ST - Once it is accepted that Appellant is rendering 'Mandap Keeper' service and Bills were raised for gross amount towards food, assessee would be eligible for abatement of 40% from value for payment of service tax: CESTAT
By TIOL News Service
MUMBAI, OCT 24, 2016: THE Appellant had taken over control of "Hotel Centaur" from Govt. of India under its divestment programme in the year 2002. The Appellant took service tax registration under the category of Mandap Keeper Services and till September 2002 paid service tax. For the subsequent period, due to financial constraints they could not make service tax payments.
SCNdt. 31.08.2004 was issued alleging that the Appellant hadalso not got registered nor paid service tax on Health and Fitness Services and Drycleaning Services. It was also contended that service tax though collected under the category of 'Mandap Keeper Services' was not paid to the Government. Out of the total tax demand of Rs.54,27,614/-, demand Rs.31 Lakh allegedly pertained to service tax on Mandap keeper which was charged by the Appellant from the customers but was not paid to the government.
The appellant submitted that non-registration under the category of 'Health and Fitness Service' and 'Dry cleaning services' was due to ignorance of law;that even though they were facing financial constraints and closure of business they paid service tax of Rs.31 Lakhs as soon as pointed out by the department and amount of Rs.3,38,277/- was paid in February and May 2004; that the calculation of demand of Rs.54,27,614/- was made on gross value whereas they are eligible for 40% abatement in case of Mandap Keeper Service.
The adjudicating authority confirmed the demand vide order dt. 30.09.2011 and imposed penalties.
Before theCESTAT, the appellant submitted that non-payment of service tax under the category of "Mandap Keeper" was due to financial constraints, non-cooperation of employees and VRS amounts given to them. It is also submitted that the benefit of the abatement of 40% under the category of Mandap Keeper Services has not been extended to them; that upon extending the benefit, the overall demand of service tax on all the services comes to Rs.34,38,277/-; that the same has been paid before passing of the impugned order; that the allegation that the tax has been collected from customers is incorrect asin the bill the total amount was shown and service tax was not shown separately; that on account of severe financial crisis and subsequent closure of their business, no malafide can be attributed; all the information was available in their books of accounts, no act of suppression or contumacious conduct is committed and hence no penalty should be imposed.
The AR reiterated the findings of the impugned order.
The CESTAT observed -
On merits:
"7. …We find that there is no doubt about the taxability of services in question. The appellant also not contesting the taxability except the quantification of service tax due to denial of notification of abatement. Once it is accepted that the Appellant rendering 'Mandap Keeper / Banquet Services and the Bills were raised for the gross amount towards food and all services related with such activity, the assessee would be eligible for abatement of 40% from the value of the service for payment of service tax. Therefore the service tax liability of the Appellant in respect of 'Mandap Keeper' services should be on the value after abatement of 40% in terms of Notification No. 21/97-ST dt.26.06.97 and subsequent analogous notifications. We accordingly hold that the Appellant is eligible for abatement of 40% from the value of services under aforesaid notifications. As may be seen from the calculation shown in Annexure 'J' to the appeal memo the services tax on services of 'Mandap Keeper' as well as 'Health Club & Fitness Service' and "Dry Cleaning Services" comes to Rs.34,38,279/-. We thus hold that the services tax liability of the Appellant is restricted to Rs.34,38,279/- only out of total demand of Rs.54,27,614/- and the remaining demand is set aside. As regards the charge of collection of service tax and not paid to the Government exchequer, on perusal of the invoice, we find that there is no mention of service tax in the invoice over and above the bill amount."
Penalties:
The Appellant had taken over the hotel known as 'Hotel Centaur" from Govt. of India under its divestment programme. However as the facts appear, due to non cooperation by employees and their strike, litigation in High Court, VRS to their employee and subsequent closure the service tax payment could not be made. We also find that details of services rendered by them were appearing in their Bills and accounts books. We find that the non payment of service tax on above services was due to financial constraints as well as various happenings as mentioned above. Moreover, the Appellant has not contested the service tax liability which is payable and major amount was already deposited. We, therefore, hold that the Appellant is eligible for waiver of penalties in terms of Section 80 of the Finance Act, 1994.
Conclusion:
The order is modified to the extent that the demand of Service tax is reduced to Rs.34,38,279/- and penalties imposed under section 76, 77 & 78 are set aside. As regard the penalty imposed under section 75A, we find that it is fact that the Appellant has not got the Health & Fitness and Dry-cleaning services incorporated in their registration. Therefore, penalty under section 75A imposed, is sustained.
The Appeal was partly allowed.
(See 2016-TIOL-2763-CESTAT-MUM)
