Decided on September 25,2009

Food World, Secunderabad Appellant


Manoranjan Virk, Member (A) - (1.) THE appeal is filed against the revisional order of the Deputy Commissioner (CT), Secunderabad Division for the assessment year 1999 -2000 (APGST). The appellant is a Railway Catering Contractor who obtained orders for providing catering services to the Trains passing through or terminating at Hyderabad. The catering contract was entered into between them and the Northern Railways. The appellant is a registered dealer on the rolls of the Commercial Tax Officer, R.P. Road Circle. The appellant also applied for and obtained an L1 -Certificate for composition of tax under Section 5G with respect to turnovers under Section 5F of the APGST Act, '57. After the assessment was finalized, the Revisional Authority i.e., the Deputy Commissioner (CT), Secunderabad Division on verification of the assessment records observed that the Commercial Tax Officer had wrongly treated a turnover of Rs. 25,04,833/ - as receipts under Works Contract under Section 5F and levied tax at a concessional rate of 2% or 4% under Section 5G on the basis of the Form -L1. The Deputy Commissioner (CT) observed that as per definition of Works Contract under Section 2(1)(t) of the APGST Act, preparation of Food and Food articles by the assessee and supply of the same through the Pantry Car in a train does not come under the purview of Works Contract. He was of the view that the nature of transaction of the assessee shows that the turnover comes under the purview of Section 5C (as on 31 -12 -1999) of the APGST Act. In view of this, the Deputy Commissioner (CT), issued pre -revision show cause notice for proposing to apply higher rate of tax on the said turnover. The assessee received the show cause notice on 24 -09 -2002 and filed a letter dated 07 -10 -2002 requesting to grant 15 days time to file their reply. However, they did not file any objections till 26 -12 -2002 when the Revisional Authority passed orders confirming the proposed higher rate of tax.
(2.) THE present appeal has been filed by the appellant against the above mentioned revisional orders of the Deputy Commissioner. As seen from the grounds of appeal, the appellant has first of all argued that what they receive from the Northern Railways is reimbursement and not sale price. According to them, there was no sale made by them while supplying the food to the passengers in moving trains. Therefore the turnover related to such services provided by them cannot be taxed. They have further stated that since the agreement between themselves and the Northern Railways was entered into at Delhi, the Sales Tax authorities at Hyderabad have no jurisdiction to tax the disputed turnover. Thirdly, the appellant has stated that they had obtained an L1 Certificate from the Commercial Tax Officer, R.P. Road Circle with whom they are registered. The L1 Certificate was in force and was not cancelled by the Commercial Tax Officer. Therefore, it is wrong on the part of the Revisional Authority to levy a higher rate of tax on the disputed turnover, as the Commercial Tax Officer after due consideration only of the facts and circumstances of their business had issued the L1 Certificate. They have produced a copy of the said L1 Certificate before us and pointed out that it clearly mentions their business as Railway Catering Contractor and since the said Certificate is valid during the assessment year 1999 -2000 the impugned order of the Revisional Authority needs to be set aside. The State Representative has supported the orders of the Revisional Authority. He has stated that providing food to Railway passengers at the prescribed rates cannot be regarded as Works Contract under Section 5F. Therefore, L -1 Certificate had been wrongly issued by the Commercial Tax Officer and concessional rate of tax had been wrongly levied under Section 5G treating the nature of contract of the appellant as contract under Section 5F. The Revisional Authority was therefore correct in detecting the mistake made by the Commercial Tax Officer and setting it right.
(3.) AFTER hearing both sides and after going through the agreement signed between the appellant and the Northern Railways, we are of the opinion that just because of the words "supply of food article" is used in the contract, we cannot regard the payment made by the Northern Railways to the appellant as reimbursement. Clearly there was sale of food articles to the Northern Railways and not to the passengers in the train. No doubt that the said food articles were supplied to the passengers in the trains free of cost but, the appellant was not doing charity work. No doubt there is no direct nexus between the appellant and the passengers but however the food is being supplied in terms of the agreement entered into between by the appellant with the Northern Railways and the same is not free of cost. The food is being supplied to the passengers on behalf of the Northern Railways who have agreed to pay the appellant and the appellant has agreed to receive payment at certain mutually agreed rates. Therefore, the payment made by the Northern Railways to the appellant is to be regarded as deferred payment and not reimbursement. Hence, there is no doubt that there is sale of food articles by the appellant to the Northern Railways.;

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