TaxTMI 
TaxTMI 
2026 (7) TMI 459
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....hese halls. However, the appellant was found to be discharging service tax only in respect of the food and beverages served in the air-conditioned hall and not in respect of those served in the nonair-conditioned hall. The Department was of the view that by failing to pay the appropriate service tax on the taxable value in respect of the food and beverage served in the non-air conditioned portion of the restaurant the appellant had violated the provisions of the Notification No.03/2013-ST dated 01.03.2013 (w.e.f 01.04.2013).Consequent to details sought and statement recorded from the General Manager of the appellant, the Department issued a show cause notice dated 08.04.2015 demanding the service tax on the services rendered during the period 01.04.2013 to 30.09.2013 along with the appropriate interest and proposing to impose penalty under Section 76 of the Finance Act, 1994 (Act). For the subsequent period from 01.10.2013 to 31.03.2015, a statement of demand dated 09.10.2015 was issued proposing to demand service tax along with appropriate interest and proposing to impose penalty under Section 76 of the Act. After due process of law, the Adjudicating Authority vide Order in Origin....
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.... Office of the Commissioner of Central Excise, Customs and Service Tax, Race Course Road, Coimbatore. d) While so, by a proceeding bearing No. dated 3.9.2013 issued by the Superintendent (PREV) attached to the Office of the Commissioner of Central Excise, Customs and Service Tax (HQ) Preventive Unit, Coimbatore, the Appellant was required to provide details of branch-wise sales in air-conditioned and non-air-conditioned restaurants for the period 1.4.2013 to 31.7.2013. That proceeding assumed the stand that the sale of food and beverages in the non-air-conditioned halls also attracted service tax liability with effect from 1.3.2013. In response to the same, the Appellant submitted a letter dated 10.9.2013 making clear their stand of non-liability and some of the reasons for the same. On 11.9.2013, a sworn statement of G. Devarajan, General Manager (Finance) of the Group of the Appellant was taken. e) By a show cause notice bearing No.5/2015 dated 8.4.2015, the Commissioner of Central Excise, Customs and Service tax proposed to demand service tax on the sales of food and beverages in the non-airconditioned restaurants of the Appellant located in the same business c....
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....aurants were physically demarcated, that there were clear price differences, separate sale invoices had been raised with separate serial numbers, the words 'Non A/C" had been employed in the bills raised in the non-air-conditioned restaurants and accordingly no part of the food and beverages sold in the non-air-conditioned restaurants could be brought to tax under the Notification as proposed by the show cause notice as well as the Statement Of Demand. The Appellant also resisted the proposal to impose penalty and pleaded bonafides. g) However, by the impugned Order -in-Original Nos. 1 and 2/17-COMMR dated 28.2.2017, the adjudicating authority has confirmed the proposals in the show cause notice as well as the statement of demand. 4. Ld. Counsel contended that the impugned order has been passed on a mis-interpretation of the exemption notification. The adjudicating authority had failed to appreciate the fact that the wording of the notification had been clear to the effect exemption is for the serving of food of that restaurant which is not air-conditioned. 5. Ld. Counsel argued that the Order suffers from a clear jurisdictional error in as much as ordinary and outri....
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.... Supreme Court in the judgement reported in 45 STC 212 (Northern India Caterers (India) Limited Vs Lt. Governor of Delhi, and thus suffers from jurisdictional error. 10. Ld. Counsel further contends that indisputably, the air conditioned and non-air-conditioned restaurants, although found in the same premises or complex, were physically demarcated and were in separate areas, the price at which the Appellant sold the food and drinks in the airconditioned restaurants were higher by at least 10% on an average when compared to the identical food and drinks sold by the Appellant in the non-air-conditioned restaurants, the Appellant had raised separate sale invoices with separate serial numbers for their sales of food and drinks in the air-conditioned and non-air-conditioned restaurants. Separate set of workers and service area and price list for non-airconditioned restaurants were also involved and present. The ambience was different between the air conditioned and non-air-conditioned restaurants, while the air-conditioned restaurants had separate names, the non-air-conditioned restaurants although did not have separate names, the Appellant had employed the word, "Non-A/C" in the bil....
