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TMI Blog2010 (9) TMI 21X X X X Extracts X X X X X X X X Extracts X X X X ..... Chapter V of Finance Act, 1994. (2) Penalty of Rs. 200/- (Rupee Two Hundred ) per day or 2% of Service Tax per month was levied till payment of tax subject to condition that the penalty amount shall not exceed the amount of Service Tax evaded under Section 76 of the Finance Act, 1994 for non payment of Service Tax correctly. (3) Penalty of Rs. 1,29,44,543/- (Rs. One crore, twenty nine lacs, forty four thousand, five hundred and forty three only) was imposed under the provisions of Section 78 of Finance Act, 1994. 1.2. The appellant is an assessee registered in terms of Registration No. AADCS 2086AST 004 under Finance Act, 1994 (hereinafter referred to as "the Act") and provided service of Mandap Keeper and other services. In response to the enquiry made by the department relating to. the period March, 2005 to September 2006, they came to know from a reply dated 5.2.2007 of the Appellant that its hotel was started in Indore in the year 1996 and they were paying service tax availing abatement of 40% in terms of Notification No. 21/1997-ST dated 26.6.97, as amended by Notification Ho. 12/2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion No. 1/2006-ST. (D). It was alternatively contended by the Appellant that if the appellant is not granted exemption under Notification No. 12/2003-ST, they should be allowed exemption under Notification No. 1/2006-ST and the appellants agreed to reverse the Cenvat credit availed on input services used for mandap keeper services. (E). According to the Appellant a contract involving supply of goods and services cannot be artificially vivisected and service portion charged to service tax (Ref: Para-14 of order of adjudication). Provision of banquet hall facility to club members was not coveredunder'Mandap Keeper Service'. (F) Gross amount received by the appellant towards marriage functions was to be excluded from the value of taxable service and the gross amount received by the appellant from its customers is to be considered as cum-tax value and no interest/penalty can becharged/imposed on the Appellant. 1.5. ST-3 returns of the appellant for the impugned period were examined. It was found that they have availed Cenvat credit of servi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to mean a substantial and satisfying meal. The term 'meal' generally denotes either lunch or dinner or both. The definition also emphasizes that it should be "substantial and satisfying". 3.1. Learned Adjudicating Commissioner heard the appellant thoroughly and adjudicated the matter confirming the demand proposed by show cause notice as aforesaid. He noticed in para 21 of the order that the appellant was providing packaged service to the service recipient. His observation reads as under:- "In the instant case of the Noticee, I find that the Noticee is in fact providing a package of services in which both the services are included i.e. Mandap Keeper services as weli as Catering services and both of them are separately covered unbder the levy of Service Tax. For such cases, the Board has prescribed a consolidate abatement of 40% and Service Tax is chargeable only on 60% of the gross amount charged by the Noticee. Thus the Noticee's plea that "Demand of Service Tax on sale of food and beverage is not valid" does not hold good In this case. Furthermore, Service Tax is in the instant case is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndividual job. Both the activities are the integral form of the contract Such a composite contract cannot be vivisected and serviced part of it subjected to service tax under 'Mandap keepers service'. Thus, the Mandap keeper service and supply of food forms the integral part of the contract and cannot be artificially vivisected so as to levy service tax on a pert of service under a particular category of taxable service." 3.3. Learned Commissioner discarded the plea of separation of catering receipts from Mandap keeper service receipts in para 22 of adjudication order. Receipts from both activities were aggregated to determine taxable valje of service of "Mandap Keeper" provided by the appellant and service tax was levied on the ground that thse two activities were inseparable from each other and catering service was not works contract. Maintenance of separate account by the appellant to bring a segregation of catering charges from Mandap keeper service receipts did not appeal to the learned Adjudicating Authority. He recorded in para 25 of the order as under:- "I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... de before the learned adjudicating authority as well as grounds of appeal, challenged the order of adjudication on the following ground: (A). That catering services provided is sale of goods on which VAT was paid by the appellant as a registered dealer under VAT law for which value received towards catering is not taxable according to the terms of Notification No. 12/2003 - ST dated 20.6.2003. (B). Food bills were issued separately for the food supplied and mandap services were billed differently without clubbing both receipts together in view of applicability of above Notification. (C). Both contracts were separate and such factual position was informed to the authority in terms of an earlier letter. When a contract is divisible to tax the services involved therein as has been held by Larger Bench in the case of BSBK's case - 2010 (18) STR 555 (LB), the appellant is entitled to the ratio laid down in paras 8 and 11 of that judgment of the Tribunal since entire mandap keeper service if includes catering, no tax is leviable on catering involving sale of food. (D). Drawing to attention reference made to Larger Bench of T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... B). When the appellant failec to disclose material facts in the returns filed under law without clubbing the catering receipts while