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Brief Facts of the case:

M/s. Bhagwati Banquets & Hotels Ltd. functioning from Third Floor, Circle-P Building, above Honest Restaurant, S.G. Road, Ahmedabad (herein-after referred to as ‘the said Service Provider’) are engaged in the business of providing “Outdoor Caterer’s Services”, “Mandap Keepers Service”, and “Renting of Immovable property Service” as defined under Section 65 of the Finance Act 1994 as amended, for which they are registered with Service Tax Commissionerate, Ahmedabad and holding Service Tax registration No. AABCB6825AST001 with effect from 22.06.2006.

2. It was noticed that in addition to the above mentioned services, the said Service provider is also engaged in Managing and maintaining the Rooms, suite rooms, fully furnished Air-conditioned restaurants and coffee shops located at Karnavati Club, Rajpath Club and the Gujarat Cricket Association Club House for the past few years and collecting charges for the same. It was also noticed that they are also providing Outdoor Catering Service to the members of the aforesaid Clubs and Associations for which they have entered into written contract with the above-mentioned clubs and Associations. The said Service provider is engaged in providing catering items in the restaurants and rooms of the above clubs and the Association’s club house. However, they treat the said catering service as non-taxable service as they are paying VAT on catering items as applicable on sale of food. It was also noticed that they are also paying certain amount to M/s Karnavati Club Ltd to earn the exclusive right in respect of all the revenue earned through catering service and the rooms. However, the said service provider has not obtained registration with the Service Tax department for the “Management, Maintenance & Repair Service” and “Renting of Immovable Property service” and they do not pay any Service Tax on the payments received by them for the Management of Rooms, rent and Outdoor Catering service.

Service Tax Liability while providing services to M/s Karnvati Club Ltd

3. Whereas, M/s Karnavati Club Ltd., located at Sarkhej-Gandhinagar Road, Opp. Shailby Hospital, Ahmedabad, is a club with different facilities like club house, rooms, sports and fitness facilities, restaurants, lawns, Halls and other facilities. M/s Karnavati Club Ltd had an agreement dated 1.4.2006 with one M/s TGB Resorts Karnavati (initially a partnership firm, whose business was acquired by M/s Bhagwati Banquets & Hotels Ltd. in 2005), according to which the said Club, which has 43 deluxe rooms plus 2 executive suite rooms, which are air-conditioned and fully furnished, one Tropicana air-conditioned restaurant, one side walk air-conditioned coffee shop, one Shatranj air-conditioned restaurant, one air-conditioned Sharbhara restaurant and open cafeteria (food Court), have agreed upon the usage of aforesaid accommodation by M/s Bhagwati Banquets & Hotels Ltd (Formerly M/s TGB Resorts Karnavati) for running, managing and maintaining the same for a period of three years commencing from 01-04-2006 to 31-03-2009 which is further extended for the year 2009-10 vide agreement dated 1.4.2009. M/s Bhagwati Banquets & Hotels Ltd. are basically engaged in two activities in the premises taken on hire from M/s Karnavati Club Ltd. i.e. first one being providing catering service to the members exclusively in the above-mentioned premises and residential rooms and secondly, maintaining, managing and running

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the residential rooms at M/s Karnavati Club Ltd., which are for usage of members of Karnavati Club only.

OUTDOOR CATERER’S SERVICE

4. As per the provisions of section 65(76a) of the Finance Act, 1994 as amended:

“Outdoor Caterer” means a caterer engaged in providing service in connection with catering at a place other than his own but including a place provided by way of tenancy or otherwise by the person receiving such services.

In view of the above definition and various terms and conditions agreed upon under the aforesaid agreement, as discussed in the below given paras, it appeared that the services provided by M/s Bhagwati Banquets & Hotels Ltd., Ahmedabad get covered under the purview of above definition of “Outdoor Caterer” as they are engaged in providing services of catering at a rented place owned by M/s Karnavati Club Ltd. Moreover, the service of “Outdoor Caterer” provided by M/s Bhagwati Banquets & Hotels Ltd is exclusively received by the members of Karnavati Club.

The word caterer has been defined in section 65(24) of the Finance Act 1994 as any person who supplies either directly or indirectly, any food, edible preparations, alcoholic or non-alcoholic beverages or crockery and similar articles or accoutrements for any purpose or occasion.

5. As per Supreme Court’s Judgment in the case of Tamilnadu Kalyana Mandapam Assn. Vs Union of India (CA No. 2727 of 2002, decided on 15.04.2004), the services rendered by an outdoor caterer is clearly distinguishable from the service rendered in a restaurant or hotel in as much as, outdoor catering service has the following characteristics namely,

a. Food/Eatable/drinks are the choice of the person who partakes the services.

b. The customer is free to choose the kind, quantum and manner in which the food is to be served.

c. The customer is at liberty to choose the time and place where the food is to be served.

d. The customer negotiates each element of the catering service including the prices to be paid to the caterer.

e. Outdoor catering has an element of personalized service to the customer.

f. The service element is more weighty, visible and predominant in the case of outdoor catering.

6. On examining the said agreement between M/s Karnavati Club Ltd., and M/s Bhagwati Banquets & Hotels Ltd. (Formerly M/s TGB Resorts Karnavati) it was noticed that clauses 1, 2, 3, 4 and 5 deal with the terms of refundable deposit, license fee to be deposited by the latter. On further examination of the said agreement it was observed that Clause 18 states that the said service provider has to obtain and serve products of approved agencies only at the club premises and no other product or brand of any other ice cream or soft drink will be allowed to be served in the room, restaurant, and canteen and in other areas of the club premises. Clause 21 further states that the club management will not allow outside hawkers, but the said service

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provider will provide products like Bhelpuri, chana jorgaram etc during the contract period. Both these clauses fulfill characteristic (a) above as laid down by Supreme Court to fulfill conditions of outdoor caterer. Clause 22 further states that the service provider will collect on their own the amount for room facilities and restaurant facilities as approved by the management of the club. Clause 30 provides that the charges for residential rooms as well as the items of food to be supplied by the said service provider shall be fixed in consultation with the club management and shall be final and binding to the said service provider. Increase in price of catering will be based on fluctuations and prevailing price index and general market situation. On increase in the price of Ice creams or aerated water, on pro-rata basis the effect of such increase will be allowed to the said service provider with the consent of club management. This fulfills condition laid down in (d) above. Clause 25 specifies the place where the food is to be served as well as the quality and quantum of food which satisfies the characteristics of an outdoor caterer as described in b & c above. It states that eatable food has to be provided in the residential rooms as well as in the restaurants and coffee shops of the club and it shall be ensured that there is no complaint from either the members of the club or the guest regarding the services and quality of food supplied by the said service provider. The fact that the service element is pre-dominant is evident from clause 30 and 25 of the contract as also clause 11, which permits the said service provider to use their logo for clubrooms and services provided in the club. Thus, it appeared that the above referred agreement between the said two parties as discussed above is in conformity with the characteristics of an outdoor caterer as laid down by the Hon’ble Supreme Court in the above referred case to distinguish an outdoor caterer from a restaurant or hotel. Clause 27 of the said agreement clearly brings out the difference that the said service provider is acting as an outdoor caterer and not as restaurant because catering to non members is not permitted as per club rules and secondly, Party booking for catering is done by M/s TGB Resorts Karnavati in member’s name only with the prior approval of club management. This very clearly distinguishes this case from a regular restaurant where anybody can be/is served.

7. It also appeared relevant to mention that in-flight caterers, persons providing catering services within the premises of factories, academic institutions as well as on trains are all covered under service tax as outdoor caterers and on the same analogy the said service provider is also liable to pay service tax.

8. Thus, it appeared from the statutory definition, and the aforesaid Supreme Court judgment read with the agreement/contract submitted by the said service provider, that the services provided by the said service provider, M/s Bhagwati Banquets & Hotels Ltd (formerly known as M/s TGB Resorts) to M/s Karnavati club services are in connection with catering at a place other than their own but including a place provided by way of tenancy (place owned by M/s Karnavati Club Ltd., and given on rent to M/s Bhagwati Banquets & Hotels Ltd) will fall under “Outdoor caterer service” and the said service provider is an “Outdoor Caterer” as defined in section 65(24) of the Finance Act 1994.

9. The service provider is availing the benefit of Notification No. 1/2006-ST dated 01.03.2006, for “Outdoor Catering Service” provided by him elsewhere (other banquet halls), which is subject to the condition that the service provider has not availed the benefit under the Notification of 12/2003-ST dated 20.06.2003. Whether to avail the

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benefit of one notification against the other or even not to avail any benefit is the choice of the service provider. In the instant case the service provider has chosen to avail the benefit of the Notification 1/2006-ST which clearly bars the availment of benefit of the Notification 12/2003-ST.

MANAGEMENT, MAINTENANCE OR REPAIR SERVICE

10. The second issue relates to applicability of service tax on room rent collected by M/s Bhagwati Banquets & Hotels Ltd, Ahmedabad from members of Karnavati Club. The service provider, M/s Bhagwati Banquets & Hotels Ltd is maintaining, managing and running residential rooms of M/s Karnavati Club Ltd., under a contract. The residential rooms are exclusively provided for usage to members (and their guests) of Karnavati Club and the room tariff is collected by M/s Bhagwati Banquets & Hotels Ltd, Ahmedabad. For the room occupancy of the member’s guest, temporary membership charge of Rs. 10/- is collected by M/s Bhagwati Banquets & Hotels Ltd, from such occupants, on per head basis, and the same is reimbursed to the club alongwith the details of the guest occupant. The contract also provides that if there is any upward revision of room tariff, then 40% of such increase is to be retained by the club. It was also agreed that 50% of the cost and charges of maintenance, service contract and repair of the Siemens telephone system, provided in all residential rooms and suit rooms and other places, in the premises given to the said service provider shall be borne by the club. Therefore, it appeared that the room tariff collected by M/s Bhagwati Banquets & Hotels Ltd is a compensation provided to them by M/s Karnavati Club Ltd., for the service of Management and Maintenance of their residential rooms.

11. As per the provisions of Section 65 (64) of the Finance Act, 1994, as amended w.e.f. 16-06-2005, “Management, Maintenance or repair means any service provided by - any person under a contract or an agreement; or a manufacturer or any person authorized by him, in relation to -

a) Management of properties, whether immovable or not;b) Maintenance or repair of properties, whether

immovable or not; or c) Maintenance or repair including reconditioning or restoration,

or servicing of any goods, excluding a motor vehicle,”

In view of the above definition it appeared that, as M/s Bhagwati Banquets & Hotels Ltd are managing and maintaining the residential rooms and suites in Karnavati Club, by way of charging the room tariff from the members of M/s Karnavati Club Ltd., Service Tax is chargeable under the category of “Management, Maintenance or Repair Service”.

