By TIOL News Service

MUMBAI, APR 18, 2014: THE appellantis registered with the department under the category of ‘Mandap Keeper Service'.

While rendering ‘Mandap Keeper Services' they were also providing catering services. However, they split the charges received for the services rendered into two parts; one towards ‘hall charges' for the temporary usage of the banquet hall for conducting the functions and the other for supply of food. They discharged service tax liability on the ‘hall charges' collected from the customers. However, they did not pay service tax on the food charges collected from the customers. It was their contention that, as regards supply of food, the transaction is one of sale and therefore, no service tax is leviable. They also claimed that food is exempt from sales tax.

Two show cause notices were issued to the appellant for the period 2005-06 to 2009-10 and 01/04/2010 to 30/09/2011 and demanding ST of Rs.1.11 crores and Rs.44.15 lakhs respectively. There is also another demand contained in the first SCN of service tax towards renting of immovable property to the extent of Rs.1,76,197/-.

As the demands were confirmed by the CCE, Nagpur with penalties etc. the appellant is before the CESTAT.

It is submitted that as they charge separately for the catering done and on which they are discharging VAT liability and sale of food is not rendering of any service the said activity does not attract service tax liability. Reliance is placed on the decision in Daspalla Hotels Ltd. vs. Commissioner of Central Excise, Visakhapatnam 2010-TIOL-219-CESTAT-BANG and the decision of the High Court of Karnataka in the case of Sky Gourmet Catering Pvt. Ltd. .It is also submitted that in respect of another unit of the appellant the Jt. Commissioner of Central Excise had accepted this contention dropped the demand to the said extent; that the entire transaction was known to the department and hence the demand is hit by limitation; that there is an error in computation of the duty demand raised in the second SCN and hence the matter needs to be remanded.

The Revenue representative submitted that that the issue involved is covered by the decision of the Supreme Court in the case of Tamil Nadu KalyanaMandapam Assn. vs. Union of India 2004-TIOL-36-SC-ST wherein it was held that service tax on catering services does not amount to tax on sale and purchase of goods and the service tax on Mandap Keeper and outdoor caterers is in pith and substance a tax on services and not a tax on sale of goods or on hire purchase activities. Reliance is also placed on the decision in Sayaji Hotels Ltd. 2011-TIOL-226-CESTAT-DEL wherein an identical issue was considered by this Tribunal and it was held that in the case of Mandap Keeper Services, catering service is incidental and ancillary to the Mandap Keeper services and, therefore, the charges for catering services would be includable in the taxable value of Mandap keeper Services. It was also submitted that the benefit of notifications 1/2005-ST, 1/2006-ST cannot be allowed as the appellant had availed CENVAT credit on input services. As regards the appellant contention that identical demands in respect of another own unit were dropped, the Revenue representative mentioned the Supreme Court decisions in FuljitKaur Vs. State of Punjab – 2010 (262) ELT 40 (SC) and Chandigarh Administration Vs. Jagjit Singh – 1995 AIR 705 to submit that it is a settled position of law that a wrong decision or order cannot be perpetuated.

The Bench observed that the decisions cited by the Revenue representative of Tamil Nadu Kalyana Mandapam Assn. vs. Union of India 2004-TIOL-36-SC-ST & Sayaji Hotels Ltd. 2011-TIOL-226-CESTAT-DEL squarely applied to the facts of the case and, therefore, the demands were correctly raised against the appellant.

In the matter of the first SCN dated 15.11.2010, the Bench held that the same sought to demand ST for the period even beyond the extended period of 5 years and hence the demand for the period 1.4.2005 to 30.9.2005 is not legally sustainable.

As regards the question whether extended period of time could be invoked at all in this case since the department had knowledge about the other unit against whom demand was dropped, the Bench held that each premises of the appellant from where business is carried out is a separate assessee and is separately registered for the purpose of Service Tax. Therefore, the Service Tax assessee is separate for each of the premises registered and they have to be treated independently and separately and hence the submission had no merits. Furthermore, prior to April, 2005, the appellant had been discharging Service Tax on Mandap Keeper Services on the combined receipt of Food/Banquet Hall charges and only w.e.f. April, 2005, they started splitting the bills, one for the food and other for the Banquet Hall charges, so as to evade payment of Service Tax on catering charges.

The plea of bonafide belief was also held to be devoid of merits in view of the SC decision in Tamil Nadu KalyanMandapam – 2004-TIOL-36-SC-ST. The reliance placed by the Revenue representative on the decisions in FuljitKaur and Chandigarh Administration (supra) were also held apt to negate the claim of the appellant in the matter of adopting the ratio of the dropped identical demands in respect of their other unit.

The Bench also held that in view of the Gujarat HC decision in Neminath Fabrics Pvt. Ltd. – 2011-TIOL-10-HC-AHM-CX the extended period of limitation was rightly invoked to confirm the Service Tax demands.

In the matter of claim made for abatement, the Bench held that the fact whether the appellant had availed CENVAT credit on inputs/input services was needed to be verified by adjudicating authority. As the computation of the second demand was also held to be in error, the Bench held that the matter needed to be remanded on the said count too.

In fine, the Bench concluded thus –

"6. …, we are of the considered view that the matter has to go back to the adjudicating authority for re-computation of the Service tax demand and re-determination of consequential interest and penal liabilities. We make it very clear that remand is only for re-computation of Service Tax demand and consequential interest and penal liabilities; otherwise the liability of the appellant to pay Service Tax on the whole of the consideration received i.e. both banquet hall charges and catering charges is confirmed. We also uphold the invocation of extended period of time and imposition of penalties under Sections 76, 77 and 78 subject to re-quantification of the penalty amounts after re-computing the Service Tax demand."

The appeal was allowed by way of remand.

(See 2014-TIOL-589-CESTAT-MUM)