2006 (4) TMI 34 - HC - Service Tax

Monopoly rights not taxable under service tax for consideration received. Appeal allowed.

CKP MANDAL Versus COMMISSIONER OF CENTRAL EXCISE, MUMBAI-IV

CKP MANDAL Versus COMMISSIONER OF CENTRAL EXCISE, MUMBAI-IV - 2006 (4) S.T.R. 183 (Bom.) , [2006] 4 VST 81 (Bom) Issues Involved:1. Whether the consideration received by the appellant from Saideep Caterers for monopoly rights is chargeable to Service tax under Section 65(90)(m) of the Finance Act, 1994.2. Whether the Customs, Excise, and Service Tax Appellate Tribunal was correct in holding that the appellant was rendering catering/decoration services under Section 65(90)(m) of the Finance Act, 1994.Issue-wise Detailed Analysis:Issue 1: Chargeability of Consideration to Service TaxThe appellant, a charitable trust, entered into contracts granting Saideep Caterers exclusive rights for catering and decoration services at its halls. Saideep Caterers paid the appellant Rs. 8,35,000/- and Rs. 9,80,000/- for these rights over specified periods. The core question was whether this consideration is chargeable to service tax under Section 65(90)(m) of the Finance Act, 1994. The court held that the consideration received from Saideep Caterers for granting monopoly rights is not chargeable to service tax. The reason being that the taxable service in relation to the use of mandap is the service to the hirer, not the caterer. The appellant did not provide any direct or indirect catering services to the hirer; rather, Saideep Caterers did. Therefore, the amount received from Saideep Caterers is not for services rendered to the hirer and thus not taxable.Issue 2: Tribunal's Holding on Rendering Catering/Decoration ServicesThe Tribunal had held that the appellant was rendering catering/decoration services within the meaning of Section 65(90)(m) of the Finance Act, 1944. The court examined the statutory provisions and the agreements between the appellant and Saideep Caterers. It concluded that the appellant was not providing catering services to the hirer, either directly or indirectly. The agreements only granted monopoly rights to Saideep Caterers, who were responsible for the catering and decoration services. The court emphasized that the taxable service must be provided by the mandap keeper to the client (hirer), which was not the case here. Consequently, the Tribunal's decision was incorrect.Conclusion:The court answered both substantial questions of law in the negative, thereby allowing the appeal and setting aside the Tribunal's judgment. The court clarified that the consideration received from Saideep Caterers for monopoly rights does not constitute a taxable service as defined under the relevant statutory provisions. The appellant was not rendering catering/decoration services to the hirer, and thus, the amounts received from Saideep Caterers were not chargeable to service tax.