2009 (7) TMI 551 - AT - Service Tax

Convention services- Notification No. 12/2003-ST, dated 20.06.2003- The appellants, M/s. Daspalla Hotels Ltd. paid service tax under Mandap-Keeper Service for the period 20-12-2001 to 30-6-2003. Vide the impugned order, the Commissioner found that the appellants had actually rendered Convention Services While discharging the service tax, the appellant had excluded value attributable to food items supplied to customers of convention service . Notification No. 12/2003-ST, dated 20-6-2003 granted exemption (sic) from tax relatable to value of food only with effect from 1-7-2003. The adjudicating authority confirmed demand of service tax short paid. In the light of the decision of Sky Gourmet (P.) Ltd. v. CST 2009 22 STT 422 (Bang. - CESTAT), in which Tribunal held that once sales tax had already been discharged on food, beverages etc, assessee could not be required to pay service tax on same value, and therefore, demand of service tax was not maintainable, held that impugned demand was to be set aside. The appeal is allowed.

Summary

Issues:
1. Whether the appellants correctly paid service tax under 'Mandap-Keeper Service' or rendered 'Convention Services'?
2. Whether the appellants were liable to pay service tax on the value of food items supplied to customers of 'convention service'?
3. Whether penalties imposed on the appellants were justified?

Issue 1:
The appellants, M/s. Daspalla Hotels Ltd., paid service tax under 'Mandap-Keeper Service' but were found to have actually rendered 'Convention Services' as per section 65, clause (105)(zc) of the Finance Act, 1994. The Commissioner determined that a total of Rs. 1,50,860 was short paid by the appellants on 'convention service' during the relevant period. The impugned order also demanded applicable interest for delayed payment of service tax and imposed penalties under sections 78 and 76 of the Act.

Issue 2:
The appellants challenged the demand and penalties imposed, citing judicial authorities. They argued that the Apex Court's decision in Bharat Sanchar Nigam Ltd. v. Union of India and Imagic Creative (P.) Ltd. v. CCT supported their position that service tax on food and beverages supplied under a contract for rendering convention service was not justified. They emphasized the exclusion of the value of food from taxable services, as per Notification No. 12/2003-ST. The appellants contended that they had already paid value-added tax on food and beverages, making the service tax demand unsustainable in law.

Issue 3:
During the hearing, the appellants provided evidence of having paid value-added tax on the items sought to be taxed under 'convention service.' Relying on the Tribunal's decision in Sky Gourmet (P.) Ltd.'s case, the appellants argued that once sales tax had been discharged on food and beverages, they should not be required to pay service tax on the same value. The Tribunal agreed with the appellants, citing legal provisions and previous judgments. Consequently, the demand for service tax and penalties were vacated, and the appeal was allowed.

This detailed analysis of the judgment from the Appellate Tribunal CESTAT, Bangalore, highlights the issues involved, the arguments presented, and the legal reasoning leading to the decision in favor of the appellants.