Continuous mess services at client-provided premises constitute taxable outdoor catering, despite their ongoing nature.

The appellant contracted with the RBI Staff College to operate an on-site mess using premises and infrastructure provided by the College.

It collected food charges from trainees and employees, with the RBI subsidising part of the cost.

The Department treated the activity as outdoor catering and, denying exemption under Notification No. 22/2006-ST, raised service-tax demands for 2006–07 to June 2009, with interest and penalties.

The adjudication order was affirmed on appeal, leading to the present appeal and an application to raise additional grounds.

Whether the appellant’s operation of the on-site mess constituted taxable outdoor catering service.

Whether the show-cause notices adequately disclosed the basis of the proposed demand.

Whether the appellant was entitled to exemption under Notification No. 22/2006-ST, and whether the demand could be imposed on the food-related receipts.

Whether the extended period of limitation was invocable and whether interest and penalties were sustainable.

Whether the appellant was entitled to cum-tax treatment under Section 67(2) of the Finance Act, 1994.

Section 65(105)(zzt) of the Finance Act, 1994 covered services provided by an outdoor caterer; Sections 65(24) and 65(76a) defined a caterer and an outdoor caterer, including catering at a place provided by the service recipient.

Section 68(1) placed the service-tax liability on the provider, while Section 68(2), read with Rule 2 of the Service Tax Rules, 1994, shifted liability only for services specifically notified; Notification No. 22/2006-ST exempted services to the RBI only where the RBI was liable under that mechanism.

The notice must disclose the essential factual and legal foundation of the demand so the assessee can defend itself; a material basis cannot be introduced for the first time in adjudication.

Under Continental Foundation Joint Venture, Easland Combines and Uniworth Textiles, extended limitation requires suppression or a positive, blameworthy act evidencing intent to evade; a bona fide interpretative dispute alone is insufficient.

Section 75 provides for interest on delayed tax, while Section 67(2) permits cum-tax treatment where the gross amount charged includes service tax.

The agreement and course of dealing showed that the appellant provided catering at premises supplied by the RBI Staff College, which contracted for the service and paid the agreed amounts, including a subsidy.

The trainees and employees were the ultimate beneficiaries, not the contracting recipients; continuous operation did not make the College’s premises the appellant’s own.

The notices disclosed the essential charge, and the reference to a “canteen” in the appellate order did not enlarge it.

The activity was therefore outdoor catering, and the receipts could not be treated solely as sale proceeds of food; the RBI exemption did not apply because outdoor catering was not a service for which the RBI was liable under Section 68(2).

However, the appellant’s reliance on the notification and RBI certificate, together with the interpretative nature of the issue, did not establish intentional suppression.

The extended period was therefore unavailable; interest remained payable on the surviving liability, while penalties were unwarranted.

Cum-tax treatment was allowable, subject to recalculation.

It sustained the demand only for the normal period, set aside the demand beyond that period and all penalties, upheld interest on the surviving tax, and allowed cum-tax treatment under Section 67(2).

The matter was remanded solely for re-quantification of tax and interest, to be completed within 90 days.

The impugned order was modified, and the appeal was partly allowed; the miscellaneous application was disposed of.