providing kalyan mandap service and deliberately splitted the bills relating to both the services provided, legitimate due of service tax was evaded. Accordingly show cause notice was issued bringing the appellant to the charge. (C). Granting fair opportunity of hearing, adjudication order was passed with the consequence of law as mentioned in the adjudication order. (D). Revenue detected that Notification No. 12/2003 -ST dated 20/06/2003 was abused by the appellant and failed to pay service tax on catering service. Penalty was accordingly imposed while demanding service tax. (E). The citations made by appellant is of no help to them in view of direct judgment of Apex Court in Tamil Nadu MandapAssn's case or the issue directly involved in this case and that has been followed by Hon'ble High Court of Kerala in the case of Saj Flight Services Pvt. Ltd. Vs. Superintendent of Central Excise - 2006 (4) STR 429 (Ker). (F). It has been held by the Hon'ble Kerala Hig ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... courts, leaving the work they are supposed to do in a state of suspended animation. We have come across cases where buses and lorries are being run under orders of Court though they were either denied permits or their permits had been cancelled or suspended by Transport Authorities. We have come across cases where liquor shops are being run under interim orders of court. We have come across cases where the collection of monthly rentals payable by Excise Contractors has been stayed with the result that at the end of the year the contractor has paid nothing but made his profits from the shop and walked out. We have come across cases where dealers in food grains and essential commodities have been allowed to take back the stocks seized from them as if to permit them to continue to indulge in the very practices which were to be prevented by the seizure. We have come across cases where land reform and important welfare legislations have been stayed by courts. Incalculable harm has been done by such interim orders. All this is not to say that interim orders may never be made against public authorities. There are, of course, cases which demand that interim orders should be made ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e necessity for self-imposed discipline in such matzers In obeisance to such weighty institutional considerations like the need to maintain decorum and comity. So also we mean no disrespect to the High Court in stressing the need for self-discipline on the part of the High Court in passing interim orders without entering into the question of amplitude and width of the powers of the High Court to grant interim relief. The main purpose of passing on interim order is to evolve a workable formula or a workable arrangement to the extent called for by the demands of the situation keeping in mind the presumption regarding the constitutionality of the legislation and the vulnerability of the challenge, only in order that no irreparable injury is occasioned. The Court has therefore to strike a delicate balance after considering the pros and cons\ of the matter lest larger public interest is not jeopardized and institutional embarrassment is eschewed."[Emphasis supplied] I 8. Section 65(105)(m) of the Finance Act, 1994, states that service provided or to be provided to any person, by a mandap keeper inrelation to the use of mandap in any man ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt charged by the mandap-keeper. Accordingly levy of sales tax or VAT on the value of food catered by a mandap keeper under State legislation does not alter or affect the levy of service tax under Finance Act, 1994 on the aspect of catering service provided by mandap keeper through the above abatement formula since legislature has great latitude in the matters of taxation. This view is fortified from the judgment of Hon'ble Keralahigh Court in the case of Saj Flight Services P. Ltd. Vs. Superintendent of Central Excise - 2006 (4) STR 429 (Ker). 10. Interpreting Article 366 (29A) (f) of the Constitution, Hon'ble Supreme-Court in Para 43 of the Judgment in Tamil Nadu KalyanMandapam Assn.'s case - 2004 (167) ELT 3 (SC) held that Constitution permits the State to impose a tax on the supply of food and drink by whatever mode it may be made. It does not conceptually or otherwise includes the supply to services within the definition of sale and purchase of goods. This is particularly apparent from the phrase contained in the said sub-article "such transfer, deliver ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... also defined as meaning to bring into association or connection with. The expression 'in relation to' (so also 'pertaining to'), is a very broad expression which presupposes another subject matter. These are words of comprehensiveness which might have both a direct significance as well as an indirect significance depending on the context." (B). In Renusagar Power Co. Ltd. v. General Electric Company and Another (1984) 4 SCC 679, it was observed as under : "Expressions such as "arising out of" or "in respect of" or "in connection with" or "in relation to" or "in consequence of" or "concerning" or "relating to" the contract are of the widest amplitude and content and include even questions as to the existence validity and effect (scope) of the arbitration agreement." (C). In Thyssen Stahlunion GMBH v. Steel Authority of India Ltd. (1999) 9 SCC 334, this Court observed as under : "The phrase "in relation to arbitral proceedings" cannot be given a narrow meaning to mean only pendency of the arbitration proceedings before the arbitrator. It would cover not only proceedings pending before the arbitrator bu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an other matters." 