2024 (6) TMI 625 - AT - Service Tax

Levy of service tax - Restaurant Service or not - activity rendered by the Appellant at its licenced bar - exemption under N/N. 25/2012-ST dated 20.06.2012 - HELD THAT - As per the clarification issued vide Board s Circular No. 139/8/2011-TRU dated 10.05.2011, the Service Tax is liable to be paid on restaurants (i) having the facility of air-conditioning in any part of the establishment and (ii) which have a licence to serve alcoholic beverages. The usage of and in the above clarification makes it amply clear that both the requirements are to be fulfilled to satisfy the criteria for attracting Service Tax levy on Restaurant Service. Thus, it is clear that Service Tax is liable to be paid on the Restaurant Service if two essential conditions are fulfilled viz., if it has the facility of air-conditioning in any part of the establishment and it should have licence to serve alcoholic beverages. For the period from 01.05.2011 to 16.03.2012, the restaurant at the premises of the Appellant do not fulfil the requirement of having a licence to serve alcoholic beverages in the premises of the air-conditioned restaurant, in order to bring the service under the ambit of Restaurant Services. The demand raised in the Show Cause Notice is on the total collections (liquor sales) in the licenced bar and not on the value of the food and beverages served inside the bar and as such the demand suffers from infirmity and the adjudicating authority made a blatant error in confirming the demand. For computation of service tax considering entire liquor sales in a permit room is clearly against the provisions of the law as alcoholic liquor for home consumption is outside the Service Tax Act. Even, in a case where snacks and beverages are sold in permit room, service tax payable should have been limited to computing to such sales of snacks and beverages. The demand of service tax on the Appellant is devoid of merits - Appeal allowed.

Summary

Issues Involved:
1. Whether the activity rendered by the Appellant at its licensed bar qualifies for demand of Service Tax under "Restaurant Service" in terms of provisions of Section 65(105)(zzzzv) of the Finance Act, 1994, up till 30.06.2012?
2. Whether the appellant is eligible for exemption under Notification No. 25/2012-ST dated 20.06.2012, which is effective from 01.07.2012?

Summary:

Issue 1: Demand of Service Tax under "Restaurant Service" u/s 65(105)(zzzzv) of the Finance Act, 1994
The Appellant, M/s. Nala Hotels (P) Ltd., was found to be providing "Restaurant Service" from 01.05.2011. The levy of Service Tax on "Restaurant Service" came into effect from 01.05.2011 u/s 65(105)(zzzzv) of the Finance Act, 1994. The Department issued a Show Cause Notice demanding service tax for the period from 01.05.2011 to 30.09.2012, which was confirmed by the Adjudicating Authority and upheld by the Commissioner (Appeals). The Appellant contended that their air-conditioned restaurant did not serve liquor and that the bar, which served liquor, was a separate entity. The Tribunal found that for the period from 01.05.2011 to 16.03.2012, the restaurant did not fulfill the requirement of having a license to serve alcoholic beverages in the premises of the air-conditioned restaurant, thus not attracting Service Tax under "Restaurant Service."

Issue 2: Eligibility for Exemption under Notification No. 25/2012-ST dated 20.06.2012
With effect from 01.07.2012, the service provided by a restaurant in relation to serving food or beverage in its premises does not figure in the negative list under Section 66D. The Tribunal noted that the exemption under Notification No. 25/2012-ST dated 20.06.2012 is not applicable to services provided by a restaurant having air-conditioning and a license to serve alcoholic beverages. However, the Appellant's restaurant did not fulfill the criteria of having a license to serve alcoholic beverages in the premises of the restaurant for the period from 01.04.2012 to 31.03.2013. Therefore, the demand of service tax on the Appellant was found to be devoid of merits.

Conclusion:
The Tribunal held that the demand of service tax on the Appellant is devoid of merits and allowed the appeal filed by the Appellant. The impugned order was set aside, and the Department's appeal was dismissed. The Tribunal followed the judicial discipline as established in the case of Commissioner of GST and Central Excise, Trichy Vs. Sangu Chakra Hotels Pvt. Ltd., Trichy.