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.... 15. The learned Adjudicating authority has in violation of the principles of natural justice found in paragraph 42 of the Order under challenge that the Appellant had named the Air-conditioned halls after the investigation to hoodwink the department. This finding is clearly without any evidence and contrary to the evidence of record in the form of letter address to the department during investigation and also during the hearing which clearly established that that Air-conditioned restaurants always bore separate names. This finding is also beyond the Show cause notice and Statement of Demand as aforesaid. Besides, had the Appellant been put on Notice, they would have been able to place before the Adjudicating authority their letter dated 17.7.2014 addressed to Assistant Commissioner of Service tax, which clearly showed that each one of the air-conditioned halls functioning in the same complex along with the non-air-conditioned halls had separate names. 16. LD. Counsel further contended that on similar facts the Dy. Commissioner of CGST & Central Excise, Coimbatore III Division has in the case of Haribhavanam Hotels, Coimbatore vide OIO No.29/2018 dated 13.06.2018 dropped the pr....
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....r-conditioned and the others not and sourcing food from a same common kitchen. It would not be applicable when the very same restaurant had both air-conditioned and non-air-conditioned halls. The operative part of the definition is 'having facility of air conditioning in any part of the establishment at any time during the financial year' and remains unamended. Therefore, even if one part of the establishment is air-conditioned and another part of the very same establishment is not, service tax is applicable. Moreover, even if the air conditioning is operative only for a part of the year due to weather conditions, service tax is applicable. It is argued that the exemption notification has to be interpreted strictly and the scope cannot be enlarged. It is contended that the Adjudicating Authority has correctly held the appellant to be liable to pay service tax for providing services relating to supply of food and beverage in the non-airconditioned portion of the restaurant which is located in the same establishment. Ld. A.R. prays that the appeal be dismissed. 21. We have heard the rival submissions at length and carefully perused the material available on record. ISSUE FOR DE....
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....ients e.g. salt, chilies, onion, garlic or oil. The extent and quality of services available in a restaurant is directly reflected in the margin charged over the direct costs. It is thus not uncommon to notice even packaged products being sold at prices far in excess of the MRP. 1.2 In certain restaurants the owners get into revenue-sharing arrangements with another person, who takes the responsibility of preparation of food, with his own materials and ingredients, while the owner takes responsibility for making the space available, its decoration, furniture, cutlery, crockery and music etc. The total bill, which is composite, is shared between the two parties in terms of the contract. Here the consideration for services provided by the restaurants is more clearly demarcated. 1.3 Another arrangement is whereby the restaurant separates a certain portion of the bill as service charge. This amount is meant to be shared amongst the staff who attend the customers. Though this amount is exclusively for the services it does not represent the full of value of all services rendered by the restaurants. 1.4 The new levy is directed at services provided by high-end r....
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....ded by Restaurants, inter-alia, clarified as under: 1 If there are more than one restaurants belonging to the same entity in a complex, out of which only one or more satisfy both the criteria relating to air-conditioning and licence to serve liquor, will the other restaurant(s) be also liable to pay Service Tax? Service Tax is leviable on the service provide by a restaurant which satisfies two conditions: (i) it should have the facility of air conditioning in any part of the establishment and (ii) it should have license to serve alcoholic beverages. Within the same entity, if there are more than one restaurant, which are clearly demarcated and separately named, the ones which satisfy both the criteria is only liable to service tax. 2 Will the services provided by taxable restaurant in other parts of the hotel e.g. swimming pool, or an open area attached to a restaurant be also liable to Service Tax? The taxable services provided by a restaurant in other parts of the hotel e.g. swimming pool, or an open area attached to the restaurant are also liable to Service Tax as these areas become extensions of the restaurant. 3 Is the serving of food ....
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.... relation to his employment; (c) fees taken in any Court or tribunal established under any law for the time being in force. Explanation- xxxxx (emphasis supplied) 31. Section 66E stipulated as under: 66E. Declared Services.-The following shall constitute declared services, namely:- (a) xxx (b) xxx xxx (i) service portion in an activity wherein goods, being food or any other article of human consumption or any drink (whether or not intoxicating) is supplied in any manner as a part of the activity. 32. The Notification No.1/2006-ST dated 01-03-2006, inter-alia, amended by Notification No.34/2011-ST dated 25-04-2011, was rescinded vide Notification No.34/2012-ST dated 20.06.2012, with effect from 01-072012 and exemptions were provided to taxable services from the whole of service tax leviable under Section 66B with effect from 01-07-2012, vide Notification No.25/2012-ST dated 20.06.2012, wherein at Sl. No. 19 it was stipulated as under: "19. Services provided in relation to serving of food or beverages by a restaurant, eating joint or a mess, other than those having: (i) the facility of air-conditio....
