Restaurant service tax applies only to the air-conditioned section, not a separately demarcated non-air-conditioned area.

Restaurant service tax under the Finance Act, 1994 was confined to the air-conditioned restaurant service covered by the exemption structure in Notification No. 25/2012-ST as amended, and could not be extended to food and beverages supplied in a separately demarcated non-air-conditioned section merely because another part of the same premises was air-conditioned. The Tribunal treated the common kitchen, separate billing, and distinct restaurant segments as supporting separate service streams, and relied on the Board's contemporaneous circular as a relevant clarification. On that basis, service tax was not leviable on the non-air-conditioned portion, and the demand and penalty were unsustainable.

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Issues: Whether service tax was payable on the supply of food and beverages in the non-air-conditioned portion of a restaurant where the establishment also had an air-conditioned portion in the same premises during the period from 01.04.2013 to 31.03.2015.

Analysis: The levy on restaurant services was traced to the statutory scheme under the Finance Act, 1994 and the exemption structure under Notification No. 25/2012-ST as amended by Notification No. 03/2013-ST. The decisive question was whether the exemption carved out by Sl. No. 19 turned on the entire establishment merely because some part of it had air-conditioning, or whether the tax incidence was confined to the air-conditioned restaurant service itself. The Board's Circular No. 173/8/2013-ST was treated as a relevant contemporaneous clarification, and the common-kitchen, separate demarcation, separate billing, and separately named restaurant segments were accepted as showing distinct service streams. The Tribunal further held that the levy could not be extended so broadly as to tax customers served only in the non-air-conditioned section when the taxable service was intended to attach to the air-conditioned restaurant service.

Conclusion: Service tax was not leviable on the supply of food and beverages in the non-air-conditioned portion of the restaurant, and the demand and penalty could not be sustained.

Ratio Decidendi: For restaurant service, the exemption and levy must be applied to the specific service area actually answering the statutory description of the taxable restaurant, and a non-air-conditioned, separately demarcated restaurant section does not become taxable merely because another part of the same establishment is air-conditioned.

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