12. From the above details, it is appeared that unlike hotels providing residential accommodation to public in general, at M/s Karnavati Club, the rooms are available exclusively to the members of the club and their guests who are made temporary members. Thus, the part of room rent retained by M/s Bhagwati Banquets & Hotels Ltd is nothing but a kind of compensation provided to them by M/s Karnavati Club through its members. Therefore, service tax is also chargeable on the part of room rent retained by M/s Bhagwati Banquets & Hotels Ltd which is a compensation provided to them by M/s Karnavati Club through its members. Therefore, Service Tax is chargeable on the room tariff charged and retained by M/s

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Bhagwati Banquets & Hotels Ltd, Ahmedabad under the category of “Management, Maintenance or Repair Service”.

13. Further, it was noticed that the said Service provider is also rendering catering facilities in the Restaurants located at Rajpath Club, Ahmedabad; managing and maintaining rooms and providing catering services at the restaurants located in club premises of Gujarat Cricket Association, Ahmedabad. The said service provider has an agreement with Gujarat Cricket Association Club, situated at Motera Stadium, Motera, Ahmedabad, Gujarat, effective from 01-06-2006 and one agreement with M/s Rajpath Club Ltd., effective from 13-02-2007.

A BRIEF DISCUSSION ON THE TERMS AND CONDITIONS LAID DOWN IN THE AGREEMENT BETWEEN GUJARAT CRICKET ASSOCIATION WITH M/s BHAGWATI BANQUETS & HOTELS LTD.

14. Whereas, scrutiny of the agreement dated 01-06-2006 between Gujarat Cricket Association Club, Motera and M/s Bhagwati Banquets & Hotels Ltd., it is found that the Gujarat Cricket Association Club has a club house situated in the premises of Motera stadium, which has 26 fully furnished air-conditioned and one non-air-conditioned rooms including 02 (two) Executive suit rooms; one restaurant, Dining Hall, respective kitchens and store rooms. As per the agreement, the said residential rooms and restaurants have been given by the Gujarat Cricket Association club to the said Service provider for running, managing and maintaining for a period of three years commencing from 01-06-2006 and the said Service provider has been termed as ‘Manager’. Further, as per the terms of the said agreement, the said Service provider pays 12 % commission on the income of Restaurant, food, beverages and stall after deduction of 4 % lump-sum tax to Gujarat Cricket Association. In addition, the service provider also pays 50% Commission on Residential Room Tariff income at the end of each quarter to GCA Club. Thus following the same analogy as discussed in the case of M/s Karnavati Club Ltd, Service Tax is chargeable on the room tariff charged and retained by M/s Bhagwati Banquets & Hotels Ltd, Ahmedabad under the category of “Management, Maintenance or Repair Service” as well as on the income from catering service provided in restaurants and room of GCA club under the category of “Outdoor Caterer’s Service”.

A BRIEF DISCUSSION ON THE TERMS AND CONDITIONS LAID DOWN IN THE AGREEMENT BETWEEN RAJPATH CLUB LTD. WITH M/s BHAGWATI BANQUETS & HOTELS LTD.

15. The second agreement dated 13-02-2007 is between M/s Rajpath Club Ltd. and the said Service Provider company, wherein the said Service provider has been termed as ‘Caterer’. On scrutiny of the said agreement, it is found that M/s Rajpath Club Ltd. is engaged in running a Club in the name of “Rajpath Club” providing several facilities and entertainment to its members and their guests, which include the sports & recreation facilities, Card room, Food & beverages, Residential rooms, etc. and the ‘Caterer’ has been provided to takeover as exclusive caterer to provide the required catering services to the members of Rajpath Club Ltd. Further, as per the terms of the agreement, it is found that from the charges collected for catering service by the club from its members & their guests, the club retains 13 % in the first year and thereafter 14 % for the remaining period. Thus following the same analogy as discussed in the case of M/s Karnavati Club Ltd, and GCA club Service Tax is chargeable from M/s

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Bhagwati Banquets & Hotels Ltd, Ahmedabad on the income from catering service provided in restaurants and room of Rajpath club under the category of “Outdoor Caterer’s Service”.

16. Notification No. 20/2004-ST dated 10.09.2004 provided abatement of 50% of the gross amount charged from the client by outdoor caterer for the services provided in relation to catering, where outdoor caterer provides services of catering including supply of food, the said exemption was subject to the conditions that ,-

(a) such outdoor caterer also provides food and the invoice, bill or challan issued for this purpose indicates that it is inclusive of charges for supply of food; and(b) no credit of duty paid on inputs or capital goods has been taken under the provisions of the Cenvat Credit Rules, 2004; and(c) such outdoor caterer has not availed the benefit under the notification of the Government of India in the Ministry of Finance (Department of Revenue), No. 12/2003-Service Tax, dated the 20th June, 2003;For the purpose of this notification the expression “food” means a substantial and satisfying meal.

17. The above mentioned notification was superseded by notification No. 1/2006-ST dated 01.03.2006 wherein abatement of 50% of the gross amount charged from the client by outdoor caterer for the services provided in relation to catering, where outdoor caterer provides services of catering including supply of food and where the invoice, bill or challan issued indicates that it is inclusive of charges for supply of food, was given subject to the conditions that-

(i) the CENVAT credit of duty on inputs or capital goods or the CENVAT credit of service tax on input services, used for providing such taxable service, has not been taken under the provisions of the CENVAT Credit Rules, 2004; or(ii) the service provider has not availed the benefit under the notification of the Government of India in the Ministry of Finance (Department of Revenue), No.12/2003-Service Tax, dated the 20th June, 2003

For the purpose of this notification the expression “food” means a substantial and satisfying meal and the expression “catering service” shall be construed accordingly.

18. In this regard it is pertinent to mention that abatement under the above said notification can only be availed where “food” i.e. a substantial & satisfying meal has been provided. In the premises of Karnavati Club, Food Court and Café are also being run/ managed wherein normally it can not be said for sure that satisfying meal is served. Therefore, in wake of the circumstances and in the absence of all the invoices for scrutiny, and as such there was no mechanism to ascertain whether food was being served/provided and therefore the abatement under notification No. 20/2004-ST dated 10.09.2004 or under notification No. 1/2006-ST dated 01.03.2006 can not be allowed. The said service provider has also availed Cenvat Credit of the service tax paid on Rent on certain halls/party plots which is in violation of the condition stipulated in the above said notification. Therefore, it appeared that the taxable value would be the gross value received by the said service provider for providing outdoor catering service in the various restaurants in the premises of M/s Karnavati Club, M/s Rajpath Club & M/s GCA Club, without allowing 50% abatement under the above mentioned notifications.

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PERIOD COVERED: 01-04-2009 TO 31-03-2010 – SERVICES PROVIDED BY M/s BHAGWATI BANQUETS & HOTELS LIMITED.

19. Thus, from the above details, it appeared that M/s Bhagwati Banquets & Hotels Ltd., Ahmedabad have provided Outdoor Caterer’s Service defined under the Section 65 (76a) of the Finance Act, 1994 as amended and taxable under the provisions of section 65(105) (zzt) of the Finance Act, 1994, to M/s Karnavati Club Ltd., M/s Rajpath Club Ltd. and M/s Gujarat Cricket Association, Ahmedabad during the period from 01-04-2009 to 31-03-2010.

20. Therefore, letter No. SD-01/4-06/Bhagwati/10-11 dated 10-06-2010 followed by reminders dated 06-07-2010, 18-08-2010, 08-09-2010, 07-10-2010, 28-10-2010 and 16-11-2010 were written to the assessee to provide copy of agreement with Karnavati Club Ltd for the year 2009-10 and figures of income received during the period 2009-10 for Management of Rooms, Catering Service at Karnavati Club, Rajpath Club & Gujarat Cricket Association Club. The said Service Provider has submitted above required information and copy of the agreement vide letter dated 09-09-2010. The details of the income received under the above mentioned services are as under:

FOR OUTDOOR CATERER’S SERVICEType of income 2009-10

Income from catering provided in restaurants & rooms of Karnavati Club

5,09,33,964/-

Income from catering provided in restaurants & rooms of Rajpath Club 3,22,79,593/-Income from catering provided in restaurants & rooms of GCA Club 57,08,874/-

Total 8,89,22,431/-

Calculation of Service Tax on the above outdoor catering Service is as under:Period Gross value

collectedRate of Service Tax payable (%)

Amount of Service Tax payable (Rs.)

Rate of Edn. Cess payable (%)

Amount of Edcn. Cess payable (Rs.)

Rate of of Higher Edcn. Cess (%)

Amount of Higher Edcn. Cess payable (Rs.)

Total Service Tax payable (Rs.)

01-04-09 to 31-03-10

8,89,22,431/- 10 88,92,243/- 2 1,77,845/- 1 88,922/- 91,59,010/-

21. From the above details, the total taxable value of outdoor catering service provided by the said Service provider to M/s Karnavati Club Ltd., M/s Rajpath Club Ltd. and M/s Gujarat Cricket Association Club is to the tune of Rs. 8,89,22,431/- and the amount of Service tax payable at the rates shown in the table is Rs. 91,59,010/- (Service Tax Rs. 88,92,243/- + Education cess Rs. 1,77,845/- + Higher Education cess Rs. 88,922/- ).

For Management, Maintenance & Repair Service:

22. M/s. Bhagwati Banquets & Hotels Ltd., Ahmedabad, have also provided Management, Maintenance & Repair Service defined under Section 65 (64) of the Finance Act, 1994 as amended which is taxable under the provisions of section 65(105) (zzg) of the Finance Act, 1994, to M/s Karnavati Club Ltd., the company owning Karnavati Club and M/s Gujarat Cricket Association owning GCA club, during the period from

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01-04-2009 to 31-03-2010. Details of income as per letter dated 09-09-2010 of the said Service Provider are as under:

Calculation of Service Tax on the Management, Maintenance & Repair Service is as under:

Period Net taxable value (Rs.)

Rate of Service Tax payable (%)

Amount of Service Tax payable (Rs.)

Rate of Edn. Cess payable (%)

Amount of Edcn. Cess payable (Rs.)

Rate of Higher Edcn. Cess (%)

Amount of Higher Edcn. Cess payable (Rs.)

Total Service Tax payable (Rs.)

