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ST – Issue involves interpretation of complex legal provisions, as such, in terms of Section 80, penalty u/s 76 is set aside: CESTAT

2019-TIOL-2324-CESTAT-ALL

IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
REGIONAL BENCH, ALLAHABAD
COURT NO. I

Appeal Nos. ST/206 & 208/2012-CU[DB]

Arising out of Order-in-Original No. (ST-130/2010) 45 of 2011, Dated: 14.11.2011
Passed by Commissioner of Central Excise and Service Tax, Allahabad

Date of Hearing: 22.02.2018
Date of Decision: 22.02.2018

HOTEL KANHA SHYAM
(A UNIT OF SBW UDYOG LTD ALLAHABAD) AND
COMMISSIONER OF CENTRAL EXCISE
ALLAHABAD

Vs

COMMISSIONER CENTRAL EXCISE AND SERVICE TAX
ALLAHABAD AND M/s HOTEL KANHA SHAYM

Appellant Rep by: Shri Pawan Shree Agarwal Adv.
Respondent Rep by: Shri Mohd Altaf, Asstt Commr AR

CORAM: Anil Choudhary, Member (J)
Anil G Shakkarwar, Member (T)

ST – The issue in these appeals is whether the assessee who is engaged in providing the Mandap Keeper Services and has obtained Service Tax Registration has not made true and full disclosure of taxable service been provided by them in their ST-3 returns filed from time to time and also that the full and correct value received from Mandap Keeper Service has been suppressed in violation of Section 67 of FA, 1994 while determining their service tax liability – The assessed is having three fully air-conditioned banquet halls with four star facilities namely senator with lawn, royal room and kanha darbar – The booking of banquet hall on buffet menu basis consists of elements of renting and catering activity and it does not appear to be disputed that the amount of renting of banquet hall and catering stands amortised in buffet menu, therefore, supply of food/beverages in the banquet hall are not sale of food/beverages where other services are involved and predominant, therefore, the predominant of these other activities in buffet menu fall under the category of Mandap Keeper Services – In absence of any sale contract between assessee and its customers, assessee is not eligible for exemption under Notfn 12/2003-ST and are liable to pay service tax under Mandap Keeper Services within the normal period of limitation – As regards the penalty levied under Section 76 is concerned, it is applicable in cases other than those cover under Section 78 of the Act – Section 80 of the Act provides that no penalty shall be imposed on assessee for any failure referred in Section 76 or 78 of the Act, if the assessee proves that there was reasonable cause for the said failure – The act itself statutorily provides for waiver of penalty, since there was a bona fide believe on the part of assessee that their activities are not subject to service tax, based on the detail reasoning, therefore, there was a reasonable cause for failure if any on the part of the assessee to pay service tax although they filed ST-3 returns – The issue involved in the present appeal involves interpretation of complex legal provisions, as such in terms of Section 80 penalty under Section 76 are hereby set aside – The period of dispute is from April, 2005 to March, 2010 and the SCN was issued on 07.10.2010 – During audit, the audit team examined each and every documents and records of assessee and did not raise any objection to the effect that whether the assessee was eligible for benefit of Notfn 12/2003-ST subject to payment of Trade Tax/VAT on these transactions and whether the assessee would fall within the scope of Mandap Keeper Service or not and the audit team recorded that nothing is found incriminating as such the allegation of suppression in SCN does not survive: CESTAT

Appeal partly allowed

Case law cited:

Sayaji Hotels limited vs. Commissioner of Central Excise – 2011-TIOL-226-CESTAT-DEL… Para 4

FINAL ORDER NOS. 72115-72116/2018

Per: Anil Choudhary:

The issue in these appeals is whether the appellant-assessee who is engaged in providing the Mandap Keeper Services defined under Section 65(67) of Finance Act, 1994 and has obtained Service Tax Registration has not made true and full discloser of the taxable service been provided by them in their ST-3 returns filed from time to time and also that the full and correct value received from Mandap Keeper Service has been suppressed in violation of Section 67 of the Finance Act, 1994 while determining their service tax liability.

