2011 (1) TMI 650 - AT - Service Tax

Demand - Mandap keeper service - Time limitation - cost of goods sold - exemption under notification no. 12/2003 - there was no sale involved in the Appellant s transaction as Mandap keeper while serving their customers, for there is no sale of food and beverage as defined in section 2(h) of the Central Excise Act, 1944. When there is no sale of any materials or goods, the exemption under Notification No. 12/03-ST would not apply. This exemption notification is inapplicable to indivisible service contracts like the present one in hand. The plea that service tax can not be levied on the portion of value of Mandap Keeper Service which represents the value of food and beverages served is baseless. In fact in paras 42 & 43 of the Apex Court judgment in case of Tamil Nadu Kalyana Mandapam Association (2004 -TMI - 135 - SUPREME COURT OF INDIA) it has been held in very clear terms that Article 366(29A)(f) only permits the states to impose a tax on the supply of food and drinks by whatever mode it may be made and it does not conceptually or otherwise includes the supply to services within the definition of sale and purchase of goods. - Decided against the assessee. It was pleaded that in absence of fraud, suppression of facts, wilful misstatement etc. with intent to evade the payment of tax penalty under section 78 ibid is not called for - Held that there is no suppression of facts etc. on the part of the Appellant and this is a case of interpretation of exemption notification, and since the criteria for imposition of penalty under section 78 ibid is the same as the criteria for invoking extended limitation period under proviso to section 73(1), there are no grounds for imposition of penalty under section 78.

Issues Involved:
1. Applicability of Notification No. 12/03-ST for exemption on the value of goods and materials sold.
2. Applicability of Notification No. 21/97-ST and its successor Notification No. 1/06-ST for Mandap Keeper services.
3. Classification of the supply of food and beverages as a sale or service.
4. Invocation of extended limitation period for recovery of service tax.
5. Imposition of penalties under sections 76 and 78 of the Finance Act, 1994.

Detailed Analysis:

1. Applicability of Notification No. 12/03-ST:
The Appellant claimed exemption under Notification No. 12/03-ST, arguing that their transactions involved the sale of food and beverages, which should be exempt from service tax. They contended that separate invoices were raised for the value of food and beverages, and sales tax/VAT was paid on these amounts. However, the Tribunal held that the supply of food and beverages in the course of providing Mandap Keeper services was not a sale but an ancillary service. The Tribunal noted that the exemption under Notification No. 12/03-ST is inapplicable to indivisible service contracts like the one in question, where the primary intention is to provide a service, not to sell goods. The Tribunal concluded that there was no sale of food and beverages within the meaning of section 2(h) of the Central Excise Act, 1944, and thus, Notification No. 12/03-ST could not be availed.

2. Applicability of Notification No. 21/97-ST and Notification No. 1/06-ST:
The Tribunal examined whether the Appellant could avail of the specific exemption notifications for Mandap Keeper services, which allow abatement of 40% of the gross amount charged, provided certain conditions are met. The Tribunal noted that these notifications are intended to avoid charging service tax on the portion of the value representing the food and beverages component. The Tribunal held that the Appellant should have paid service tax based on these notifications if the conditions were satisfied. For appeal No. ST/462/2010, the Tribunal remanded the matter to the Commissioner to re-quantify the service tax demand after allowing the exemption under Notification No. 1/06-ST, subject to the reversal of Cenvat credit.

3. Classification of Supply of Food and Beverages:
The Tribunal discussed whether the supply of food and beverages in the course of providing Mandap Keeper services constituted a sale. It referred to the definition of "sale" under section 2(h) of the Central Excise Act, 1944, which involves the transfer of possession of goods for consideration. The Tribunal concluded that the Appellant's contracts were primarily for providing services, and the supply of food and beverages was incidental to the service. The Tribunal held that the supply of food and beverages did not constitute a sale, and thus, the exemption under Notification No. 12/03-ST was not applicable.

4. Invocation of Extended Limitation Period:
The Tribunal examined whether the extended limitation period for recovery of service tax could be invoked. It noted that the Appellant had declared the availment of Notification No. 12/03-ST in their ST-3 returns, and there was no suppression of facts. The Tribunal held that the criteria for invoking the extended limitation period were not satisfied, and only the normal limitation period of one year from the relevant date was available for recovery of short-paid tax. Accordingly, part of the demand in appeal No. ST/374/08 for the period prior to March 2006 was held to be time-barred.

5. Imposition of Penalties:
The Tribunal considered the imposition of penalties under sections 76 and 78 of the Finance Act, 1994. It held that since there was no suppression of facts or intent to evade tax, the penalty under section 78 was not warranted and was set aside. However, the penalty under section 76 was upheld, as the service tax was not paid by the due date.

Conclusion:
The Tribunal upheld the service tax demands on merits but provided relief in terms of re-quantification and abatement under specific notifications. The penalties under section 78 were set aside, while those under section 76 were upheld. The appeals were disposed of accordingly.

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