               01-04-09 to 31-03-10

4,27,11,174/-

10 42,71,117/- 2 85,422/- 1 42,712/- 43,99,251/-

23. From the above details, the total taxable value under Management, Maintenance or Repair Service provided by the said Service provider to M/s Karnavati Club Ltd. and Gujarat Cricket Association Club, Ahmedabad is Rs. 4,27,11,174/- and the amount of Service tax payable at the rates shown in the table above is Rs. 43,99,251/- (Service Tax Rs. 42,71,117/- + Education cess Rs. 85,422/- + Higher Education cess Rs. 42,712/-).

24. It is pertinent to mention that the income earned from catering service in the restaurants of Karnavati Club, Rajpath Club & GCA Club have not been taken into consideration for evaluating the total taxable value under “Outdoor Catering Service” provided by M/s Bhagwati Banquets & Hotels Limited, Ahmedabad, and on the same neither service tax have been paid nor they have been shown in the ST-3 returns filed for the relevant period.

25. Further, from the scrutiny of ST-3 returns filed by M/s Bhagwati Banquets & Hotels Limited, Ahmedabad, for the period from April’2009 to September’2009 & October’2009 to March’2010, it is observed that the said service provider has availed Cenvat credit to the tune of Rs. 7,90,525/- & 22,04,200/-, in the respective half year, totally amounting to Rs. 29,94,725/-. The said service provider has clarified that they are availing the above mentioned cenvat credit in respect of Renting of Immovable Property i.e. Hall Rent, for various halls/party plot, paid by them. It is noticed that M/s Bhagwati Banquets & Hotels Limited, Ahmedabad, are paying Rent/ Management Charges/ Booking Rights in respect of certain Halls on which the Hall/ Party Plot owner is charging service tax of which cenvat credit is being availed by M/s Bhagwati Banquets & Hotels Limited, Ahmedabad.

26. M/s Bhagwati Banquets & Hotels Limited, Ahmedabad, is also providing Mandap Keeper Service & Outdoor Catering Service on these halls/ party plots. The service tax paid on the Rent/ Management Charges/ Booking Rights on these Halls/ Party plots is service tax on input service in respect of provision of the output services of Mandap

Type of income 2009-10Income from management of rooms at Karnavati Club

3,90,06,422/-

Income from management of rooms at GCA Club 37,04,752/-

Total 4,27,11,174/-

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Keeper & Outdoor Catering Service. On the said output service the service provider is paying service tax after availing benefit of Notification No. 1/2006-ST dated 01.03.2006 which clearly stipulates that a service provider will be eligible for abatement subject to the condition that “the CENVAT credit of duty on inputs or capital goods or the CENVAT credit of service tax on input services, used for providing such taxable service, has not been taken under the provisions of the CENVAT Credit Rules, 2004”. By availing cenvat credit of service tax paid on Rent/Management Charges/ Booking Rights on these Halls/ Party plots the said service provider has not fulfilled conditions stipulated in Notification No. 1/2006-ST dated 01.03.2006 and therefore, they are not entitled to avail benefit under the said notification for the period from April’2009 to March’2010.

27. On scrutiny of the ST-3 returns of the said service provider for the period from April, 2009 to September, 2009 & October, 2009 to March, 2010 it is observed that the abatement claimed by them from the gross value under Notification No. 1/2006-ST dated 01.03.2006 needs to be denied and service tax needs to be demanded on the value of abatement claimed by them. The abatement claimed by them under the said notification under the category of Mandap keeper Service & Outdoor Catering Service is as under:

“MANDAP KEEPER SERVICE”

Period Abatement amt claimed (Rs)

ST rate (%)

Service tax amount (Rs)

Edu cess rate (%)

Edu Cess amt (Rs)

High edu cess rate (%)

High edu cess amt (Rs)

Total Service tax (Rs)

April’09 to March ’10

4,89,78,983/- 10 48,97,898/- 2 97,958/- 1 48,979/- 50,44,835/-

28. From the above details, the taxable value for Mandap Keeper Service provided by the said Service provider is Rs. 4,89,78,983/- and the amount of Service tax payable at the rates shown in the table is Rs. 50,44,835/- (Service Tax Rs. 48,97,898/- + Education cess Rs. 97,958/-+ Higher Education cess Rs. 48,979/-).

“OUTDOOR CATERING SERVICE”

Period Abatement amt claimed (Rs)

ST rate (%)

Service tax amount (Rs)

Edu cess rate (%)

Edu Cess amt (Rs)

High edu cess rate (%)

High edu cess amt (Rs)

Total Service tax (Rs)

April’09 to March ’10

12,28,36,340/- 10 1,22,83,634/- 2 2,45,673/- 1 1,22,836/- 1,26,52,143/-

29. From the above details, the taxable value for Outdoor Catering Service provided by the said Service provider is Rs. 12,28,36,340/- and the amount of Service tax payable at the rates shown in the table is Rs. 1,26,52,143/- (Service Tax Rs. 1,22,83,634/- + Education cess Rs. 2,45,673/- + Higher Education cess Rs. 1,22,836/-).

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30. From the facts given in the above paras, it appeared that M/s. Bhagwati Banquets & Hotels Ltd., Ahmedabad is engaged in providing Outdoor Caterer’s Service and Management, Maintenance & Repair service to M/s Karnavati Club Ltd., M/s Rajpath Club Ltd. and M/s Gujarat Cricket Association, Ahmedabad, but not discharging their tax liability on the income realized in respect of all the above-mentioned services, though being registered with Service Tax department and holding valid Service Tax registration for Outdoor Caterer’s service, but have not obtained registration for Management, Maintenance & Repair service. As discussed in the above para, they have also wrongly availed the abatement under Notification No. 1/2006-ST dated 01.03.2006 for Mandap keeper Service & Outdoor Catering Service during the period from 01.04.2009 to 31.03.2010. As per the provisions of the Finance Act, 1994 and rules made thereunder, the Service Provider was required to assess correct value for the service provided by them as well as to pay service tax on the amount received by them for rendering different services in due time as prescribed and to follow all the procedure laid down in the Act and Rules. In this case the said service provider has not paid the service tax on the taxable value received by them for the ‘Outdoor Caterer’s Service and Management, Maintenance & Repair service’ provided to M/s Karnavati Club Ltd., M/s Rajpath Club Ltd. and M/s Gujarat Cricket Association and has wrongly availed abatement under Mandap Keeper Service & Outdoor Catering Service. Therefore Service tax is required to be recovered from them under Section 73(1) of Finance Act, 1994.

31. From the above, it appeared that the said service providers, M/s. Bhagwati Banquets & Hotels Ltd., Ahmedabad, have provided services defined as “‘Outdoor Caterer’s Service and Management, Maintenance & Repair service” as provided under Section 65(76a) and Section 65 (64) of the Finance Act, 1994 and the service provided to various clients by the said service provider are taxable services under Section 65(zzt) and Section 65(105)(zzg) of Chapter V of the Finance Act, 1994. Hence, they have evaded service tax amounting to Rs. 91,59,010/- for the period from 01-04-2009 to 31-03-2010 in case of Outdoor Caterer’s Service and Rs. 43,99,251/- in case of Management, Maintenance & Repair service 01-04-2009 to 31-03-2010 respectively, as mentioned in para supra. Further, M/s. Bhagwati Banquets & Hotels Ltd., Ahmedabad, have wrongly availed abatement under notification No. 1/2006-ST dated 01.03.2006 for Mandap Keeper Service & Outdoor Catering Service during the period from 01.04.2008 to 31.03.2009 and have evaded service tax total amounting to Rs. 50,44,835/- in case of Mandap Keeper Service & Rs. 1,26,52,143/- in case of Outdoor Catering Service.

32. From the evidence, it appeared that the said assessee has not taken into account all the incomes received by them for rendering taxable services for the purpose of payment of service tax and thereby have reduced their tax liabilities. They have not shown correct value of taxable service in ST-3 returns and have not paid the correct amount of service tax. Therefore the said Service Provider appeared liable for penal action as per the provisions of Section 77 of Finance Act 1994 for not showing correct taxable value in the ST-3 return.

33. Thus it appeared that M/s. Bhagwati Banquets & Hotels Ltd., Ahmedabad, have contravened the provisions of:(i) Section 68 of the Finance Act,

1994 read with Rule 6 of the Service Tax Rules, 1994 in as-much-as they have failed to pay the service tax amounting to Rs. 2,18,11,153/- (Rs. 91,59,010/- + Rs. 1,26,52,143/-)

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as mentioned in para supra in case of Outdoor Caterer’s Service; Rs.43,99,251/- in case of Management, Maintenance & Repair service and Rs. 50,44,835/- in case of Mandap Keeper Service for the period from 01-04-2009 to 31-03-2010 to the credit of the Government within the stipulated time limit;

(ii) Section 69 of the Finance Act,1994 read with Rule 4 of the Service Tax Rules, 1994 in as much as they failed to take registration from the department as Service provider for payment of Service Tax under Management, Maintenance and Repair Service and have thereby rendered themselves liable to penalty as provided under section 76 of Finance Act, 1994.

(iii) Section 70 of the Finance Act, 1994, as amended, read with Rule 7 of the Service Tax Rules, 1994, in as much as they have failed to self – assess the Service Tax on the taxable value received by them and to file ST-3 returns for the said service providing firm during the period from 01-04-2009 to 31-03-2010 in case of Outdoor Caterer’s Service and Management, Maintenance & Repair service.

34. All the above acts of contravention on the part of the said service provider appeared to have been committed with an intend to evade payment of service tax and, therefore, the said service tax not paid is required to be demanded and recovered from them under Section 73(1) of the Finance Act, 1994. All these acts of contravention of the provisions of Section 68, Section 69 and Section 70 of the Finance Act, 1994 read with Rule 4, Rule 6 and Rule 7 of the Service Tax Rules, 1994 appear to be punishable under the provisions of Section 76, Section 77 of the Finance Act, 1994 as amended time to time.

