2010 (9) TMI 21 - AT - Service Tax

Deduction of cost of sales - notification no. 12/2003 - the appellant started availing benefit of such notification from March, 2005 and splitted bills relating to services rendered for use of Mandap Keeper and Catering of food and beverages served in the Mandap. - Held that - the Appellant cannot claim that they are selling the food and drink, as the price charged for supply of food and drink is loaded with the value of various services and is in fact, the price for catering service, not for sale of food and drinks. When a Mandap Keeper, while providing catering service as part of the service in relation to use of Mandap by his client, serves the food and drink, just because by virtue of the legal fiction of Article 366 (29A) (f) of COI sales tax is charged on the supply of the foods and drink served by treating the same as deemed sale, the MandapKeeper does not became the seller of food and drinks for the purpose of Notification No. 12/03-St. - Considering totality of the facts and circumstances of the case and in absence of any evidence to the aspect of undue hardship before us, we direct the appellant to make pre deposit of Rs. 60.00 lakhs

Summary

Issues Involved:

1. Denial of Benefit of Notification No. 12/2003-ST and Levy of Service Tax.
2. Imposition of Penalty under Section 76 of the Finance Act, 1994.
3. Imposition of Penalty under Section 78 of the Finance Act, 1994.

Detailed Analysis:

1. Denial of Benefit of Notification No. 12/2003-ST and Levy of Service Tax:

The appellant, a registered assessee under the Finance Act, 1994, provided Mandap Keeper services and other related services. The department denied the benefit of Notification No. 12/2003-ST dated 20.06.2003, which exempts goods and materials sold by the service provider from service tax if the value of goods is distinctly shown in invoices. The appellant claimed that the supply of food and beverages in the banquet hall constituted a sale of goods liable to VAT, not service tax. They argued for the deduction of the value of goods sold under Notification No. 12/2003-ST. However, the department contended that the appellant did not provide distinct evidence of the sale value of goods in invoices and was thus governed by Notification No. 1/2006-ST, which provides concessional taxation for Mandap Keeper services without separating catering receipts from the gross value.

The adjudicating authority confirmed the demand for service tax on the composite value of services, including catering, provided by the appellant. The authority held that the appellant was providing a package of services, including Mandap Keeper and catering services, which are inseparable and subject to service tax on 60% of the gross amount charged, as per Notification No. 1/2006-ST.

2. Imposition of Penalty under Section 76 of the Finance Act, 1994:

The appellant was penalized Rs. 200 per day or 2% of the service tax per month until the tax was paid, subject to the penalty not exceeding the amount of service tax evaded. The adjudicating authority imposed this penalty for the non-payment of service tax correctly. The appellant argued that the gross amount received for marriage functions should be excluded from the taxable service value and considered cum-tax value, thus no interest or penalty should be charged.

3. Imposition of Penalty under Section 78 of the Finance Act, 1994:

A penalty equal to the service tax evaded, amounting to Rs. 1,29,44,543, was imposed under Section 78 of the Finance Act, 1994. This penalty was for willful suppression of facts to evade tax. The appellant contended that they maintained separate accounts and invoices for food and beverages and Mandap services, thus should not be penalized.

Separate Judgments:

Per D.N. Panda:

The tribunal noted that the appellant repeatedly sought waiver of pre-deposit on the grounds that no service tax should be levied if VAT was paid. The tribunal emphasized the need for judicial discipline and the protection of public revenue. The tribunal referred to the Supreme Court's decision in Tamil Nadu Kalyan Mandap Assn. v. Union of India, which upheld the constitutionality of service tax on Mandap Keeper services, including catering. The tribunal concluded that the appellant's segregation of catering receipts from Mandap Keeper services was questionable and likely resulted in revenue loss. The tribunal directed the appellant to pre-deposit Rs. 60 lakhs within four weeks and report compliance, failing which the appeal would not proceed.

Per Rakesh Kumar:

Judge Rakesh Kumar agreed with the analysis and emphasized that the appellant did not establish a prima facie case for total waiver of pre-deposit. He highlighted that the supply of food and beverages by the Mandap Keeper did not constitute a sale of goods under the Central Excise Act or the Sale of Goods Act, thus Notification No. 12/2003-ST was not applicable. He reiterated that the appellant's argument for exemption under Notification No. 12/2003-ST was not tenable, and the service aspect of catering was taxable under the Finance Act, 1994. He concurred with the direction for a pre-deposit of Rs. 60 lakhs and the stay of penalties and interest during the appeal's pendency.