2006 (11) TMI 88 - AT - Service Tax

Mandap Keeper Appellant contended that they letting out the premises only for cultural purposes like drama, dance and music etc and these are not covered under social function Authority decided that appellant activity is social function and liable for service tax

Summary

Issues Involved:
- Service Tax liability of Mandap Keeper for letting out premises for social/cultural functions
- Applicability of penalties under various sections of the Finance Act, 1994
- Interpretation of the term 'function' in the context of Service Tax levy
- Invocation of Section 80 of the Finance Act, 1994 for penalties
- Consideration of dance programs as social functions for Service Tax liability

Analysis:

The appeal before the Appellate Tribunal CESTAT, Bangalore involved challenging the Order-in-Original (OIO) passed by the Commissioner of Central Excise (Appeals-II), Bangalore, which confirmed the Service Tax demand on the appellants, who were letting out their premises for social/cultural functions under the category of Mandap Keeper. The investigations conducted by the Preventive Unit revealed the liability for Service Tax, interest, and penalties under various sections of the Finance Act, 1994. The Adjudicating Authority upheld the Service Tax demand and imposed penalties, leading the appellants to appeal to the Commissioner (Appeals), who also affirmed the decision, prompting the appeal to the Tribunal.

During the proceedings, the appellants argued that their activities primarily focused on promoting cultural events and were not liable for Service Tax as Mandap Keepers. They contended that the lower authorities erred in equating cultural activities with social functions, citing relevant case laws and Circulars to support their position. The appellants highlighted their belief in good faith regarding compliance with the Finance Act, 1994, and requested the invocation of Section 80 to waive penalties.

In response, the Revenue represented by the JDR emphasized Circulars stating that letting out premises for dance, drama, and music programs constituted taxable services. The Tribunal carefully reviewed the arguments and precedents cited by both parties. While acknowledging the cultural significance of the activities, the Tribunal agreed with the Revenue's interpretation that such events fell under the purview of social functions, making them liable for Service Tax as Mandap Keepers. However, considering the appellants' genuine belief and lack of prior enforcement actions by the department, the Tribunal invoked Section 80 to waive penalties, directing the appellants to pay the Service Tax and interest while setting aside all penalties.

Ultimately, the Tribunal pronounced its decision on 28-11-2006, resolving the appeal in favor of the Revenue regarding Service Tax liability but granting relief to the appellants by waiving penalties under Section 80 of the Finance Act, 1994.