14. We have examined the contents of Notification No. 12/2003-ST dated 20/06/2003 relied upon by the appellant. The notification states that value of goods and materials sold by the service provider to a recipient of service while providing service, shall not be liable to service tax subject to the condition that there is documentary proof specifically indicating the value of the said goods and materials sold and Cenvat credit on input was not availed. In the present case in hand, when the appellant pleads that catering and mandap keeper services were separated splitting the bills, prima facie we notice that service element of catering has escaped taxation while that service was provided by the appellant to the recipient of services of mandap keeper. Prima facie, Revenue's plea of applicability of Notification No. 01/2006 - ST dated 01/03/2006 to the case of the Appellant appears to be sound when law is clear to immune goods and materials from levy of service tax. 15. When the appellant drew our attention to paras 8 and 11 of the Larger Ben ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... p; Appellant's reliance on the judgment in Vahoo Colour Lab & others - 2010-TIOL-494-HC-P&H in the case of CCE Meerut -I Vs. M/sTechnica Color Lab is of no help to him since decision in those cases were rendered on a different taxable entry under Finance Act, 1994. 18. Law being well settled by Constitutional Bench of Apex Court in the case of Tamil Nadu Kalyan Mandap Assn. Vs. Union of India - 2004 (167) ELT 3 (SC) to impose service tax on the gross value of mandap keeper service including catering service, there appears no ambiguity in taxation of service aspect of catering along with service of mandap keeper according to the abatement formula provided by legislature. Prima facie it appears that the modus operandi followed by the appellant segregating gross receipt of catering service from the gross value of mandap keeper service has made its modus operandi questionable and it appears that such practice has caused loss of revenue as has been noticed by the learned ad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of pre-deposit under Section 35F of the Central Excise Act, 1944, as made applicable to Service tax by Section 83 of the Finance Act, 1994 While I fully agree with his discussion on this issue, would like to emphasise on certain points raised in course of hearing of this matter in this separate order recorded by me. 21. The Appellant provide "Mandap Keeper" Service, which is taxable under Section 65 (105) (m) -ead with Section 65 (66) of the Finance Act. In course of providing Mandap Keeper service by providing temporary occupation of a Mandap for a consideration for organizing any official or social or business function, they also provide catering service to the guests of their client by serving food ard beverages. 21.1 As per the definition of "Mandap Keeper" in Section 65 (66), Mandap Keeper means a person who allows temporary occupation of aMandap for re-consideration for organising any official, social or business function. 21.1. In terms of Section 65 (105) (m), as it stood w.e.f. 16/6/05, taxable service by a Mandap Keeper is defined as service to any person by a Mandap&nb ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... recipient of service, subject to conditions that - (i) there is documentary proof specifically indicating the value of the said goods and services ; (ii) no credit of duty paid on such goods and materials sold has been taken under Cenvat Credit Rules 2004 ; or (iii) when such Cenvat credit has been taken by the service provider on such goods and materials, he has paid an amount equal to such credit availed before the sale of such goods and material. 21.1.4.1 Though the word 'sale' has not been defined in this notification, as per the provisions of Section 65 (121) of the Finance Act, 1994, word and expression used but not defined in this chapter and defined in the Central Excise Rules, 1994 or the rules madethereunder, shall apply, so far as may be, in relation to Service tax as they apply in relation to duty of excise. As per Section 2 (h) of the Central Excise Act, 1944, Sale means any transfer of goods by one person to another person in ordinary course of trade or business for cash or other valuable consideration. Same is the definition of the word 'Sale' in Section 4 of the Sale of Goods Act, 1930. 21.1.5&nb ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te of Punjab vs. Associated Hotels of India reported in (1972) 1 SCC - 472wherein on the question as to whether sale of food is involved and thereby attracting the sales tax when a hotelier serves meals also to his guest during his stay in the Hotel, Hon'ble Supreme Court held that the transaction of a hotelier with his guest staying in the hotel is of service of receiving a customer in the hotel to stay and the supply of meals during his stay in the hotel will not constitute sale. 22.1 Following the ratio of the above-mentioned judgments of the Apex Court and Delhi High Court, I am of the view that no sale of any goods or materials within the meaning of this term, as defined in section 2 (h) of the Central Excise Act, 1944 or Section 4 of the Sale of Goods Act, 1930 is involved when a Mandap Keeper, in course of use of the Mandap by his client for some function, also serves food and drinks to the guests of his clients. When there is no sale of any material or goods, the exemption Notification No. 12/03-ST would not apply. 22.2 By 46th Constitutional amendment, by addi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ervice transactions not involving any sale as defined in Section 2 (h) of the Central Excise Act, 1944/Section 4 of the Sale of Goods Act, 1930 by invoking the legal fiction of Article 366 (29A) (f)- In this case, just by splitting up the invoices for service in relation to use of Mandap into the invoice for food and drink served and for use of Mandap, 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. 22.3 In view of the above, the Appellant have not been able to establish prima facie case in t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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