal also noted that the entire amount was settled before the show-cause notice, aligning with Section 73(3) of the Finance Act, 1994, negating the need for further action against Sodexo.
The judgment provides consequential relief to Sodexo, overturning the previous Order-in-Appeal by the Commissioner (Appeals), marking a significant interpretation of service tax regulations post-2012.
Bottom Line:
Service tax paid under a wrong category can be considered towards discharge of liability under the correct category, and the tax need not be paid again under the Reverse Charge Mechanism.
Statutory provision(s): Finance Act, 1994 Section 73(3), Negative List provisions effective from 1.07.2012
