Restaurant service tax demand overturned as air-conditioned facility lacked alcohol serving licence under Board Circular 139/8/2011-TRU

CESTAT Chennai allowed the appeal challenging service tax demand on restaurant service. The tribunal held that service tax on restaurants requires both air-conditioning facility and licence to serve alcoholic beverages as per Board Circular 139/8/2011-TRU. For the period 01.05.2011 to 16.03.2012, appellant's air-conditioned restaurant lacked licence to serve alcohol, failing to meet restaurant service criteria. Additionally, the demand incorrectly included total liquor sales from licensed bar rather than limiting to food/beverages served therein. Service tax cannot be levied on alcoholic liquor for home consumption as it falls outside Service Tax Act provisions.

---

---

Issues Involved:
1. Whether the activity rendered by the Appellant at its licensed bar qualifies for demand of Service Tax under "Restaurant Service" in terms of provisions of Section 65(105)(zzzzv) of the Finance Act, 1994, up till 30.06.2012Rs.
2. Whether the appellant is eligible for exemption under Notification No. 25/2012-ST dated 20.06.2012, which is effective from 01.07.2012Rs.

Summary:

Issue 1: Demand of Service Tax under "Restaurant Service" u/s 65(105)(zzzzv) of the Finance Act, 1994
The Appellant, M/s. Nala Hotels (P) Ltd., was found to be providing "Restaurant Service" from 01.05.2011. The levy of Service Tax on "Restaurant Service" came into effect from 01.05.2011 u/s 65(105)(zzzzv) of the Finance Act, 1994. The Department issued a Show Cause Notice demanding service tax for the period from 01.05.2011 to 30.09.2012, which was confirmed by the Adjudicating Authority and upheld by the Commissioner (Appeals). The Appellant contended that their air-conditioned restaurant did not serve liquor and that the bar, which served liquor, was a separate entity. The Tribunal found that for the period from 01.05.2011 to 16.03.2012, the restaurant did not fulfill the requirement of having a license to serve alcoholic beverages in the premises of the air-conditioned restaurant, thus not attracting Service Tax under "Restaurant Service."

Issue 2: Eligibility for Exemption under Notification No. 25/2012-ST dated 20.06.2012
With effect from 01.07.2012, the service provided by a restaurant in relation to serving food or beverage in its premises does not figure in the negative list under Section 66D. The Tribunal noted that the exemption under Notification No. 25/2012-ST dated 20.06.2012 is not applicable to services provided by a restaurant having air-conditioning and a license to serve alcoholic beverages. However, the Appellant's restaurant did not fulfill the criteria of having a license to serve alcoholic beverages in the premises of the restaurant for the period from 01.04.2012 to 31.03.2013. Therefore, the demand of service tax on the Appellant was found to be devoid of merits.

Conclusion:
The Tribunal held that the demand of service tax on the Appellant is devoid of merits and allowed the appeal filed by the Appellant. The impugned order was set aside, and the Department's appeal was dismissed. The Tribunal followed the judicial discipline as established in the case of Commissioner of GST and Central Excise, Trichy Vs. Sangu Chakra Hotels Pvt. Ltd., Trichy.

---