2010 (9) TMI 21 - AT - Service Tax

Appellant's Exemption Claim Denied, Liable for Service Tax on Catering Services

The appellant's claim for exemption under Notification No. 12/2003-ST for the supply of food and beverages in the banquet hall was denied, and they were ... Taxability of mandap keeper service including catering as part of composite service - distinction between sale of goods and provision of service for exemption - applicability of general exemption vis a vis specific abatement notification - prima facie case requirement for waiver of pre deposit - protection of public revenue in grant of interim reliefTaxability of mandap keeper service including catering as part of composite service - distinction between sale of goods and provision of service for exemption - Whether catering supplied by the appellant as part of mandap keeper service constitutes a distinct sale of goods for claiming exemption under Notification No. 12/2003 ST or forms part of the taxable mandap keeper service for purposes of Notification No. 01/2006 ST - HELD THAT: - The Tribunal, after examining the statutory entry for mandap keeper service and the Constitutional Bench precedent in Tamil Nadu Kalyan Mandap Assn., held that the taxable ambit of mandap keeper service is wide enough to include catering services rendered in relation to the use of a mandap. Reliance was placed on authorities construing phrases like 'in relation to' and on decisions that serving of food in the context of such services ordinarily partakes of a service rather than a sale. The Tribunal observed that Notification No.12/2003 ST applies only where there is a distinct sale of goods evidenced and segregated in invoices and that the legal fiction permitting State taxation of deemed sales under Article 366(29A)(f) cannot be invoked to extend the scope of that exemption. Given the factual finding that the appellant's modus operandi involved splitting bills to escape service tax and that vivisection of the composite contract was not genuinely established, the Tribunal found the department's plea that Notification No.01/2006 ST applies to be prima facie sound. The Tribunal rejected reliance on contrary Tribunal and High Court decisions where those decisions did not consider or follow the Apex Court precedent directly on point. [Paras 14, 18, 22]Prima facie, the catering element is taxable as part of the mandap keeper service and the appellant cannot claim exemption under Notification No.12/2003 ST where no genuine distinct sale of goods is shown; Notification No.01/2006 ST is applicable.Applicability of general exemption vis a vis specific abatement notification - Whether the appellant had an option to choose benefit under Notification No.12/2003 ST instead of the specific abatement under Notification No.01/2006 ST - HELD THAT: - The Tribunal held that when a specific abatement notification (Notification No.01/2006 ST) is in force dealing with the precise situation of mandap keepers providing catering, the assessee cannot, by resort to a more general exemption (Notification No.12/2003 ST), obtain a more favourable result merely by artificial segregation of receipts. The specific scheme envisaging a 40% abatement on mandap keeper receipts (leaving 60% taxable) is intended to address the composite nature of the service and to preclude selective invocation of the general exemption where vivisection is not bona fide. The Tribunal therefore rejected the appellant's contention of a free choice between notifications. [Paras 3, 18, 25]The appellant cannot elect the general exemption in preference to the specific abatement notification where the latter governs the composite mandap keeper plus catering service.Prima facie case requirement for waiver of pre deposit - protection of public revenue in grant of interim relief - Whether the pre deposit requirement should be waived and a full stay granted on the demand, penalties and interest during pendency of the appeal - HELD THAT: - Applying established principles that interim relief affecting public revenue must be granted with circumspection, the Tribunal found that the appellant had failed to establish a prima facie case or undue hardship meriting total dispensation from pre deposit. The Tribunal noted repeated earlier interim orders and the risk to revenue from continued non payment where the department's case on applicability of the specific abatement appeared sound. In exercise of discretion, and to protect the revenue while not entirely denying interim relief, the Tribunal directed a substantial conditional pre deposit. Following the reasoning in Dunlop and other precedents, the Tribunal balanced the parties' positions and declined full waiver. [Paras 7, 22, 23]Total waiver of pre deposit is refused; interim relief is granted subject to making a conditional pre deposit.Protection of public revenue in grant of interim relief - Interim direction as to pre deposit, stay of realization of penalties and interest upon compliance - HELD THAT: - Considering the totality of facts and absence of a