Tribunal Reverses Service Tax Demand, Rules in Favor of Appellant

The Tribunal allowed the appeal in favor of the appellant on 13.07.2017. The appellant successfully challenged a service tax demand and penalties based on two issues. Firstly, the denial of benefit under Notification No.1/2006-ST due to availing cenvat credit on inputs, which was subsequently reversed. Secondly, the liability of service tax on open-air restaurant services was contested, with the Tribunal ruling in favor of the appellant due to non-fulfillment of specified criteria under the Finance Act, 1994. The Tribunal found merit in the appellant's arguments, leading to the reversal of the impugned order.

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Issues:
1. Denial of benefit claimed under Notification No.1/2006-ST due to availing cenvat credit on inputs.
2. Liability of service tax on open-air restaurant services.

Analysis:
1. The appeal challenged an order confirming a service tax demand against the appellant, along with penalties, based on two issues. Firstly, denial of benefit under Notification No.1/2006-ST due to availing cenvat credit on inputs, which the appellant reversed subsequently. The appellant argued that the reversal of credit should be considered as non-availment, citing the Supreme Court judgment in Chanderpur Magnet Wires Pvt. Ltd. v. Commissioner of Central Excise. The Tribunal agreed that upon reversal of cenvat credit, the appellant was entitled to the benefit of the notification for claim of abatement.

2. The second issue pertained to the liability of service tax on services provided by an open-air restaurant. The appellant contended that no service tax should be levied on such restaurants as they did not meet the criteria specified in Section 65(105)(zzzv) of the Finance Act, 1994. The appellant referred to Circular No.139/8/2011-TRU to support their argument that open-air restaurants were not within the taxable service ambit. The Tribunal noted that the restaurant in question did not fulfill the conditions of having air conditioning and a license to serve alcoholic beverages, as required by the law. Referring to a CBEC circular, the Tribunal held that service tax demand on the restaurant service could not be upheld against the appellant.

3. After hearing both sides and examining the case records, the Tribunal found that the appellant had valid grounds for their arguments on both issues. Consequently, the impugned order was deemed to lack merit, leading to the appeal being allowed in favor of the appellant on 13.07.2017.

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