35. Therefore, the said Service provider M/s. Bhagwati Banquets & Hotels Ltd. functioning from Third Floor, Circle-P Building, above Honest Restaurant, S.G. Road, Ahmedabad, vide show cause notice F. No. STC/4-114/O&A/10-11 were called upon to show cause to the Commissioner, Service Tax, 1st Floor, Central Excise Bhavan, Near Panjrapole, Ambawadi, Ahmedabad as to why;

(i) The catering services provided in the restaurants of Karnavati Club, Rajpath Club & GCA Club, should not be considered as Outdoor Catering Service provided by M/s Bhagwati Banquets & Hotels Ltd., for the period from 01.04.2009 to 31.03.2010;

(ii) The management & maintenance services provided for the residential rooms of Karnavati Club & GCA Club, should not be considered as Management, Maintenance or Repair Service provided by M/s Bhagwati Banquets & Hotels Ltd., for the period from 01.04.2009 to 31.03.2010, as discussed in the foregoing paras;

(iii) Services rendered by M/s Bhagwati Banquets & Hotels Limited, should not be considered as taxable service under the category of “Outdoor Caterer’s Service” as defined under Section 65 of the Finance Act 1994, as amended, and the amount of taxable value of Rs. 21,17,58,771/- (Rs. 8,89,22,431/- + Rs. 12,28,36,340/) received as payment/recovered by them from their customers should not be considered as taxable value and Service Tax amounting to Rs. 2,18,11,153/- (Service Tax Rs. 2,11,75,877/- + Edcn. Cess Rs. 4,23,518/- and Higher

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Edcn. Cess Rs. 2,11,758/-) for the period from 01-04-2009 to 31-03-2010 should not be demanded from them under section 73(1) of the Finance Act, 1994;

(iv) Services rendered by M/s Bhagwati Banquets & Hotels Limited, should not be considered as taxable service under the category of “Management, Maintenance & Repair Service” as defined under Section 65 of the Finance Act 1994, as amended, and the amount of taxable value of Rs. 4,27,11,174/- received as payment/recovered by them from their customers should not be considered as taxable value and Service Tax amounting to Rs. 43,99,251/- (Service Tax Rs. 42,71,117/- + Edcn. Cess Rs. 85,422/- and Higher Edcn. Cess Rs. 42,712/-) for the period from 01-04-2009 to 31-03-2010 should not be demanded from them under section 73(1) of the Finance Act, 1994;

(v) Services rendered by M/s Bhagwati Banquets & Hotels Limited, should not be considered as taxable service under the category of “Mandap Keeper Service” as defined under Section 65 of the Finance Act 1994, as amended, and the amount of taxable value of Rs. 4,89,78,983/- received as payment/recovered by them from their customers should not be considered as taxable value and Service Tax amounting to Rs. 50,44,835/- (Service Tax Rs. 48,97,898/- + Edcn. Cess Rs. 97,958/- and Higher Edcn. Cess Rs. 48,979/-) for the period from 01-04-2009 to 31-03-2010 should not be demanded from them under section 73(1) of the Finance Act, 1994;

(vi) Interest as applicable on the above amount of service tax liability should not recovered from M/s Bhagwati Banquets & Hotels Limited, Ahmedabad, under section 75 of the Finance Act, 1994 as amended;

(vii) Penalty should not be imposed upon M/s Bhagwati Banquets & Hotels Limited, Ahmedabad, under Section 76 of the Finance Act, 1994 as amended for the failure to make the payment of service tax payable by them;

(viii) Penalty should not be imposed upon M/s Bhagwati Banquets & Hotels Limited, Ahmedabad, under Section 77 of the Finance Act, 1994 as amended for contraventions of the provisions of the Finance Act,1994 and the rules made there under as discussed in the foregoing para including the failure to file correct taxable Value in the prescribed service tax return within the stipulated time.

Defence Reply & Personal Hearing:

36. The said service provider did not file any reply to the show cause notice. Personal Hearing in the case was fixed for 25.5.2011, 10.6.2011, 12.7.2011 and 17.8.2011. However, the said service provider requested for adjournments and the personal hearing was ultimately held on 26.8.2011 which was attended by Shri Vipul Khandhar, Chartered Accountant on behalf of the said service provider. He explained the issue and promised to give a written submission on 30.8.2011 as well as premises wise details of Cenvat Credit availed against Mandap Keeper service. He filed the written submission dated 8.8.2011 on 30.8.2011 along with copies of ST-3 returns. They also submitted a certificate dated 29.8.2011 issued by the Chartered Accountants O.P. Bhandari & Co. along with Annexures- A,B,C & D for the Financial Year 2009-10.

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37. In the above said written submission they submitted that the demand under the said show cause notice is neither sustainable on merit nor on limitation. They submitted that they are registered with the service tax department since 1998 under the category of ‘Out door catering service’, ‘Mandap Keeper service’, ‘renting of immovable properties service’ and recently under the category of “Short term accommodation service provided by the hotels”. They submitted that department was well aware of their activities and therefore the demand is hit by bar of limitation.

38. They submitted that department has basically relied on various clauses of the agreement executed with the clubs as well as Supreme Court’s Judgment in the case of Tamilnadu Kalyana Mandapam Assn. Vs. Union of India (C A No. 2727 of 2002, decided on 15.04.2004). They submitted that the clauses of agreement are restrictive & commercial in nature and the liability of service tax under the category of ‘outdoor catering service’ can only be concluded by going into the other factual details & documents. They reproduced Section 76(a) of the Act as under:

“[(76a) “outdoor caterer” means a caterer engaged in providing services in connection with catering at a place other than his own [but including a place provided by way of tenancy or otherwise by the person receiving such services;](zzt) [to any person], by an outdoor caterer;”

They submitted that service element is must for being classified as a service provider. Service rendered by outdoor caterer is clearly distinguishable from the service rendered in a restaurant or hotel (i.e. “indoor”) in as much as in the case of outdoor catering service the food/ eatables/drinks are of the choice of the person who partakes the service. He is free to choose the kind, quantum and manner in which the food is to be served. But in the case of restaurant, the customer’s choice of foods is limited to the menu card. Again in the case of outdoor catering, the customer is at liberty to chose the time and place where the food is to be served. In the case of an outdoor caterer, the customer negotiates each element of the catering services, including the price to be paid to the caterer. Outdoor catering has element of personalized service provided to the customer. Clearly, the service element is more weighty, visible and predominant in the case of outdoor catering. They also relied on the Hon’ble Supreme Court’s judgment in the case of Tamil Nadu Kalayana Mandapam Association VUOI & Ors. (2004) 5SCC 632: AIR 2004 SC 3757: 2004 (167) ELT 3(SC): 2006 (3) STR 260 (SC). They submitted that they were engaged in the running of the restaurant at above referred places and their activities can not be classifiable under the “outdoor catering service”.

38.1 They drew attention towards the fact that they were engaged in selling of food items, on which they were discharging VAT liabilities regularly. Therefore, they were eligible for the deduction of value of sale of goods under Notification No.12/2003 dt.20.06.2003, on which they had paid VAT. They produced copy of Annual VAT return. They relied on the following citations:(i) Bharat Sanchar Nigam Ltd. & Anr. V. UOI & Ors. 2006(2) STR 161

(SC) : 2006-TIOL-15-SC-CT-LB : AIR 2006 SC 1383 : (2006) 3 SCCI,

(ii) Imagic Creative Pvt. Ltd. v CCT (2008) 2SCC 614 : 2008-TIOL-04-SC-VAT : 2008 (9) STR 337 (SC)

(iii) Sky Gourmet Pvt. Ltd. v CST, Bangalore 2009-Tiol-915-CESTAT-BANG : 2009 (14) STR 777 (Tri. – Bang.),

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(iv) Daspalla Hotels Ltd. v CCE, Visakhapatnam 2010 (18) STR 75 (Tri. - Bang): 2010-TIOL-219-CESTAT-BANG;

(v) LSG Sky Chefs (India) Pvt. Ltd. v CST, Bangalore 2010 (18) STR 37 (Tri. - Bang.).

They further submitted that if their activities are treated as “outdoor catering service”, then they are eligible for the abatement as provided in Notification No. 1/2006 and the demand may also be reduced to this extent.

38.2 They submitted that it has been alleged in the show cause notice that as they have availed Cenvat credit, they are not eligible for the benefit of abatement. However, they have followed the procedure mentioned in Rule 6(1) of Cenvat Credit Rules by maintaining separate records for the service provided & availed. They submitted that Notification No. 20/2004-ST dates 10.09.2004 which was superseded by Notification No. 1/2006-ST dated 01.03.2006 provides abatement of 50% of the gross amount charged from the client by outdoor caterer for the services provided in relation to catering, where outdoor caterer provided services of catering including supply of food and where the invoice, bill or challan issued indicates that it is inclusive of charges for supply of food, subject to the conditions that,-(i) the CENVAT Credit of duty on inputs or capital goods or the

CENVAT Credit of service tax on input services, used for providing such taxable services, has not been taken under the provisions of the CENVAT Credit Rules, 2004; or

(ii) the service provider has not availed the benefit under the notification of the Government of India in the Ministry of Finance (Department of Revenue), No. 12/2003-Service Tax, dated the 20th June, 2003.

They submitted it was very much clear from the meals charges, that they were eligible for the abatement in service tax value.

38.3 Regarding applicability of service tax under the category of “management, maintenance or repair” on the activities of short term accommodation service they submitted that they were engaged in the business of renting of short term accommodation to the various clients and were engaged in following activities:(i) Taking premises on rental basis and paying fixed rent on

monthly basis to the landlord as per rent agreement.(ii) Segregating rooms in the category of deluxe rooms and other

rooms & deciding tariff for the stay as per market condition and season.

(iii) They had taken registration as required from the Municipal Corporation & Entertainment Tax division for providing of stay in hotel.

(iv) They were paying entertainment tax on the room tariff charges.(v) They had shown receipt of income of stay in hotel in respective

heads.(vi) They were collecting room tariff income from the clients directly.(vii) They were engaged in the business of Hotel industry.(viii) They were possessing effective controls & Usages right for the

said premises.

In view of the above activities they submitted that they were not providing any service relating to the “management, maintenance or repair” and reproduced the definition as under:

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“Taxable service means any service provided or to be provided, to any person, by any person in relation to management, maintenance or repair. [Section 65(105) (zzg)]

“Goods” has the meaning assigned to it in clause (7) of section 2 of the Sale of Goods Act, 1930. [Section 65(50)]“Goods are defined as every kind of movable property other than actionable claims and money, and include stock and share, growing crops, grass and things attached to or forming part of the land which are agreed to be severed before sale or under the contract of sale”.[Section 2(7) of the Sale of Goods Act, 1930]

“Management, maintenance or repair” means any service provided by- (i) Any person under a contract or an agreement; or(ii) A manufacture or any person authorized by him, in relation to,--(a) Management of properties, whether immovable or not;(b) Maintenance or repair of properties, whether immovable or not;

or(c) Maintenance or repair including reconditioning or restoration, or

servicing of any goods, excluding a motor vehicle.Explanation.—for the removal of doubts, it is hereby declared that for

the purpose of this clause,--(a) “Goods” includes computer software;(b) “Properties” includes information technology software. [Section

65(64)]

They submitted that for maintenance of immovable property a service provider takes care of the property to keep it in good condition on behalf of the owner of the property and in turn service provider gets fixed remuneration. Whereas, in their case they had taken properties on rental basis, paid monthly rent amount as fixed, to the owner of the properties and were using the premises as stay in hotel & earning room tariff income on the occupancy basis.

