2025 (4) TMI 959 - AT - Service Tax

Service tax liability for the period 2011-12 and 2012-13 - Renting of immovable property - Outdoor catering and Restaurant services - Value of pure sales not excluded - Supply to SEZ units - Extended period of limitation - Cum-tax benefit. Service tax liability for the period 2011-12 and 2012-13 - HELD THAT - There are no reason as to why the threshold limit in terms of Notification No. 6/2005-ST dated 01.03.2005 as amended was not calculated while determining the demand. The matter hence merits being remanded for determination afresh. Renting of immovable property - HELD THAT - It is a settled principle in law that a contract is to be interpreted according to the joint intent of both the parties to the contract and which is to be discovered from the entirety of the contract and the circumstances surrounding its formation. The Maxim Pacta dant legem contractui means that the stipulations of the parties constitute the law of the contract. It is hence the duty of the appellant in the circumstances to lead the best evidence in his possession which in this case is the contract as it would throw light on his claim and in case such material evidence is withheld an Authority may draw adverse inference - The Hon ble Supreme Court in Smt. J. Yashoda Vs Smt. K. Shobha Rani 2007 (4) TMI 11 - SUPREME COURT held that the rule which is the most universal is that the best evidence which the nature of the case will admit shall be produced. So long as the higher or superior evidence is within a persons possession or may be reached by him he shall give no inferior proof in relation to it. The taxability of the service if any hence needs to be discussed in terms of the conditions of the contract and has to be examined afresh with a copy of the same - The impugned order also does not disclose any reason for its conclusion approving taxability for the alleged service. The Appellant has claimed that he provides item wise food based on the availability and further collects and pays Value Added Tax for such sale. The same is not seen discussed. The matter hence merits to be examined afresh by the Original Authority. Outdoor catering and Restaurant services - HELD THAT - The Adjudicating Authority has determined the taxable value by including the sodexo sales swiggy sales bakery sales etc. which are not exigible to service tax. The Appellant has submitted that they paid Rs. 19, 30, 844/- in excess during the period 2015-16 and therefore requested to adjust the demand relating to the period April 2015 to June 2017 which works out to Rs. 12, 11, 966/- which has not been examined by the Original Authority. There are no discussion of this matter in the OIO and hence this matter of the stated activity not being exigible to service tax and tax not being adjusted too deserves to be examined afresh. Supplies to SEZ - HELD THAT - Rule 9 of the SEZ Rules provides for the grant of approval for authorized operations. As per Rule 10 the goods and services required for the authorized operations may be approved by the Board. Hence unauthorized operations performed within the SEZ area are liable to duty. In the case of Competent Authority Vs. Barangore Jute Factory 2005 (11) TMI 490 - SUPREME COURT it has been held by the Hon ble Apex Court that where statute requires an act to be done in a particular manner the act has to be done in that manner alone (Para 5). Similar views have been expressed in the case of A.K. Roy Vs. State of Punjab 1986 (9) TMI 412 - SUPREME COURT and CIT Vs. Anjum M.H. Ghaswala 2001 (10) TMI 4 - SUPREME COURT . In fact a Constitutional Bench of the Hon ble Supreme Court in Commissioner Vs Hari Chand Shri Gopal 2010 (11) TMI 13 - SUPREME COURT considered the matter of exemption and also the pre-conditions for entitlement to avail such exemption. It held that the doctrine of substantial compliance cannot be pleaded if a clear statutory prerequisite which effectuates the object and the purpose of the statute has not been met - The appellant is provided one more chance to produce the requisite documents in support of their claim for exemption and the provisions of the SEZ Act. Extended period of limitation - HELD THAT - The OIO has alluded to evidence showing enrichment by the appellant based on public money collected as taxes. However since the matter is being remanded this issue can also be examined afresh. Cum-tax benefit - HELD THAT - One of the allegations against the appellant is that they collected service tax from their customers but did not pay the same to the exchequer. This factual matter needs to be examined by the lower authority before granting the benefit of cum-duty valuation in line with the Tribunal decision in Advantage Media Consultant . This issue may also be examined by the Original Authority during remand proceedings and if necessary the duty may be re-quantified suitably by giving the cum-tax advantage where ever due. Conclusion - i) For service Tax Liability for 2011-12 and 2012-13 the threshold limit was not considered while determining the demand warranting a remand for fresh determination. ii) For Renting of Immovable Property due to the absence of the contract terms with Tamarai Hotels (P) Ltd. the Tribunal could not assess the nature of the service provided. iii) For Outdoor Catering and Restaurant Services it is found that the orders from the adjudicating authority were cryptic and lacked analysis on how the contracts met legal requirements. iv) For inclusion of Sodexo Swiggy and Bakery Sales there are no discussion on this matter in the original order necessitating a remand for reevaluation of the taxable value. v) For supplies to SEZ Units appellant was given another opportunity to produce necessary documentation to support their exemption claim. vi) For invocation of period of limitation there are evidence of tax collection without deposit and non-compliance with statutory obligations suggesting suppression of facts. Appeal allowed by way of remand.

