Appeal upheld for catering services but liquor sales demand dropped due to lack of evidence. Penalties reduced.

The appeal was filed against an Order-in-Appeal upholding a demand of Rs. 5,44,098/- for catering services due to lack of evidence proving liquor sales. The Ld. Commissioner(Appeals) upheld the demand for catering services. However, the demand for sale of liquor was set aside as proper documentation was provided, showing no inclusion of liquor sales in taxable services. Penalties for non-payment of service tax were upheld but reduced due to dropping the service tax demand on liquor sales. The Revenue's appeal was dismissed.

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Issues:
1. Upholding demand for catering services
2. Setting aside demand for sale of liquor
3. Imposition of penalty for non-payment of service tax

Analysis:

Issue 1: Upholding demand for catering services
The appeal was filed against an Order-in-Appeal upholding a demand of Rs. 5,44,098/- for catering services. The Adjudicating authority confirmed the demand due to lack of documentary evidence proving the sale of liquor. The appellant contended that ample opportunities were given to produce evidence, but the sale of liquor was not established. The Ld. Commissioner(Appeals) considered evidence from balance sheets, VAT payment documents, sample invoices, and a C.A. certificate. The Commissioner concluded that there was indeed a sale of liquor, as per para 10.5 of the Board Circular dated 27/7/2005. The Ld. Commissioner(Appeals) upheld the demand for catering services.

Issue 2: Setting aside demand for sale of liquor
The appellant argued that the sale of liquor should not be taxed if proper documentation was available, citing para 10.5 of the Board's circular. The appellant submitted sample liquor sale bills, ledger accounts, and VAT statements. The Ld. Commissioner(Appeals) found that the appellant issued bills for liquor sales, had income from liquor sales in their accounts, and paid VAT on these sales. Consequently, the value of liquor sales was held not includable in the assessable value of taxable services. The Ld. Commissioner(Appeals) dismissed the appeal by the Revenue regarding the demand dropped on the sale of liquor.

Issue 3: Imposition of penalty for non-payment of service tax
The appellant failed to pay service tax correctly and did not disclose total receipts accurately in ST 3 returns, leading to a penalty for suppression of facts to evade tax. The Ld. Commissioner(Appeals) upheld penalties under both Section 76 and Section 78 of the Finance Act, 1994, as the non-payment occurred before the amendment of Section 78 in 2008. The Commissioner found the penalties legally valid and reduced them due to the dropping of the service tax demand. The Ld. Commissioner(Appeals) applied sufficient evidence, such as sale bills, balance sheets, C.A. certificate, and VAT statements, to conclude that there was no infirmity in dropping the demand for service tax on liquor sales. The Revenue's appeal was dismissed.

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