2007 (6) TMI 504 - AT - Service Tax

Levy of service tax - mandap keeper service - social functions - scope of service - invocation of extended period of limitation

Summary

Issues:
1. Interpretation of the term 'Mandap Keeper' under Service tax law.
2. Whether the activities of renting out premises for cultural events fall under the category of 'Mandap Keeper'.
3. Applicability of Service tax on various functions organized in rented premises.
4. Justifiability of invoking the longer period for tax demand.
5. Distinction between 'cultural event' and 'social function' for Service tax levy.

Issue 1 - Interpretation of 'Mandap Keeper':
The case involved a dispute over whether the services rendered by the appellants fell under the category of 'Mandap Keeper' as per the Finance Act, 1994. The Tribunal emphasized that the purpose for which the premises were rented out needed examination to determine tax liability. The definition of 'Mandap Keeper' included allowing temporary occupation for official, social, or business functions. The Tribunal highlighted the need to analyze each case individually based on the purpose of renting the premises.

Issue 2 - Activities for Cultural Events and 'Mandap Keeper' Category:
The Tribunal discussed the distinction made by the appellants between 'cultural event' and 'social function'. The appellants argued that organizing cultural events like dance or drama did not constitute a social function. However, the Tribunal disagreed, stating that cultural events were a subset of social functions. It was held that cultural events also fell under the purview of social functions, as per the Board's clarification and the inclusive definition of 'social function'.

Issue 3 - Applicability of Service Tax on Functions in Rented Premises:
The Tribunal examined the purposes for which the Town Hall and Kalamandir were rented out, including social drama, school functions, and cultural programs. It was established that cultural functions were considered social functions and liable for Service tax under the 'Mandap Keeper' category. The Tribunal upheld the levy of Service tax on the appellants for renting out premises for cultural events.

Issue 4 - Justifiability of Invoking Longer Period for Tax Demand:
The appellants contended that the longer period for tax demand was not justified, as they believed their activities were not taxable under the 'Mandap Keeper' category. The Tribunal agreed with the appellants, restricting the demand to the normal period and setting aside penalties due to the issue involving interpretation of the law.

Issue 5 - Distinction Between 'Cultural Event' and 'Social Function' for Service Tax Levy:
The Tribunal clarified that the term 'social function' was not limited to marriage alone, as per the inclusive definition. It was emphasized that cultural events were integral to social functions, and the Board's clarification supported considering dance, drama, and music programs as social functions for Service tax levy. Instances like Kannada film shooting and political meetings were excluded from the levy of Service tax under the 'Mandap Keeper' category.

In conclusion, the Tribunal partially allowed the appeals, upholding the levy of Service tax on the appellants for renting out premises for cultural events but restricting the demand to the normal period. Penalty was set aside due to the issue involving interpretation of the law.