Summary

ISSUES PRESENTED and CONSIDERED

The core legal questions considered in this judgment include:

• Whether the appellant is liable for service tax for the period 2011-12 and 2012-13 under Notification No. 6/2005-ST.
• The applicability of service tax on renting of immovable property, particularly concerning buildings used for hotels.
• Classification of services provided to clubs as outdoor catering or as mere sale of food, and the applicability of service tax on such transactions.
• Whether sales through sodexo, swiggy, and bakery sales should be included in the taxable value for restaurant services.
• The applicability of service tax on supplies made to SEZ units, considering procedural compliance.
• The invocation of the extended period for demand under the premise of suppression of facts by the appellant.
• Entitlement to cum-tax benefit under Section 67(2) of the Finance Act.

ISSUE-WISE DETAILED ANALYSIS

1. Service Tax Liability for 2011-12 and 2012-13

The appellant argued that their turnover for renting of immovable property was below the threshold limit as per Notification No. 6/2005-ST, thus exempting them from service tax. The Tribunal found that the threshold limit was not considered while determining the demand, warranting a remand for fresh determination.

2. Renting of Immovable Property

The appellant claimed that buildings used for hotels fall outside the purview of 'renting of immovable property service' under Section 65(105)(zzzz). However, due to the absence of the contract terms with Tamarai Hotels (P) Ltd., the Tribunal could not assess the nature of the service provided. The Tribunal emphasized the need for the appellant to present the contract to ascertain the service's taxability, necessitating a remand for further examination.

3. Outdoor Catering and Restaurant Services

The appellant contended that their transactions with clubs were mere sales of food, not outdoor catering services, as VAT was charged. The Tribunal noted that the orders from the adjudicating authority were cryptic and lacked analysis on how the contracts met legal requirements. The Tribunal found it necessary to examine the matter afresh, focusing on whether the transactions were taxable services or mere sales.

4. Inclusion of Sodexo, Swiggy, and Bakery Sales

The appellant claimed that these sales were not exigible to service tax and that they had paid excess tax, which should be adjusted. The Tribunal found no discussion on this matter in the original order, necessitating a remand for reevaluation of the taxable value.

5. Supplies to SEZ Units

The appellant argued that procedural lapses should not negate their exemption under the SEZ Act. The Tribunal highlighted that exemptions are subject to statutory requirements and procedural compliance. The appellant was given another opportunity to produce necessary documentation to support their exemption claim.

6. Invocation of Extended Period

The appellant contested the invocation of the extended period, arguing that the issue was one of classification. The Tribunal noted evidence of tax collection without deposit and non-compliance with statutory obligations, suggesting suppression of facts. However, this issue was also remanded for fresh examination.

7. Cum-tax Benefit

The appellant sought cum-tax benefit, citing a precedent where the value received was considered as cum-tax if service tax was not charged. The Tribunal agreed with the precedent but noted allegations of tax collection without remittance. This factual matter was remanded for further examination to determine the applicability of cum-tax benefit.

SIGNIFICANT HOLDINGS

The Tribunal emphasized the necessity of detailed reasoning and proper analysis in adjudicating orders, citing precedents on the importance of clarity and precision in judgments. The Tribunal set aside the impugned orders and remanded the matters for de novo adjudication, instructing the lower authority to follow principles of natural justice and provide a well-reasoned order. The appellant was directed to cooperate with the adjudicating authority to expedite the process.