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....anation 2. - For the removal of doubts, it is clarified that the provider of taxable service shall not take CENVAT credit of duties or cess paid on any goods classifiable under Chapters 1 to 22 of the Central Excise Tariff Act, 1985 (5 of 1986)." 34. By Notification No.03/2013 dated 01-03-2013, the aforementioned entry Sl.No.19 in the Notification No.25/2012-ST ibid was substituted, with effect from 01-04-2013, as under: "19. Services provided in relation to serving of food or beverages by a restaurant, eating joint or a mess, other than those having the facility of air-conditioning or central air-heating in any part of the establishment, at any time during the year;" ANALYSIS AND REASONINGS 35. Bearing the above in mind, what becomes clear is that the intention of the Government to tax the services provided by an airconditioned restaurant that has licence to serve liquor was brought into effect from 01-05-2011 by giving an abatement of 70% and it was made amply clear that for the services provided by a restaurant, by whatever name called, to be liable to service tax the two conditions to be cumulatively satisfied is that, first, the restaurant should have the fac....
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....erages by a restaurant, eating joint or a mess that has the facility of air-conditioning or central air-heating in any part of the establishment, at any time during the year, consequent to the exemption under Sl.No.19 being unavailable. 38. At the outset we address the challenge to the impugned order raised by the Appellant that their activity in the non-air-conditioned restaurants only constituted outright and ordinary sale of food and beverages for price in terms of the principles laid down by the Hon'ble Supreme Court in the judgements reported in 42 STC 386 (Northern India Caterers (India) Limited Vs Lt. Governor of Delhi) and 45 STC 212 (Northern India Caterers (India) Limited Vs Lt. Governor of Delhi. We are of the view that given our view elaborated supra as to the interpretation of the statutory provisions as well as Sl.No.19 of the Exemption Notification 25/2012-ST ibid as amended, and in view of the settled position in law that there may be more than one taxable events in a single transaction, involving different kinds of taxes and different aspects of taxation, and in light of the decisions of the Honourable High Courts in Indian Hotels and Restaurants Association v. ....
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....nsequently, the appellant has contended, the benefit of the Notification ought to have been extended to the Appellant in respect of the services provided in relation to serving of food or beverages in the non-air-conditioned restaurants. 40. The appellant places reliance on the Board's Circular No.173/8/2013-ST dated 07-10-2013 to contend that since the air-conditioned and nonair-conditioned restaurants are clearly demarcated and separately named, with only food being sourced from a common kitchen, the benefit of the said clarification is available. Aid of the TRU Circular on the scope of the levy is also taken. Reliance is further placed on the letter C.No.IV/16/344/2015. S.Tax(CCO) dated 08.12.2015 received by the Tamil Nadu Hotel Association from the Office of the Chief Commissioner of Central Excise Coimbatore. 41. The Appellant has annexed a letter dated 26-11-2025 by the Secretary, Tamil Nadu Hotels Association, addressed to the Chief Commissioner of Service Tax, Chennai, inter-alia contending that there are very many partially airconditioned hotels in our Country. In such hotels, one room or hall will have AC facility and the remaining portion will be non-airconditione....
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.... service provided in the non air conditioned/noncentrally air-heated restaurant will be treated as exempted service and credit entitlement will be as per the Cenvat Credit Rules. 2 In a hotel, if services are provided by a specified restaurant in other areas e.g. swimming pool or an open area attached to the restaurant, will service tax arise? Yes. Services provided by specified restaurant in other areas of the hotel are liable to service tax. 3 Whether service tax is leviable on goods sold on MRP basis across the counter as part of the Bill/invoice. If goods are sold on MRP basis (fixed under the Legal Metrology Act) they have to be excluded from total amount for the determination of value of service portion. 43. As we had observed supra, from 01-05-2011 and upto 01-07-2012, a restaurant, by whatever name called, was exigible to service tax if it satisfied two conditions, first, the restaurant should have the facility of air conditioning in any part of the establishment, at any time during the financial year and second, it should have license to serve alcoholic beverages. The tax was for the service provided or to be provided by such restaurant to a person in ....
