2023 (8) TMI 1049 - AT - Service Tax

Service tax demand upheld for 2011-2015 period with penalties under Finance Act

The Tribunal upheld the demand for service tax for the period from 01.05.2011 to 31.03.2015, along with penalties under Sections 77(1)(a), 77(2), and 78 ... Restaurant service taxable if air-conditioning facility exists - facility of air-conditioning as determining factor for service tax liability - exemption under notification dependent on absence of air-conditioning - suppression and wilful misstatement attracting extended period of limitation - penalty under sections 77(1)(a), 77(2) and 78 of the Finance Act, 1994Restaurant service taxable if air-conditioning facility exists - facility of air-conditioning as determining factor for service tax liability - exemption under notification dependent on absence of air-conditioning - Services provided by the appellant fall within the definition of Restaurant service and are taxable because the establishment had air-conditioning facility during the relevant period and thus is not eligible for the exemption claimed. - HELD THAT: - The Tribunal examined the statutory definition of taxable 'Restaurant service' and the evidence on record. The appellant had, in its application for State Excise licence, declared the restaurant as air conditioned; the State Excise authority confirmed verification of those declared facts and routine inspections; there was no documentary communication from the appellant purporting to have removed air-conditioning after grant of licence. The appellant's subsequent statement that air-conditioning was removed and replaced by air-coolers was not supported by substantive proof and was held to be a self-serving cover to avoid liability. The Tribunal found no perversity in the material relied upon by the adjudicating authority and concluded that the appellant failed to discharge the burden of proving entitlement to the exemption notification which requires absence of air-conditioning. [Paras 6, 7, 8, 11, 12]The demand of service tax for the period 01.05.2011 to 31.03.2015 is upheld on the ground that the appellant's establishment had air-conditioning and therefore did not qualify for the exemption.Suppression and wilful misstatement attracting extended period of limitation - penalty under sections 77(1)(a), 77(2) and 78 of the Finance Act, 1994 - Extended period of limitation is invokable and penalties are sustainable because the appellant suppressed material facts and wilfully misrepresented the existence of air-conditioning with intent to evade service tax. - HELD THAT: - The Tribunal accepted the revenue's finding that the appellant attempted to mislead both the State Excise and Central Excise authorities by denying the existence of air-conditioning despite earlier declarations and licence conditions indicating otherwise. That conduct evidenced intention to evade duty rather than a bona fide or inadvertent non-compliance. Given this suppression and wilful misstatement, the extended period for demand was held to be applicable and penalties under the specified provisions of the Finance Act were confirmed. [Paras 9, 10, 12]Extended limitation applies and penalties under Section 77(1)(a), 77(2) and 78 of the Finance Act, 1994 are confirmed.Final Conclusion: The appeal is dismissed; the impugned order is affirmed and the service tax demand together with penalties for the period 01.05.2011 to 31.03.2015 is upheld. Issues Involved:1. Applicability of service tax on services provided by the appellant under the category of 'Restaurant-cum-Bar Service'.2. Validity of extended period of limitation for the demand of service tax.3. Applicability of penalties under Sections 77(1)(a), 77(2), and 78 of the Finance Act, 1994.Summary:1. Applicability of Service Tax on 'Restaurant-cum-Bar Service':The primary issue was whether the services provided by the appellant fall under the category of 'Restaurant-cum-Bar Service' as defined under Section 65(105)(zzzzv) of the Finance Act, 1994, and whether the appellant is liable to pay service tax. The Tribunal examined the definition clause, which specifies that taxable service includes any service provided by a restaurant with air-conditioning facilities at any time during the financial year and a license to serve alcoholic beverages. The appellant argued that the air-conditioning facility was removed by the end of 2010 and replaced with air coolers. However, the Tribunal found that there was no substantive proof to support this claim. The initial application for the liquor license in 2010 stated that the restaurant was air-conditioned, and no communication was made to the State Excise Department about removing the air-conditioning facility. The Tribunal concluded that the appellant's claim was a cover-up to avoid service tax liability.2. Validity of Extended Period of Limitation:The appellant contended that the extended period of limitation should not apply as there was no suppression or willful misstatement of facts with the intent to evade duty. The Tribunal, however, observed that the appellant tried to defraud two revenue departments by violating the conditions of the state excise license and not paying service tax. The Tribunal agreed with the Commissioner (Appeals) that the appellant's actions showed an intention to evade tax liability, thus justifying the extended period of limitation.3. Applicability of Penalties:The Tribunal upheld the penalties under Sections 77(1)(a), 77(2), and 78 of the Finance Act, 1994, due to the appellant's suppression of facts and misrepresentation. The Tribunal found that the appellant's conduct indicated a clear intention to evade duty, and it was not a case of bona fide belief or ignorance of service tax liability.Conclusion:The Tribunal affirmed the impugned order, upholding the demand for service tax for the period from 01.05.2011 to 31.03.2015, along with penalties under Sections 77(1)(a), 77(2), and 78 of the Finance Act, 1994. The appeal was dismissed.