They referred to the newly introduced service of “Short term accommodation service” vide Finance Act, 2011 which is defined as under:“Taxable service” means any services provided or to be provided, to

any person by a hotel, inn, guest house, club or campsite, by whatever name called, for providing of accommodation for a continuous period of less than three months. [Section 65(105)(zzzzw)]

They submitted that their service was squarely covered under the above referred definition, which was made taxable w.e.f. 01.05.2011.

Therefore, demand for their activities prior to the said date under different category of service was untenable & unjustifiable. They also reproduced Section 65A of the Act as under:“SECTION 65A. Classification of taxable services. — (1) For the purposes of this Chapter, classification of taxable services shall be determined according to the terms of the sub-clauses of clause (105) of section 65;(2) When for any reason, a taxable service is, prima facie,

classifiable under two or more sub-clauses of clause (105) of section 65, classification shall be effected as follows :-

(a) the sub-clause which provides the most specific description shall be preferred to sub-clauses providing a more general description;

(b) composite services consisting of a combination of different services which cannot be classified in the manner specified in

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clause (a), shall be classified as if they consisted of a service which gives them their essential character, in so far as this criterion is applicable;

(c) when a service cannot be classified in the manner specified in clause (a) or clause (b), it shall be classified under the sub-clause which occurs first among the sub-clauses which equally merit consideration.]”.

They submitted that since w.e.f 1.5.2011 there is a specific entry

in the Act their service can not be classified under a different head of service and requested to drop the demand of service tax under the category of “Management, maintenance or repair”.

38.4 As regards the allegation of wrong availment of abatement benefit under the category of “Mandap keeper service’ they submitted that they had followed the procedure mentioned in Rule 6(1) of Cenvat Credit Rules,2004 and has maintained separate records for the service provided & availed. They reproduced Rule 6 of Cenvat Credit Rules,2004 as under:

“RULE 6. [Obligation of a manufacturer or producer of final products and a provider of taxable service.] — (1) The CENVAT credit shall not be allowed on such quantity of [input used in or in relation to the manufacture of exempted goods or for provision of exempted services, or input service used in or in relation to the manufacture of exempted goods and their clearance upto the place of removal or for provision of exempted services] except in the circumstances mentioned in sub-rule (2).

[Provided that the CENVAT credit on inputs shall not be denied to job worker referred to in rule 12AA of the Central Excise Rules, 2002, on the ground that the said inputs are used in the manufacture of goods cleared without payment of duty under the provisions of that rule.][(2) Where a manufacturer or provider of output service avails of CENVAT credit in respect of any inputs or input services and manufactures such final products or provides such output service which are chargeable to duty or tax as well as exempted goods or services, then, the manufacturer or provider of output service shall maintain separate accounts for -(a) The receipt, consumption and inventory of inputs used –(i) In or in relation to the manufacture of exempted goods;(ii) In or in relation to the manufacture of dutiable final products

excluding exempted goods;(iii) For the provision of exempted services;(iv) For the provision of output services excluding exempted

services; and(b) The receipt and use of input services —(i) In or in relation to the manufacture of exempted goods and their

clearance upto the place of removal;(ii) In or in relation to the manufacture of dutiable final products,

excluding exempted goods, and their clearance up to the place of removal;

(iii) For the provision of exempted services; and(iv) For the provision of output services excluding exempted

services,and shall take CENVAT credit only on inputs under sub-clauses (ii) and (iv) of clause (a) and input services under sub-clauses (ii) and (iv) of clause (b).]”

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They submitted that as per the above provision they were maintaining separate records for the availment & utilization of cenvat credit.

38.5 They submitted that in Mandap keeper service for two premises they had opted for full rate of duty with Cenvat availment benefit, while for provision of service from other premises they had opted to avail abatement without availment of cenvat credit. They submitted that they had shown the said service in their ST-3 return together, but had also enclosed separate sheet for the working so there were no suppression as it was in the knowledge of the department. The above mentioned notification was superseded by Notification No. 1/2006-ST dated 01.03.2006 wherein abatement of 50% of the gross amount charged from the client by outdoor caterer for the services provided in relation to catering was given subject to the conditions of non availment of CENVAT Credit and non availment of the benefit under the Notification No. 12/2003-Service Tax, dated the 20th June, 2003.

They submitted that as is evident from the working sheets enclosed with the ST-3 return they were maintaining separate records for the full rate as well as the abated value. Therefore, they were eligible for the abatement in service tax value, where full service tax liability was discharged by them and demand for the withdrawal of abatement under the category of “Mandap keeper service” was untenable & unjustifiable.

38.6 They submitted that invocation of extended period recovery of service tax for the period 01.04.2009 to 31.03.2010 under section 73 of the Finance Act, 1994 is not justified as there is no suppression and above facts were well within the knowledge of the department. They relied on the judgment of Pushpam Pharmaceutical Company v/s Collector of Central Excise Bombay [1995 Supp (3)SCC 462]. They submitted that as detailed in the above submission, there was a reasonable cause of not discharging their statutory liability due to interpretation of law and general trade practice. Therefore, Section 73 (1) (a) of the Finance Act,1994 can not be invoked and consequently there is no applicability of penalty provision under Section 78 of the Finance Act, 1994 for that period. The demand is therefore barred by limitation. They submitted that while deciding the similar type of cases of service tax and Central Excise, the Hon’ble CEGAT as well as Commissioner (Appeal) has taken lenient view and has not imposed any penalty under section 76, 77 & 78 of finance Act, 1994 and has given relief of Section 80 ibid of Finance Act, 1994. They relied on the following Judgments in support of their case: 1. CCE, Bhopal V. Thyrocare Services [2006(4) STR 200 (Tri.-

Del.)];2. CCE, Jaipur V. Sikar Ex-Serviceman Welfare Co-Op. Soc

Ltd. [2006(4) STR 213 (Tri.-Del.)]; 3. Suri Colour Labs (P) Ltd. CCE, Meerut-II [2006(4) STR 96

(Tri.-Del.)]; 4. Surat Municipal Corpn. V. CCE, Surat [2006(4) STR 44

(Tri.-Del.)] 5. BST Ltd. V. CCE, Cochin [2006(4) STR 40 (Tri.-Bang.)] 6. Cosmic Dye Chemical V. CCE, Bombay [1995(75) ELT

721(SC)] 7. CCE, Ludhiana V. Silver Oak Gardens Resort [2008(9) STR

481 (Tri.-Del.)] 8. Arvind Motors V. CCE, Raipur [2008(9) STR 464 (Tri.-Del.),

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9. ETA Engineering Ltd. V. Chennai [2003(3) STR 429 (Tri.-LB)]

10. Smitha Shetty V, CCE, Bangalore [2003(156) ELT 84 (Tri.-Bang.)]

11. Cement Marketing Co. – 1980 (6) ELT 295 (SC): 12. CCE, Mumbai-IV V. Damnet Chemicals P. Ltd. [2007 (216)

ELT 3 (SC)], 13. CC V. Seth Enterprises [1990(49) ELT 619 (Tri.-Del.)] 14. Hindustan Steel Vs State of Orissa reported in AIR 1970

SC 253.

Discussion & Findings:

39. I have carefully gone through the records of the case, written submissions made by the said assessee to the show cause notice as well as the submission made by them during the course of personal hearing.

40. I find that the issues to be decided in this case are:

(i) Whether, the catering service provided by the said service provider in the restaurants and rooms of Karnavati Club, Rajpath Club & GCA Club, is an “Outdoor Catering Service” taxable as per Section 65(105)(zzt) of the Finance Act, 1994 and whether, the said service provider is an “Outdoor Caterer” as defined in Section 65(76a) of the Finance Act 1994 for the period from 1.4.2009 to 31.3.2010. Whether, the said service provider is eligible for benefit as per Notification No.12/2003 dated 20.6.2003 or they are eligible for abatement as provided in Notification No. 1/2006-ST dated 01.03.2006.

(ii) Whether, the activity of managing and maintaining the residential rooms and suites in Karnavati Club and GCA Club by the said service provider is a taxable service under the category of “Management, Maintenance or Repair Service” as defined under Section 65(64) of the Finance Act, 1994 and the room tariff collected from the members of the said Clubs, is the taxable value under the said service category as per the provisions of section 65(105) (zzg) of the Finance Act, 1994.

(iii) Whether, the said service provider has correctly availed the benefit of Notification No. 1/2006-ST dated 01.03.2006, for “Outdoor Catering Service” provided by them, for which they are registered and paying service tax, at places other than the restaurants and rooms of Karnavati Club, Rajpath Club & GCA Club.

(iv) Whether, the said service provider has correctly availed the benefit of Notification No. 1/2006-ST dated 01.03.2006, for “Mandap Keeper Service” provided by them, for which they are registered and paying service tax.

41. I first take up the issue of taxability on the income from the catering service provided by the said service provider in the restaurants and rooms of Karnavati Club, Rajpath Club & GCA Club, under the category of “Outdoor Catering Service” as per Section 65(105)(zzt) of the Finance Act, 1994 for the period from 1.4.2009 to 31.3.2010. I find that taxable service relating to outdoor catering has

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been defined under Section 65(105)(zzt) of the Finance Act, 1994 as follows:

“Taxable service” means any service provided or to be provided to any person, by an outdoor caterer.

I find that as per the provisions of section 65(76a) of the Finance Act, 1994 as amended:

“Outdoor Caterer” means a caterer engaged in providing service in connection with catering at a place other than his own but including a place provided by way of tenancy or otherwise by the person receiving such services.

Section 65(24) of the Finance Act, 1994 defines the term caterer as “caterer” means any person who supplies, either directly or indirectly, any food, edible preparations, alcoholic or non alcoholic beverages or crockery and similar articles or accoutrements for any purpose or occasion.