2. Brief facts of the case are that the respondents-assessee are running the business of Hotel, Banquet Halls and Restaurant from the single premises. There are various banquet halls of different sizes which the appellant-assessee allows for different functions like marriages, conferences, etc. The halls/rooms etc., let out by the hotel/restaurants is for a consideration for organizing social, official or business functions which are covered within the definition of Mandap Keeper Service and for which the appellant-assessee has obtained his service tax registration.

3. The respondent-assessed are having three fully airconditioned banquet halls with four star facilities namely senator with lawn, royal room and kanha darbar. The bookings of these banquet halls are made in two ways. First booking of banquet halls under composite banquet charges, which includes catering and other facilities to the customers intended to make bookings for the purpose of marriage etc., and secondly booking of banquet hall only on higher/rent and which does not include any other facility apart from the hall normally such type of booking is done for the purpose of exhibitions. On the basis of the intelligence received by the Department an inquiry was initiated and the appellant assessee was asked to provide certain information and documents. The scrutiny of these documents revealed that during the period from April, 2005 to March, 2010 the respondent assessee had provided the taxable services under the category of Mandap Keeper service, rent-a-cab services, internet café services and dry cleaning services and has disclosed only Mandap Keepr service in their ST-3 returns whereby suppressing the fact of providing other taxable services.

4. The appellant-assessee was issued a show cause notice dated 07.10.2010 which was adjudicated by the learned Commissioner vide its order dated 14.11.2011 has held that the contentions of the appellant-assessee on one hand is that they claim to have rented banquet hall to customers for holding conferences and other functions whereas on the other hand they do not charge any rent for booking of banquet hall for arranging lunch/dinner to the best of the customers which clearly reflects that the booking of banquet hall on buffet menu basically consists of elements of renting and catering activity and it is not disputed that the amount of renting of banquet hall and catering stood amortised in buffet menu, therefore, the supply of food/beverages in the banquet halls are not sale of food/beverages where other services were predominant. Predominance of these activities in buffet menu price appears to be service contract and false under the category of Mandap Keeper Services and such transactions of service tax was payable subject to abatement available to the respondent-assessed under Notification No.01/2006-ST, the learned Commissioner while relying upon decision of the Co-ordinate Bench of this Tribunal in the case of Sayaji Hotels limited vs. Commissioner of Central Excise, Indore reported at 2011 (24) STR 177 (Tri.-Del.) = 2011-TIOL-226-CESTAT-DEL has held that the facts of the present case are identical to the facts of the case reported (supra) as such the learned Commissioner was of the view that in absence of any sale contract between the appellant-assessee and its customers, therefore, the benefit of exemption Notification No.12/2003-ST is not available to the appellant-assessee and as such they are liable to pay service tax under Mandap Keeper Service in terms of Notification No.21/1997-ST and its successor Notification No.01/2006-ST as such the learned Commissioner confirmed the demand of service tax amounting to Rs.01,70,822/- and Rs.06,561/- under Section 73 and confirmed the demand of service tax amounting to Rs.12,43,851/- which was short paid under Section 73 and imposed a penalty of Rs.44,346/- i.e., 25% of Rs.01,77,383/- and also imposed a penalty under Section 76 and 77 and imposed a late fee of Rs.02,000/- under Section 70 of the Act.

5. Aggrieved by the said Order-in-Original dated 14.11.2011 passed by the learned Commissioner the Revenue has preferred the present appeal to the extent that the learned Commissioner has dropped the demand for invoking the extended period of limitation and the assessee has also preferred appeal before this Tribunal against the above mentioned order on the ground that service tax demand was confirmed under the category of Mandap Keeper Services for the period April, 2009 to March, 2010 and the penalty imposed under Section 76 of the Finance Act.

