2020 (6) TMI 88 - AT - Service Tax

Refund of Service tax - appellants have preferred a refund claim stating that the same was in respect of food served on which VAT was paid - HELD THAT - The Revenue has proceeded on certain surmises and conjectures. The two major surmises were that with the usage of LCD display, etc., it is evident that the banquet halls were let out temporarily for a day and that the charges for the same are inbuilt into the bill raised by the appellant towards the food charges and this inbuilt value needs to be treated as consideration towards the Mandap Keeper services provided by the appellant. We are afraid that it is not open to the Revenue to decide the taxability of a new entry merely on the basis of imagination. For any service to be held to be taxable, there should be a service provider, service recipient and consideration for the service. It cannot be imagined that such consideration was inbuilt. It is incumbent upon Revenue to show such consideration in quantifiable terms in order to levy service tax, though on a discounted value. Revenue could not place any proof in the form of a bill, etc., to substantiate the allegation that the banquet halls were rented out for a consideration - the department s stand is not substantiated so far as the reduction of refund is concerned on merits. Appeal allowed - decided in favor of appellant.

Summary

Issues:
Interpretation of service tax liability on food served in banquet halls without separate rental charges.

Analysis:
The case involved a restaurant with banquet halls that sometimes charged only for the food served without any rental fees for the halls. The Department disputed this arrangement, advising the appellants to pay service tax on such food bills. The appellants paid the disputed amount but later sought a refund based on a clarification from the Commissioner stating that service tax was required only for official, social, or business functions. The refund claim was rejected by the Asst. Commissioner and the Commissioner (A) in subsequent appeals.

The Department's argument was centered on the assumption that the banquet halls were temporarily let out for functions based on the usage of equipment like LCD projectors, laptops, etc. They contended that the charges for these facilities were included in the food bill and should be considered as consideration for 'Mandap Keeper' services, thus attracting service tax. The lower authorities upheld this reasoning, emphasizing the temporary occupation of the halls for functions. However, the Tribunal found that the Department's stance was based on surmises and conjectures, lacking concrete evidence to prove the consideration for the alleged rental of banquet halls. The Tribunal emphasized the necessity of tangible proof of consideration for levying service tax, especially considering that the appellants had already paid VAT on the food and service tax on additional items used during functions.

Ultimately, the Tribunal concluded that the Department failed to substantiate the reduction of the refund on merits. The Order-in-Appeal was set aside, and the appeal was allowed with any consequential relief as per law. The judgment highlighted the importance of concrete evidence to establish service tax liability and emphasized the need for quantifiable proof of consideration for taxable services, rather than relying on assumptions or imagination.

The judgment provided clarity on the interpretation of service tax liability in cases where banquet halls are used for functions without separate rental charges, emphasizing the necessity of tangible evidence to support tax claims and rejecting decisions based on mere assumptions or conjectures.