41.1 The said service provider has contended that the clauses of agreement are restrictive & commercial in nature and the liability of service tax under the category of ‘outdoor catering service’ can only be concluded by going into the other factual details & documents. I find that instead of discussing or countering the allegations made in the show cause notice on the basis of the clauses of the agreement, they have simply reproduced the criteria of an “outdoor caterer” as given by the Hon’ble Supreme Court in the case of Tamil Nadu Kalayana Mandapam Association V/s UOI & Ors. (2004) 5SCC 632: AIR 2004 SC 3757: 2004 (167) ELT 3(SC): 2006 (3) STR 260 (SC). I find that various clauses such as clause 11, 18, 21, 22, 25, 27 and 30 of the agreement between M/s Karnavati Club Ltd., and M/s Bhagwati Banquets & Hotels Ltd. (Formerly M/s TGB Resorts Karnavati) as detailed in the show cause notice clearly show that the said service provider is a caterer providing “outdoor catering services”. Their contention that they were engaged in the running of a restaurant at above referred places is also not acceptable as a restaurant is a place open for anybody and everybody whereas, the said service provider is providing catering services which is restricted to the members of the club. I observe that Hon’ble Supreme Court in the case of Tamil Nadu Kalyana Mandapam Association Vs UOI (2006 (003) STR 0260 S.C.) had drawn a distinction between supply of food and the service elements involved in catering. It was held that catering is not a mere sale of goods. Therefore, what has to be looked into is the nature of services which could be held liable to service tax under the taxable category of ‘outdoor catering’ service. I find that in the case before me, the essential ingredient of the definition under section 65(76a) of the Act that catering services should be provided from a place other than his own is satisfied as the services are provided by the said service provider in the clubs which is a place other than his own. I observe that if such services are provided from one’s own place, the activity would not be liable to service tax and therefore would exclude the traditional hotels. I have gone through the respective agreement between the service provider and the clubs and it comes out that the nature of activity is that of an outdoor catering service.

41.2 I find from the above agreements that the Manager/caterer is allowed to use his name/logo for club and room services which clearly suggests that the Brand name of the said service provider is of utmost importance as he has an expertise in the field of catering which is well

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known to the clubs and it’s members. The said service provider uses his own material which is processed using the expertise of the caterer to prepare food which is then duly catered to the members of the club. Thus there is a definite element of service involved in it and the service provider’s contention that there is no element of service in it is misfounded. I find that there is no dispute that the said service provider is a caterer who has provided the services to the members of the club in connection with catering at the premises of the club which is a place other than it’s own. Thus not only all the ingredients of the definition of “outdoor caterer” as per Section 65(76a) of the Finance Act, 1994 are fulfilled, the criteria laid down by the Hon’ble Supreme Court in the case of TamilNadu Kalayana Mandapam Association (supra) are also satisfied.

41.3 Now, I come to the contention of the said service provider that since they were engaged in the sale of food items and were paying VAT to the State Government on sale of goods, they were eligible for deduction of value on sale of goods as provided under Notification No. 12/2003 dated 20.6.2003. I find that exemption to the value of goods and materials sold by the service provider to the service recipient under the said notification is subject to the condition that there is documentary proof specifically indicating the value of the said goods and materials as well as non availment of cenvat credit on such goods and materials sold or payment of an equal amount, if cenvat credit is availed. The contention of the service provider is not acceptable on two grounds. The first one being that the said service provider has not produced any documentary evidence before me which specifically indicates the value of the said goods and materials. The second one being that the said notification allows deduction of value of the goods and material sold by the service provider to the service recipient. The word ‘sold’ clearly means that exemption is allowed only to those goods and materials which are bought by the service provider and then sold as such without carrying any change on it. The attempt made by the said service provider to claim exemption on the cooked food under the said notification is not proper and thus goes in vain. In view of the above, the said service provider is not eligible for exemption provided in the said notification. I find that the said service provider has relied upon various judgments of the Hon’ble Supreme Court and the Hon’ble Tribunal to impress the point that since, VAT is paid by them on the food, no service tax is leviable on the same. I have already discussed above, that there is a definite and visible element of service involved as the food served is not ready to eat packaged food or beverages but it is the food which is cooked from the raw form as per the exclusive recipes and expertise of the said caterer and then duly catered by the brand name/logo owner i.e. the caterer. Since, all the ingredients of “outdoor catering service” are present, the service is taxable under the said category and the Central Government by statute is authorized to collect service tax on the value of taxable services. If the said service provider has wrongly interpreted the statute and has paid VAT on the entire invoice value, it will not restrict the Central Government to collect service tax on the value of taxable services. I observe that if the said service provider is able to show the sale portion separately, leviable to VAT, then he may claim the exemption provided in the Notification No. 12/2003 dated 20.6.2003 subject to fulfillment of the conditions laid down and pay service tax on the taxable value of the “outdoor catering services” which is not the case here. I therefore find that the said service provider’s reliance on these judgments is misplaced and the ratio of the said judgments can not be applied in the case before me.

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41.3 It is also the contention of the said service provider that if their services are categorized as “Outdoor Catering Service” then they are eligible of abatement provided under Notification No. 1/2006-ST dated 01.03.2006 and the demand is required to be reduced to that extent. I observe that Notification No. 1/2006-ST dated 01.03.2006 provides abatement of 50% of the gross amount charged from the client by an outdoor caterer for the services provided in relation to catering, where an outdoor caterer provides services of catering and also provides food and where the invoice, bill or challan issued indicates that it is inclusive of charges for supply of food. Further, the said notification is only applicable in cases where.--

(i) the CENVAT credit of duty on inputs or capital goods or the CENVAT credit of service tax on input services, used for providing such taxable service, has not been taken under the provisions of the CENVAT Credit Rules, 2004; or

(ii) the service provider has not availed the benefit under the notification of the Government of India in the Ministry of Finance (Department of Revenue), No.12/2003-Service Tax, dated the 20th June, 2003

Explanation- For the purpose of this notification, the expression “food” means a substantial and satisfying meal and the expression “catering service” shall be construed accordingly.I find that it has been alleged in the show cause notice on the basis of ST-3 returns for the year 2009-10 that the said service provider has availed Cenvat Credit of the service tax paid by them on Hall Rent for various halls and party plots and since, the said service provider is providing the “Mandap Keeper Services” and “Outdoor Catering Services” they are not eligible for exemption under Notification No. 1/2006-ST dated 01.03.2006. I find that the said notification provides abatement separately for each service on fulfillment of specific conditions. I also find that the said notification also restricts the CENVAT credit of duty on inputs or capital goods or the CENVAT credit of service tax on input services, used for providing such taxable service. The use of words ‘such taxable service’ clearly show that the restriction is meant for the said category of service and taking of cenvat credit for any other taxable category will not debar the service provider from claiming abatement under the said notification. I also observe that it is quite apparent that the said service provider was in no position to take cenvat credit for “Outdoor catering service” provided under impugned contract/agreement by them in the restaurants and rooms of the above named three clubs as they believed that their said services were not taxable and it was simply sale of food. I have already discussed and denied the benefit of Notification No. 12/2003 dated 20.6.2003 to the said service provider while providing the “outdoor catering service” in the above named three clubs. Thus, the said service provider has fulfilled the conditions of Notification No. 1/2006-ST dated 01.03.2006. In view of this, I find that the said service provider is eligible for exemption as per Notification No. 1/2006-ST dated 01.03.2006 and the demand raised in the show cause notice as detailed in Table at Para 20 above is required to be requantified. Before, proceeding with the requantification of demand, I find it pertinent to refer to the certificate dated 29.8.2011 issued by the Chartered Accountants, O.P. Bhandari & Co. submitted by the said service provider on 30.8.2011. Along with the said certificate the said Chartered Accountant has submitted Annexure-A, B and C showing certified figures of sale of food for the year 2009-10

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from the above named three clubs. I find that there is difference in the income figures from these three clubs supplied by the said service provider vide letter dated 9.9.2010 on the basis of which demand has been quantified in the show cause notice and as shown in the above said Annexures-A, B and C. Table showing the comparison of the figures is given below:

Type of income As per letter dated 9.9.2010 As per C.A certificate dated 29.8.2011

Income from catering provided in restaurants & rooms of Karnavati Club

5,09,33,964/- 5,29,71,323/-

Income from catering provided in restaurants & rooms of Rajpath Club

3,22,79,593/-3,35,70,077/-

Income from catering provided in restaurants & rooms of GCA Club

57,08,874/-59,37,229/-

Total 8,89,22,431/- 9,24,78,629/-Since, the figures given in the said Annexures are certified by a Chartered Accountant, I believe them to be correct and hence accept the same. Accordingly, the demand is requantified in the below given table: Requantified demand of Service Tax on the outdoor catering Service provided in the restaurants and rooms of M/s Karnavati club, Rajpath club and GCA club is as under:Period

Gross value collected

Abated value i.e.50% of the gross value

Rate of Service Tax payable (%)

Amount of Service Tax payable (Rs.)

Rate of Edn. Cess payable (%)

Amount of Edcn. Cess payable (Rs.)

Rate of of Higher Edcn. Cess (%)

Amount of Higher Edcn. Cess payable (Rs.)

Total Service Tax payable (Rs.)

01-04-09 to 31-03-10

9,24,78,629/- 4,62,39,315/- 10 46,23,932/-

2 92,479/- 1 46,240/- 47,62,650/-

In view of the requantification, the demand of Rs. 91,59,010/- on ‘outdoor catering service’ in the above named three clubs is reduced to Rs. 47,62,650/-. Accordingly, demand of Rs. 43,96,360/-(Rs. 91,59,010/- - Rs. 47,62,650/-) is unsustainable.

41.4 The said service provider’s contention with regard to maintenance of separate records as per Rule 6(1) of the Cenvat Credit Rules, 2004 is not relevant and no discussion is required on it.

41.5 In view of the above, I hold that the said service provider has provided the outdoor catering services defined under Section 65 (76a) of the Finance Act, 1994 which is taxable under the provisions of section 65(105) (zzt) of the Finance Act, 1994 to the aforesaid three clubs and Rs. 4,62,39,315/- is the taxable value of the said service under Section 67 of the Act on the gross income of Rs. 9,24,78,629/- retained by them during the period from 01-04-2009 to 31-03-2010. Therefore, Service tax of Rs. 47,62,650/- (Service Tax Rs. 46,23,932/- + Education cess Rs. 92,479/- + Higher Education cess Rs. 46,240/- ) on the said taxable value is recoverable from the said service provider under Section 73(1) of the Finance Act, 1994 along with interest under Section 75 ibid.

42. Now, I come to the second issue as to whether M/s. Bhagwati Banquets & Hotels Ltd., Ahmedabad, have provided Management, Maintenance & Repair Service defined under the Section 65 (64) of the

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Finance Act, 1994 as amended which is taxable under the provisions of section 65(105) (zzg) of the Finance Act, 1994, to M/s Karnavati Club Ltd. and M/s Gujarat Cricket Association, during the period from 01-04-2009 to 31-03-2010 and whether, income of Rs. 4,27,11,174/- earned by them is the taxable value under the said service category liable to service tax of Rs. 43,99,251/-. Since, service tax is demanded under the taxable category of “management, maintenance or repair” services, I first look in to the definition of the said service and the changes it has undergone since it’s inception from 1.7.2003.

