2024 (7) TMI 1533 - AT - Service Tax

Short payment of service tax - Mandap Keeper Services - Service tax on electricity charges collected on a reimbursement basis. Short payment of service tax - Mandap Keeper Services - tax short paid on the ground that the sale of food is not a part of Mandap Keeper Service - benefit of N/N.12/2003-ST dated 20.06.2003 - contentions of the appellant are that as per their agreement, the sale of food and rental of banquet halls, are shown separately and the sale of food is the activity of sale, on which, no service tax is payable - HELD THAT - As the facts of this case are similar to the facts of HYATT RESORTS P LTD. VERSUS CCE ST- LUDHIANA 2019 (4) TMI 179 - CESTAT CHANDIGARH wherein it has been held that the amount recovered on account of sale of food is not includible in the taxable value under the category of Mandap Keeper Service , therefore, we hold that in this case also, the amount realized by the appellant on account of sale of food is not includible in the taxable service provided under the Mandap Keeper Service. Therefore, the demand on account of short payment of service tax under the category of Mandap Keeper Service , is set aside. Service tax on electricity charges collected on a reimbursement basis - HELD THAT - M/s Quality Maintenance Venture Limited, who supplied the electricity to the appellant, has raised invoices at the rate of Rs. 8.00 per unit and in turn, the appellant has also raised the invoices to their tenants at the rate of Rs. 8.00 per unit - As the appellant has recovered the electricity charges on actual basis, on this count also, no service tax is payable by the appellant as the appellant has not earned any profit for providing electricity. On taking note of the fact that in the case of M/S ICC REALITY (INDIA) PVT LTD OTHERS VERSUS COMMISSIONER OF CENTRAL EXCISE 2013 (12) TMI 854 - CESTAT MUMBAI , this Tribunal held that no service tax is payable for providing electricity - the electricity charges are not liable to service tax. Thus, except the admitted demand which has been paid by the appellant along with interest, no other demand is sustainable against the appellant - the impugned order qua demanding service tax on account of short payment of service tax under the category of Mandap Keeper Service and the service tax on electricity charges, is not sustainable and hence, set aside. In the facts and circumstances, no penalty is imposable on the appellant. Appeal disposed of.

Summary

Issues Involved:
1. Short-payment of service tax under "Mandap Keeper Service."
2. Service tax on electricity charges collected on a reimbursement basis.

Detailed Analysis:

Issue 1: Short-payment of Service Tax under "Mandap Keeper Service"
The appellant, engaged in the hospitality business, had registered under "Mandap Keeper Service" and provided banquet halls either on an outright rental basis or under a composite contract including food supply. For composite agreements, separate invoices were raised for food sales and banquet hall rentals, with applicable VAT paid on food and service tax on rent. The appellant disputed the demand for additional service tax on food sales, arguing that food sales are not part of "Mandap Keeper Service" and are subject to VAT, not service tax. The appellant relied on Notification No. 12/2003-ST and Section 65B (44) of the Finance Act, 1994, which exclude sales from the service tax ambit.

The Tribunal, referencing the case of Hyatt Resorts Private Limited, found that the appellant correctly charged VAT on food and service tax on hall rent, as evidenced by separate invoices. The Tribunal noted that as per Section 65B (44), supply of goods deemed as sales is excluded from service tax. Thus, the demand for additional service tax on food sales was set aside.

Issue 2: Service Tax on Electricity Charges
The appellant collected electricity charges from tenants on an actual reimbursement basis, arguing that this constitutes a sale of goods, not a service, and thus should not be subject to service tax. The appellant cited the case of Commissioner of Sales Tax, Madhya Pradesh Vs. Madhya Pradesh Electricity Board and the Tribunal's decision in ICC Reality (India) Private Limited, which exempted electricity from service tax.

The Tribunal found that the appellant charged tenants the same rate as billed by the electricity provider, without profit. Therefore, the reimbursement of electricity charges did not constitute a service. The Tribunal upheld the precedent set in ICC Reality (India) Private Limited, confirming that electricity charges are not liable to service tax.

Conclusion:
The Tribunal concluded that the appellant is not liable for the additional service tax under "Mandap Keeper Service" for food sales, as VAT was already paid, and such sales are excluded from service tax under Section 65B (44). Additionally, the Tribunal held that electricity charges collected on a reimbursement basis are not subject to service tax. Consequently, the impugned order demanding additional service tax was set aside, and no penalties were imposed on the appellant. The appeal was disposed of accordingly.