Service tax on hall hire charges valid while VAT applies to food component under separate billing arrangement

The CESTAT Ahmedabad allowed the appeal, setting aside the impugned order. The Tribunal held that the appellant correctly discharged service tax on hall hire charges while paying VAT on the food component. Following precedent from CESTAT New Delhi, the Tribunal ruled that separate billing for banquet hall charges and food charges is permissible under Notification No. 12/2003-ST. The requirement for separate contracts was deemed legally inconsequential when invoices clearly indicated both parties agreed to segregate the components. Extended period of limitation could not be invoked as the matter involved interpretation of law.

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Issues Involved:
1. Taxability of services provided by the assessee, specifically Mandap Keeper services and catering services.
2. Applicability of exemption notifications and abatement provisions.
3. Liability for service tax on various other services and under reverse charge mechanism.
4. Allegations of suppression of facts and invocation of the extended period for recovery.
5. Validity of the demand and penalties imposed.

Summary of Judgment:

1. Taxability of Services:
The assessee, engaged in running a hotel and providing various services including Mandap Keeper services, split invoices into charges for Mandap and food & beverages. The department observed that the assessee did not pay service tax on the catering services, claiming exemption under Notification No. 12/2003-ST. The department contended that the supply of food and beverages during Mandap Keeper services was not a "sale" and thus not exempt.

2. Exemption Notifications and Abatement:
The adjudicating authority found that the assessee should have paid service tax on the entire value of Mandap Keeper services, including catering, under Notification No. 1/2006-ST and 26/2012-ST. The assessee's reliance on Notification No. 12/2003-ST was deemed incorrect as there was no sale of food and beverages involved. The authority held that the benefit of Notification No. 12/2003-ST was not applicable, and the value of catering services should be included in the taxable value of Mandap Keeper services.

3. Liability for Other Services and Reverse Charge:
The auditors observed non-payment of service tax on Internet services, Business Auxiliary Services, GTA services, and Sponsorship services. Additionally, services received from overseas providers were liable to service tax under reverse charge, which the assessee had not paid.

4. Allegations of Suppression and Extended Period:
The department alleged that the assessee willfully suppressed facts to evade service tax, justifying the invocation of the extended period for recovery under Section 73(1) of the Finance Act, 1994. The adjudicating authority upheld this view, leading to the issuance of a show-cause notice and demand for service tax, interest, and penalties.

5. Validity of Demand and Penalties:
The tribunal considered various submissions and case laws, including the Supreme Court's judgment in Northern India Caterers (India) Ltd. v. Lt. Governor of Delhi, which held that serving food in a restaurant does not constitute a sale. The tribunal concluded that the catering component in Mandap Keeper services was not a sale and thus not exempt under Notification No. 12/2003-ST. The tribunal also distinguished the present case from other cited cases and upheld the demand for service tax on the entire value of Mandap Keeper services, including catering.

Conclusion:
The tribunal set aside the impugned order on the grounds of limitation, finding that the extended period for recovery could not be invoked due to the matter involving interpretation of law. The appeal was allowed with consequent relief, and the demand was deemed time-barred.

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