The definition of “maintenance or repair” service as it existed prior to 16.6.2005 was as under:

65(64) "maintenance or repair" means any service provided by–(i) any person under a maintenance contract or agreement; or

(ii) a manufacturer or any person authorised by him, in relation to maintenance or repair or servicing of any goods or equipment, excluding motor vehicle;

The afore said Clause (64) had been substituted by the Finance Act, 2005 w.e.f. 16.6.2005 as under:

65(64) "maintenance or repair" means any service provided by-

(i) any person under a contract or an agreement; or

(ii) a manufacturer or any person authorised by him,in relation to,—

(a) maintenance or repair including reconditioning or restoration, or servicing of any goods or equipment, excluding motor vehicle; or

(b) maintenance or management of immovable property;

From 1.5.2006, the definition is renamed as “management, maintenance or repair” and the present definition of “management, maintenance or repair service” as defined in section 65 (64) of the Finance Act, 1994 reads as under.

“management, maintenance or repair” means any service provided by—(i) any person under a contract or an agreement; or

(ii) a manufacturer or any person authorised by him, in relation to,—

(a) management of properties, whether immovable or not;

(b) maintenance or repair of properties, whether immovable or not; or

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(c) maintenance or repair including reconditioning or restoration, or servicing of any goods, excluding a motor vehicle;

Explanation.— For the removal of doubts, it is hereby declared that for the purposes of this clause,—

(a) “goods” includes computer software;

(b) “properties” includes information technology software;

(Above Explanation has been substituted vide Finance Act 2008)

[OLD-

Explanation.—For the removal of doubts, it is hereby declared that for the purposes of this clause, “goods” includes computer software;]

42.1 From the above, I find that Services of “maintenance or repair” had been brought under the service tax net w.e.f 1.7.2003. I also find that services of maintenance or management of immovable property were covered under the taxable category of maintenance or repair since 16.6.2005. The Finance Act, 2006, w.e.f 1.5.2006, had further enhanced the coverage of taxable services under this category by including therein the services of management of property other than immovable property and repair of immovable and other property. The Finance Act, 2007, w.e.f 1.6.2007 had inserted an explanation to the definition of management, maintenance or repair to clarify that goods include computer software for the purpose of this taxable service. The Finance Act, 2008, w.e.f 16.5.2008 has further expanded this explanation to clarify that properties include information technology software leading to the present definition as reproduced above.

42.2 Taxable service relating to management, maintenance or repair has been defined under Section 65(105)(zzg) of the Finance Act, 1994 as follows:

“Taxable service” means any service provided or to be provided to any person, by any person in relation to management, maintenance or repair.

42.3 I find that service tax is demanded from the said service provider on the income from management of rooms at Karnavati Club and GCA Club. Therefore, I look in to the agreements between the said service provider and the said clubs.

Agreement dated 1.6.2006 between M/s Bhagwati Banquets and Hotels Ltd and GCA Club.

I find from the said agreement that the said club desired of giving it’s said premises to the said service provider who is termed as ‘Manager’ in the said agreement, for running the same for and on behalf of the

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club. The said Manager had also submitted their proposal for managing and running the said premises. I further find from clause 15 of the said agreement that the said Manager has been authorized to collect on their own, the amount for room facilities as per the rate approved by the management of the club. I further find from clause 2 of the said agreement that the said Manager was required to pay 50% Commission on Residential Room Tariff income at each quarter ending on 30th June, 30th September, 31st December and 31st March every year. I have also seen from various clauses of the said agreement that maintenance or management of the residential rooms is the responsibility of the said Manager. Clause 12 of the said agreement is reproduced to highlight the same. “For the residential rooms, which are fully furnished with new styles tiles, split air conditioning unit, colour television sets, plants, pictures, bed sheets, pillow, mattresses, extra beds etc. which shall be properly maintained and any replacement if required should be done by the Manager. Laundry charges of all linen and uniform and all other articles used by the Manager shall be borne by the Manager”. I also find that clause 7 of the said agreement also states that the said Manager shall maintain in good working condition all the furniture, fixtures, plant, machineries and equipments etc.

Agreement dated 1.4.2009 between M/s TGB Resorts Karnavati, a unit of M/s Bhagwati Banquets and Hotels Ltd and Karnavati Club Ltd.

I find from the said agreement that the said club desired of giving it’s said premises to the said service provider who is termed as ‘Manager’ in the said agreement, for running the same for and on behalf of the club. The said Manager had also submitted their proposal for managing and running the said premises. I further find from clause 22 of the said agreement that the said Manager has been authorized to collect on their own, the amount for room facilities as per the rate approved by the management of the club. I further find from clause 3 and 4 of the said agreement that the said Manager was required to pay license Fee of Rs. 1,29,80,000/- per annum in 12 monthly installments for running and maintaining the premises of the club. I further find that any upward revision in room tariff shall be shared by the service provider and the club in the ratio 0f 60% and 40% respectively.

42.4 The said service provider has contended that they have not provided any service of management or maintenance of immovable property as they had taken the premises of the said clubs on rental basis and paid fixed rent on monthly basis to the said clubs as per rent agreement. I find that the said contention is not acceptable as the agreement between the two is not a rent agreement but an agreement for maintaining and managing the specified places such as rooms of the said clubs and providing catering facilities, specifying the responsibilities of the said Manager and the two clubs and the sharing of the income earned. I find that it is not at all important as to whether the amount is paid in the form of rent or by any other name as wrongly contended by them. What is important is that in the instant case, the service provider i.e. M/s Bhagwati Banquets and Hotels Ltd has retained some amount from the total income of Room Tariff income and paid some amount to the service receivers i.e. M/s Karnavati Club and M/s GCA Club. The said retained amount is nothing but the amount they have received for providing the services of management or maintenance of immovable property which is taxable.

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42.5 I find that the said service provider has also contended that they are registered as Hotel with the Municipal Corporation & Entertainment Tax division and were paying entertainment tax. I find that payment of tax to the Municipal Corporation or the state government under an Act is no criteria for determining the taxability of a taxable service which is governed by Section 65(105) of the Finance Act, 1994. Therefore, the said contention of the service provider is not acceptable.

42.6 Their contention that they had shown receipt of income of stay in hotel in respective heads is also not relevant as the manner of accounting will not decide or influence the taxability of a taxable service which is governed by Section 65(105) of the Finance Act, 1994.

42.7 I find that the said assessee has contended that service of short terms accommodation in hotels / inns / clubs / guest houses are introduced by the Finance Act, 2011 w.e.f 1.5.2011 and hence the same could not be subjected to service tax for the period prior to it. They referred to Section 65A of the Act and submitted that since w.e.f 1.5.2011 there is a specific entry in the Act their service can not be classified under a different head of service. I find that this contention is misplaced as the said service provider can not be said to be providing service under the category of ‘Short term Accommodation Service’ as in the said category, services provided by hotel, inn, guest house, club or campsite to any other person is taxable and the said hotel, inn, guest house, club or campsite providing the services of Short term Accommodation is liable to pay service tax on the taxable value of such service. In the case before me the said service provider has entered into an agreement in the capacity of a Manager with the two clubs for managing and maintaining the rooms of the said two clubs and has retained some portion of the total amount collected from various occupants while paying the agreed upon share to the clubs.

42.8 In view of the above, there is no doubt that the said service provider has provided the services of management or maintenance of immovable property defined under Section 65 (64) of the Finance Act, 1994 as amended which is taxable under the provisions of section 65(105) (zzg) of the Finance Act, 1994 to the aforesaid two clubs and the Residential Room Tariff income of Rs. 4,27,11,174/- retained by them during the period from 01-04-2009 to 31-03-2010 is the taxable value of the said service under Section 67 of the Act. Therefore, Service tax of Rs. 43,99,251/- (Service Tax Rs. 42,71,117/- + Education cess Rs. 85,422/- + Higher Education cess Rs. 42,712/-) on the said taxable value is recoverable from the said service provider under Section 73(1) of the Finance Act, 1994 along with interest under Section 75 ibid.

43. I now proceed to decide the issue of availment of abatement under Notification No. 1/2006-ST dated 01.03.2006 for “Outdoor Catering Service” provided by the said service provider for which they are registered and paying service tax, at places other than the restaurants and rooms of Karnavati Club, Rajpath Club & GCA Club. I find that it has been alleged in the show cause notice on the basis of ST-3 returns for the year 2009-10 that the said service provider has availed Cenvat Credit of the service tax paid by them on Hall Rent for various halls and party plots and since, the said service provider is providing the “Mandap Keeper Services” and “Outdoor Catering Services” they are not eligible for exemption under Notification No. 1/2006-ST dated 01.03.2006.

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I find that the said notification provides abatement separately for each service on fulfillment of specific conditions. I also find that there is no separate taxable service which includes the combined service of “Mandap Keeper Services” and “Outdoor Catering Services”. I also find that the said notification also restricts the CENVAT credit of duty on inputs or capital goods or the CENVAT credit of service tax on input services, used for providing such taxable service. The use of words ‘such taxable service’ clearly show that the restriction is meant for the said category of service and taking of cenvat credit for any other taxable category will not debar the service provider from claiming abatement under the said notification. I have seen the ST-3 returns for the year 2009-10 and I observe that the said service provider has only utilized the Cenvat credit for payment of service tax under the category of ‘Mandap Keeper Service’ and has shown the same under the category of ‘Renting of immovable property’ whereas, no cenvat credit has been utilized for payment of service tax under the category of ‘outdoor catering service’ . I also observe that there is no allegation in the show cause notice that cenvat credit has been taken for providing ‘outdoor catering service’. The show cause notice mentions that cenvat credit has been taken only on Hall Rent and party plots, which is already explained by the service provider as utilized for payment of service tax under the category of ‘Renting of immovable property’. In absence of any evidence to the contrary, I hold that no cenvat credit has been taken by the service provider for providing ‘outdoor catering service’. As regards the second condition of non availment of benefit as per Notification No. 12/2003, I find that there is no allegation in the show cause notice that they have deducted the value of sale of goods from the invoice value. In view of this, I find that the said service provider is eligible for abatement as per Notification No. 1/2006-ST dated 01.03.2006 for providing “outdoor catering service”. As the said service provider is eligible for abatement under the said notification, the demand of Rs. 1,26,52,143/- on the abated value of Rs. 12,28,36,340/- is not sustainable.

