2014 (4) TMI 920 - AT - Service Tax

Demand of service tax - Mandap Keeper Services - Bar of limitation - Held that - services rendered by the mandap keepers as a caterer would also be liable to service tax under the category of Mandap Keeper Services . The decision relied upon by the consultant of the hon ble High Court of Karnataka is with reference to Outdoor Catering Services rendered in an aeroplane and the other decision of the Tribunal in the case of Daspalla Hotels Ltd it is in respect of evidence relied upon by the appellant with regard to VAT paid on the value of food and beverages sought to be taxed under Convention Services . In the present case, the demand is not under any of these services but on Mandap Keeper Service and as can be seen from the decision of the hon ble apex Court in the case of Tamil Nadu Kalyana Mandapam Assn. (2004 (4) TMI 1 - SUPREME COURT OF INDIA), service tax liability is attracted in case the mandap keeper also perform catering services. Appellant did not declare to the department the non-inclusion of food charges in the consideration received nor did they declare the receipt of consideration in the ST-3 returns. Thus, there is a willful mis-statement of facts with an intent to evade tax on the part of the appellant. Therefore, the extended period of time has been rightly invoked to confirm the Service Tax demand and we hold accordingly. As regards the penalty imposed under Section 78, the penalty under the said Section would apply only when there is a suppression of facts or willful mis-statement of fact with an intent to evade Service Tax on the part of the assessee. In the present case, from the records, it is clearly seen that prior to 1.4.2005, the appellant was discharging Service Tax correctly in accordance with law by paying Service Tax on the entire consideration received for both catering charges as also banquet hall charges w.e.f. 1.4.2005, the assessee deliberately split up the charges by issuing the separate bills by splitting into catering charges and banquet hall charges. This conduct of the assessee clearly reveals the intention to evade payment of Service Tax on the charges collected as catering charges. Therefore, penalty under Section 78 is clearly imposable. However, penalty under both Section 76 and 78 are not imposable after 10.5.2008 when the provisions were amended. Therefore, for the period after 10.5.2008, no penalty would be imposable under Section 76 of the Finance Act, 1994. Matter has to go back to the adjudicating authority for re-computation of the Service tax demand and re-determination of consequential interest and penal liabilities - Decided partly in favor of the assessee.

Summary

Issues Involved:
1. Liability of service tax on catering services provided by a Mandap Keeper.
2. Invocation of extended period for demand.
3. Error in computation of service tax demand.
4. Eligibility for abatement.
5. Imposition of penalties under Sections 76, 77, and 78 of the Finance Act, 1994.

Detailed Analysis:

1. Liability of Service Tax on Catering Services:
The appellant, registered under 'Mandap Keeper Service', provided catering services and split charges into 'hall charges' and 'food charges', paying service tax only on the former. They argued that food charges were a sale transaction, exempt from service tax. However, the Tribunal referred to the Supreme Court's decision in Tamil Nadu Kalyana Mandapam Assn. vs. Union of India, which clarified that service tax on catering services is not a tax on the sale of goods but a tax on services. The Tribunal held that services rendered by mandap keepers, including catering, are liable to service tax under 'Mandap Keeper Services'.

2. Invocation of Extended Period for Demand:
The appellant contended that the extended period for demanding service tax was not sustainable since the department was aware of their practices, citing a previous order where similar demands were dropped. The Tribunal rejected this argument, stating that each registered premise is a separate assessee, and knowledge of one does not transfer to another. The Tribunal also noted that the appellant had changed their billing practice from April 2005 to evade tax, justifying the invocation of the extended period.

3. Error in Computation of Service Tax Demand:
The appellant pointed out discrepancies in the computation of service tax, arguing that the demand was based on incorrect turnover figures and did not account for abatements. The Tribunal acknowledged these errors and directed the adjudicating authority to re-compute the service tax demand based on the correct figures from the audited books of accounts.

4. Eligibility for Abatement:
The appellant claimed entitlement to abatement for the period 2005-06 to 2007-08. The Tribunal noted that abatement is only available if no CENVAT Credit on inputs/input services was availed. This factual aspect needed verification by the adjudicating authority.

5. Imposition of Penalties:
The Tribunal upheld penalties under Sections 76, 77, and 78 of the Finance Act, 1994, noting that:
- Penalty under Section 76 is for default/delay in payment of service tax and does not require proof of mens rea.
- Penalties under Section 77 and Rule 7C of the Service Tax Rules, 1994, are for contraventions of various provisions of law.
- Penalty under Section 78 applies in cases of willful misstatement or suppression of facts with intent to evade tax. The Tribunal found that the appellant's conduct post-April 2005 indicated such intent. However, penalties under both Sections 76 and 78 cannot be imposed simultaneously after 10.5.2008, necessitating re-quantification.

Conclusion:
The Tribunal confirmed the appellant's liability to pay service tax on the entire consideration received, including both banquet hall and catering charges. It upheld the invocation of the extended period and penalties, subject to re-computation of the service tax demand and consequential interest and penalties. The matter was remanded to the adjudicating authority for these specific recalculations.