6. The learned counsel for the appellant-assessee has submitted that the sale of food/beverages by the appellant-assessee is just a sale simplicitor to their customers (hosts). The transaction in question is not a composite transaction involving both sale and service the appellant-assessee is raising invoices for sale value of food and beverages the invoices evidencing the sale of the food is strictly in relation to the value of food sold and does not include any value of the services provided alongwith the sale of food. The appellant-assessee also argued that only the value of food is charged and the buffet menu does not include any banquet hall charges or other charges and has paid full value of VAT on the sale of food made by them, therefore, the intention is to sell the food in banquet hall and not to provide any service to its customers and the price which is being charged on the invoice only represents the value of food and beverages sold by the respondent-assessee, therefore, the sale of food in the present case is a sale simplicitor and is liable to VAT/Sales Tax and not to Service Tax. The charge of service tax under Mandap Keeper will arise only with regard to those transactions which are composite in nature and not when the transaction is purely sale. The learned counsel further placed reliance upon a Notification No.12/2003-ST and argued that the definition of taxes on sale and purchase of goods in Article 336 (29A) which says that the State has the power to impose sales tax on deemed sales. Once the power has been exercised under Entry 54 of List II of the VII Schedule of the Constitution of India to impose tax on the deemed sale, the power to tax the same transaction under Entry 97 of List I of the VII Schedule of the Constitution of India is not available to the Union Parliament. As such the interpretation given in the impugned order by following Sayaji Hotels (supra) is bad in law.

7. The counsel for the appellant-assessee further argued that the appellant-assessee was maintaining separate account and raising invoices for sale of food and beverages in the banquet halls thus, the Notification No.12/2003-ST is more specifically applicable than Notification No.01/2006-ST. The learned counsel also argued that the demand raised by the Revenue is time barred as an internal audit was conducted by the Department and in the verification report after perusing the documents no objection was raised to this effect for the same period and each and every document was examined and the audit party has recorded that nothing found incriminating.

8. The learned AR for the Revenue relied upon the impugned order.

9. Having heard the learned counsel for the appellant-assessee and the learned AR for the Revenue at length and after appreciating the facts on record we find that from the facts of the present case the booking of banquet hall on buffet menu basis consists of elements of renting and catering activity and it does not appear to be disputed that the amount of renting of the banquet hall and catering stands amotised in buffet menu, therefore, supply of food/beverages in the banquet hall are not sale of food/beverages where other services are involved and predominant, therefore, the predominant of these other activities in buffet menu fall under the category of Mandap Keeper Services. The learned Commissioner has also relied upon a judgment of this Tribunal in the case of Sayaji Hotels (supra) in which it was held that supply of food/beverages in the banquet halls are not sale of food/beverages for the purpose of benefit under Notification No.12/2003-ST, as such we are in full agreement with the ratio of law laid down in the case of Sayaji Hotels (supra) and hold that in the absence of any sale contract between the appellant-assessee and its customers the appellant-assessee is not eligible for exemption under Notification No.12/2003-ST and are liable to pay service tax under Mandap Keeper Services within the normal period of limitation. As regards the penalty levied under Section 76 of the Finance Act is concerned, it is applicable in cases other than those cover under Section 78 of the Act. Section 80 of the Act provides that no penalty shall be imposed on the assessee for any failure referred in Section 76 or 78 of the Act, if the assessee proves that there was reasonable cause for the said failure. The act itself statutorily provides for waiver of penalty, since in the present case, there was a bona fide believe on the part of the appellant that their activities are not subject to service tax, based on the detail reasoning given above, therefore, there was a reasonable cause for failure if any on the part of the respondent assessee to pay service tax although they filed ST-3 returns. The issue involved in the present appeal involves interpretation of complex legal provisions, as such in terms of Section 80 penalty under Section 76 are hereby set aside.

10. The Revenue has also preferred appeal against the dropping of demand imposed by extending the period of limitation on the ground that there was suppression on the part of the appellant-assessee who has not disclosed or included the booking of banquet under the composite banquet charges in their statutory ST-3 returns. However, we find that the period of dispute is from April, 2005 to March, 2010 and the show cause notice was issued on 07.10.2010. The audit was conducted during the period 28.07.2010 to 30.07.2010 and during the audit conducted by the Department the audit team examined each and every documents and records of the assessee and did not raise any objection to the effect that whether the assessee was eligible for benefit of Notification No.12/2003-ST subject to payment of Trade Tax/VAT on these transactions and whether the assessee would fall within the scope of Mandap Keeper Service or not and the audit team recorded that nothing is found incriminating as such the allegation of suppression in the show cause notice does not survive, as such the appeal filed by the Revenue is dismissed on this ground alone.

11. The appeals of the assessee is allowed in part and the appeal of the Department is dismissed.

(Pronounced in Court)

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