44. I now proceed to decide the issue of availment of abatement under Notification No. 1/2006-ST dated 01.03.2006 for ‘Mandap Keeper Service’. I find that for providing the ‘Mandap Keeper Service’ the said service provider hires the Halls and pays rent for the said halls. The amount of service tax paid to the owner of the halls is taken as Cenvat credit by the said service provider and is shown as utilized under the head ‘Renting of immovable property service’. This is grossly incorrect. The factual situation as it comes out and can be understood from the submissions of the said service provider is that for providing ‘Mandap Keeper Service’ they take certain halls on Rent, pay service tax to the owners of the halls and avail cenvat credit on the same. These halls are further rented by the said service provider and the service tax liability is discharged under the head ‘Renting of immovable property service’ using the above discussed cenvat credit availed by them. Therefore, these halls are nothing but “Mandap” within the meaning of Section 65(66) of the Finance Act, 1994 which is reproduced here under:

“Mandap” means any immovable property as defined in Section 3 of the Transfer of Property Act, 1882(4 of 1882) and includes any furniture, fixtures, light fittings and floor coverings therein let out for a consideration for organizing any official, social or business function.

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[Explanation—For the purposes of this clause, “social function” includes marriage.]

I find that the said service provider has contended that for provision of “Mandap Keeper’s Service” for those halls where they have paid the service tax on rent charged and availed the cenvat credit, they have opted for payment of service tax on the full value and in those cases where no service tax is payable on the rent for hiring of halls they have not availed cenvat credit and have availed abatement under Notification No. 1/2006 dated 01.03.2006. They submitted that they have shown both the values together in the ST-3 return however, they had enclosed a separate sheet showing the working along with the ST-3 return. I have seen the copy of both the ST-3 returns i.e. for the period April’09 to Sept’09 and Oct’09 to Mar’10 submitted by the said service provider along with the above referred Chartered Accountant’s certificate dated 29.8.2011. I find that along with the ST-3 return for the period April’09 to Sept’09 a worksheet showing the taxable value with abatement benefit and service tax payable is enclosed, whereas along with the ST-3 return for the period Oct’09 to Mar’10 no such worksheet is enclosed. I find that the said service provider, for certain halls is desirous of assessement by availing Notification No. 1/2006 dated 01.03.2006 whereas for other halls he claims of not opting the said notification. The said service provider has not given any such hall wise/contract wise bifurcation, therefore I do not go in to those merits. I find that in order to avail the benefit of abatement under Notification No. 1/2006 dated 01.03.2006, it has to be conclusively proved that CENVAT credit of duty on inputs or capital goods or the CENVAT credit of service tax on input services, used for providing such taxable service has not been taken and the service provider has not availed the benefit of Notification No. 12/2003 dated 20.6.2003. I find from Sr.No. 5B under the head ‘Cenvat credit taken and utilised’ of the ST-3 return for the period April’09 to Sept’09 and return under rule 5 of the Service Tax Credit Rules, 2002 for the said period that the said service provider has taken Cenvat credit of Rs. 7,90,525/-. I also find from Sr.No. 5 under the head ‘Cenvat credit details’ of the ST-3 return for the period Oct’09 to Mar’10 that the said service provider has taken Cenvat credit of Rs. 22,04,200/-. Moreover, as discussed by me earlier, the said service provider has utilized the said cenvat credit for providing ‘Mandap Keeper Service’ by wrongly showing the utilization under the category of ‘Renting of immovable property service’. Therefore, ‘Annexure-D’ submitted by the said service provider showing that no cenvat credit is utilized for payment of service tax under the ‘Mandap Keeper service’ is not acceptable as the utilization of the said cenvat credit is shown under the category of ‘Renting of immovable property service’. Hence, I find that the said service provider has failed to fulfill the conditions of Notification No. 1/2006-ST dated 01.03.2006.

In view of the above, I hold that the said service provider is not eligible for abatement under Notification No. 1/2006-ST dated 01.03.2006 for “Mandap Keeper Service” and the service tax of Rs. 50,44,835/- on the abatement amount of Rs. 4,89,78,983/- claimed by the service provider during the period from 01-04-2009 to 31-03-2010 is recoverable from the said service provider under Section 73(1) of the Finance Act, 1994 along with interest under Section 75 ibid.

45. The show cause notice dated 22.12.2010 demanding short payment of service tax for the period 1.4.2009 to 31.3.2010 is issued

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within the normal period of one year. Hence, the contentions made by the said service provider with regard to bar of limitations are not relevant. I further observe that there is neither any charge of suppression nor the show cause notice proposes imposition of penalty under Section 78 of the Finance Act, 1994. Therefore, I do not find any need to discuss the contentions made by the said service provider on these issues.

46. I now take up the issue of imposition of penalty under section 76 and 77 of the Act.

47. As regards the issue of imposition of penalty under Section 76 of the Finance Act, 1994, I observe that the demand is for the period 1.4.2009 to 31.3.2010 and the said service provider should have paid service tax within the stipulated time period as prescribed under Section 68 of the Finance Act, 1994 read with Rule 6 of the Service Tax Rules, 1994, which they have failed to do. Therefore, I hold them liable to penalty under Section 76 of the Finance Act, 1994.

47.1 I observe that Penalty under Section 77(1)(a) of the Finance Act, 1994 w.e.f 10.5.2008 is for failure to obtain Service Tax registration. I observe that as discussed above the said service provider was liable to pay service tax under the category of “Management, Maintenance and Repair Service” for the year 2009-10. I find that the said service provider has not furnished any evidence to show that they have made an application to amend their service tax registration for inclusion of “Management, Maintenance and Repair Service” as required under section 69 of the Finance Act, 1994 read with Rule 4 of the Service Tax Rules, 1994. The said contravention has made the said assessee liable to penalty under Section 77 of the Finance Act, 1994.

47.2 As regards their contention for invoking Section 80 of the Finance Act, 1994 for waiver of penalty, I find that the said service provider has not produced any reasonable cause for the failure to pay service tax except that it was an issue of interpretation. I have already discussed the issue of taxability of the services in the foregoing paras and arrived at the findings that the said services are taxable. I observe that if the said service provider had any doubt regarding the taxability of the services provided by them, then being a registered service tax assessee they should have approached the service tax authorities for clarification of doubt to ascertain the taxability of the service provided by them. Therefore, I consider it appropriate to hold the said service provider liable to penalty under Section 76, and 77 of the Finance Act, 1994.

48. In view of the foregoing discussion, I pass the following order:

O R D E R

i. I order to consider abated amount of Rs. 4,62,39,315/- (Rupees Four crore sixty two lakh thirty nine thousand three hundred and fifteen only) out of the total amount of Rs. 9,24,78,629/- as detailed in para 41.3 above received by M/s Bhagwati Banquets & Hotels Limited during the year 2009-10 as taxable value under the category of “Outdoor Caterering Service”;

ii. I confirm the demand of service tax of Rs. 47,62,650/- (Service Tax Rs. 46,23,932/- + Education cess Rs.

30

92,479/- + Higher Education cess Rs. 46,240/- ) (Rupees Forty seven lakh sixty two thousand six hundred and fifty only) on the above taxable value for the year 2009-10 and order to recover the same from M/s Bhagwati Banquets & Hotels Limited under Section 73(1) of the Finance Act,1994;

iii. I drop the demand of service tax of Rs.43,96,360/- (Rs. 91,59,010/- - Rs. 47,62,650/-) (Rupees Forty three lakh ninety six thousand three hundred and sixty only) as a result of requantification of demand as detailed in para 41.3 above, under the category of “Outdoor Caterering Service”;

iv. I drop the demand of service tax of Rs.1,26,52,143/- (Rupees One crore twenty six lakh fifty two thousand one hundred and forty three only) on the ‘abatement amount’ of Rs. 12,28,36,340/- under the category of “Outdoor Caterering Service”;

v. I order to consider amount of Rs. 4,27,11,174/- (Rupees Four crore twenty seven lakh eleven thousand one hundred and seventy four only) received by M/s Bhagwati Banquets & Hotels Limited during the year 2009-10 as taxable value under the category of “Management, Maintenance & Repair Service”;

vi. I confirm the demand of service tax of Rs. 43,99,251/- (Service Tax Rs. 42,71,117/- + Edu. Cess Rs. 85,422/- and Higher Edu. Cess Rs. 42,712/-) (Rupees Forty three lakh ninety nine thousand two hundred and fifty one only) on the above taxable value for the year 2009-10 and order to recover the same from M/s Bhagwati Banquets & Hotels Limited under Section 73(1) of the Finance Act,1994;

vii. I confirm the demand of service tax of Rs. 50,44,835/- (Service Tax Rs. 48,97,898/- + Edu. Cess Rs. 97,958/- and Higher Edu. Cess Rs. 48,979/-) (Rupees Fifty lakh forty four thousand eight hundred and thirty five only) on the ‘abatement amount’ of Rs. 4,89,78,983/- under the category of “Mandap Keeper Service”;

viii. I order to recover interest on the above confirmed demand of Rs. 1,42,06,736/- (Rs. 47,62,650/- + Rs. 43,99,251/- + Rs. 50,44,835/-) (Rupees One crore forty two lakh six thousand seven hundred and thirty six only) at the prescribed rate from M/s Bhagwati Banquets & Hotels Limited under Section 75 of the Finance Act, 1994;

ix. I impose penalty of Rs.200/- (Rupees Two hundred only) per day for the period during which failure to pay the tax continued, or at the rate of 2% of such tax, per month, whichever is higher, starting with the first day after the due date till the date of actual payment of the outstanding amount of service tax upon M/s Bhagwati Banquets & Hotels Limited under Section 76 of the Finance Act, 1994, provided the amount of penalty payable in terms of this section shall not exceed Rs. 1,42,06,736/- the service tax payable by the said service provider for the period from 1.4.2009 to 31.3.2010.

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x. I impose penalty under Section 77(1)(a) on M/s Bhagwati Banquets & Hotels Limited who shall be liable to pay a penalty of five thousand rupees or two hundred rupees for every day during which such failure continues, whichever is higher, starting with the first day after the due date, till the date of actual compliance i.e. amendment of their service tax registration for inclusion of “Management, Maintenance & Repair Service” as required under section 69 of the Finance Act, 1994 read with Rule 4 of the Service Tax Rules, 1994.

-SD/- 28.10.11

(A.K GUPTA) Commissioner

Service Tax,Ahmedabad

F. No. STC/4-114/O&A/10-11 Date:28.10.2011 By Regd. Post A.D.

To,M/s. Bhagwati Banquets & Hotels Ltd. Third Floor, Circle-P Building, Above Honest Restaurant, S.G. Road, Ahmedabad

Copy to: (1) The Chief Commissioner, Central Excise & Service Tax,

Ahmedabad Zone, Ahmedabad.(2) The Assistant Commissioner, Service Tax, Division-I,

Ahmedabad.(3) The Superintendent, Service Tax, A.R.-III, Division-I, Ahmedabad.(4) The Superintendent (Preventive), Group-II, Service Tax, H.Q., Ahmedabad.(5) Guard File

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