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....inition of ' air-conditioned restaurant' for all practical purposes. 46. It would be apposite to note at this juncture that the Hon'ble Supreme Court has in L. Chander Kumar v. Union of India, 1997 (92) ELT 318 (SC), addressed the issue of whether the Tribunals, constituted either under Article 323A or under Article 323B of the Constitution, possess the competence to test the constitutional validity of a statutory provision/rule? and has held as under: "91. Before moving on to other aspects, we may summarise our conclusions on the jurisdictional powers of these Tribunals. The Tribunals are competent to hear matters where the vires of statutory provisions are questioned. However, in discharging this duty, they cannot act as substitutes for the High Courts and the Supreme Court which have, under our constitutional set-up, been specifically entrusted with such an obligation. Their function in this respect is only supplementary and all such decisions of the Tribunals will be subject to scrutiny before a Division Bench of the respective High Courts. The Tribunals will consequently also have the power to test the vires of subordinate legislations and rules. However, this powe....
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....he areas of law for which they have been constituted. It will not, therefore, be open for litigants to directly approach the High Courts even in cases where they question the vires of statutory legislations (except where the legislation which creates the particular Tribunal is challenged) by overlooking the jurisdiction of the concerned Tribunal. Section 5(6) of the Act is valid and constitutional and is to be interpreted in the manner we have indicated." 47. The Appellant has contented before us that the object of the Notification was to grant a benefit to the class of consumers who consumed food and drinks in a non-air-conditioned restaurants and the construction placed by the Adjudicating authority on the Notification has clearly defeated that object. It has also been argued that service tax was not a tax which operates as a cost to a service provider. It is a cost that falls upon the service recipient. The intention of the Notification was not to burden the consumers of non-air-conditioned restaurants and that intention has been defeated by the construction placed by the Adjudicating authority on the Notification. 48. We do believe that while remaining within our remit, w....
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....ed 28-02-2011. After all, it is a settled position in law that tax laws have to be interpreted reasonably and in consonance with justice adopting a purposive approach. CIT Bombay v. Gwalior Rayon Silk Manufacturing Co. Ltd, (1992) 3 (SCC) 326 refers. 51. The contention of the appellant that it operates a restaurant where part of the premises is airconditioned and is separately demarcated remains uncontroverted. The appellant too sources its food that is served in the air-conditioned hall and that served in the non-air-conditioned hall, from a common kitchen, a condition that was noted in the Circular of the Board as noted above, and is thus essentially sharing the operational core of a restaurant business, as the food served in the non-airconditioned hall also originates from a kitchen that feeds the airconditioned hall. The separate billing, menu pricing and dedicated stewards/waiters indicate that the Appellant has extended the segregation of the air-conditioned restaurant and the non-airconditioned restaurant operationally too apart from their physical demarcation. 52. It would appear that the Revenue has come out with the said Circular No.173/8/2013-ST dated 07-10-2013 to....
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....rt in the case of Federation of Hotels (supra footnote 11). Though initially there was some uncertainty on the quantum of the receipts that would attract tax, in time, an abatement was provided for, in recognition of the position that the sale of food and beverages and drinks (including sale of beverages and intoxicating drinks) does involve both aspects of sale as well as service. 21. Service tax was initially levied on the sale of food and drink in all restaurants without exception and Entry 19 of Notification 25 of 2012 levied tax on services provided in relation to serving of food and beverages by a restaurant, eating joint or mess. 22. The levy was restricted to sales in air-conditioned restaurants alone, vide Notification No. 3 of 2013-S.T., dated 1-3-2013, commonly referred to as the mega exemption notification, that carved out specified exclusions from the coverage of the Act. By virtue of Notification 3 of 2013, the levy of tax was restricted only to those restaurants, eating joints or mess, that have the facility of air-conditioning or central heating in any part of the establishment at any time during the year." (emphasis supplied) 54. The H....