prima facie case, the Tribunal exercised its power to prescribe a conditional stay arrangement. The appellant was directed to make a specified pre deposit within a time frame. Upon compliance, realization of the penalty imposed under Section 78 and other penalties under Section 76 as well as interest on the demand were ordered to be stayed during the pendency of the appeal. This approach preserves the department's revenue interest while permitting the appeal to proceed on contest. [Paras 23]Appellant directed to make the specified pre deposit; on compliance, realization of penalties and interest is stayed pending appeal.Final Conclusion: The Tribunal held prima facie that catering forms part of the mandap keeper service and Notification No.01/2006 ST governs the composite service, rejecting the appellant's claim to exemption under Notification No.12/2003 ST; total waiver of pre deposit was refused, but the Tribunal granted a conditional interim stay of penalties and interest subject to payment of the directed pre deposit within the stipulated time. Issues Involved:1. Denial of Benefit of Notification No. 12/2003-ST and Levy of Service Tax.2. Imposition of Penalty under Section 76 of the Finance Act, 1994.3. Imposition of Penalty under Section 78 of the Finance Act, 1994.Detailed Analysis:1. Denial of Benefit of Notification No. 12/2003-ST and Levy of Service Tax:The appellant, a registered assessee under the Finance Act, 1994, provided Mandap Keeper services and other related services. The department denied the benefit of Notification No. 12/2003-ST dated 20.06.2003, which exempts goods and materials sold by the service provider from service tax if the value of goods is distinctly shown in invoices. The appellant claimed that the supply of food and beverages in the banquet hall constituted a sale of goods liable to VAT, not service tax. They argued for the deduction of the value of goods sold under Notification No. 12/2003-ST. However, the department contended that the appellant did not provide distinct evidence of the sale value of goods in invoices and was thus governed by Notification No. 1/2006-ST, which provides concessional taxation for Mandap Keeper services without separating catering receipts from the gross value.The adjudicating authority confirmed the demand for service tax on the composite value of services, including catering, provided by the appellant. The authority held that the appellant was providing a package of services, including Mandap Keeper and catering services, which are inseparable and subject to service tax on 60% of the gross amount charged, as per Notification No. 1/2006-ST.2. Imposition of Penalty under Section 76 of the Finance Act, 1994:The appellant was penalized Rs. 200 per day or 2% of the service tax per month until the tax was paid, subject to the penalty not exceeding the amount of service tax evaded. The adjudicating authority imposed this penalty for the non-payment of service tax correctly. The appellant argued that the gross amount received for marriage functions should be excluded from the taxable service value and considered cum-tax value, thus no interest or penalty should be charged.3. Imposition of Penalty under Section 78 of the Finance Act, 1994:A penalty equal to the service tax evaded, amounting to Rs. 1,29,44,543, was imposed under Section 78 of the Finance Act, 1994. This penalty was for willful suppression of facts to evade tax. The appellant contended that they maintained separate accounts and invoices for food and beverages and Mandap services, thus should not be penalized.Separate Judgments:Per D.N. Panda:The tribunal noted that the appellant repeatedly sought waiver of pre-deposit on the grounds that no service tax should be levied if VAT was paid. The tribunal emphasized the need for judicial discipline and the protection of public revenue. The tribunal referred to the Supreme Court's decision in Tamil Nadu Kalyan Mandap Assn. v. Union of India, which upheld the constitutionality of service tax on Mandap Keeper services, including catering. The tribunal concluded that the appellant's segregation of catering receipts from Mandap Keeper services was questionable and likely resulted in revenue loss. The tribunal directed the appellant to pre-deposit Rs. 60 lakhs within four weeks and report compliance, failing which the appeal would not proceed.Per Rakesh Kumar:Judge Rakesh Kumar agreed with the analysis and emphasized that the appellant did not establish a prima facie case for total waiver of pre-deposit. He highlighted that the supply of food and beverages by the Mandap Keeper did not constitute a sale of goods under the Central Excise Act or the Sale of Goods Act, thus Notification No. 12/2003-ST was not applicable. He reiterated that the appellant's argument for exemption under Notification No. 12/2003-ST was not tenable, and the service aspect of catering was taxable under the Finance Act, 1994. He concurred with the direction for a pre-deposit of Rs. 60 lakhs and the stay of penalties and interest during the appeal's pendency.