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Corporate News *  Service tax penalty can’t survive when assessee acted on dept.’s own view of non-taxability: Delhi High Court. *  GST section 74 extended limitation questionable when form 26AS mismatch was already known: Karnataka High Court grants interim relief. *  CGST demand prima facie impermissible after state GST settlement under section 128A: Bombay High Court. *  Supreme Court asks GSTAT to sympathetically consider delay as taxpayers pursued remedy before wrong forum. *  Supreme Court stays Tripura High Court ruling protecting genuine buyers from ITC denial over supplier’s GST default. *  Diary entries alone can’t prove clandestine removal of goods: CESTAT quashes excise penalty on steel trader. *  Customs could investigate preferential tariff claims even before sec. 28DA: Delhi High Court. *  Customs dept. relied on fake AI generated case laws: supreme court quashes Rs. 425.28 crore penalty. *  No GST exemption in affiliation and annual registration charges for admission or conduct Of examinations: GSTAT. *  Mere invoices, cheque payments insufficient to establish genuine movement of goods: GSTAT restores Rs. 43.44 lakh ITC demand. *  Consolidated GST show cause notice covering multiple financial years is not without jurisdiction: Delhi High Court. *  Construction of independent houses on separate plots not taxable as ‘Residential Complex’ without common facilities: CESTAT. *  GST penalty exceeding statutory maximum unsustainable; Allahabad High Court quashes ? 50,000/- penalty after taxpayer filed return and paid late fee. *  GST order against standard chartered bank passed without hearing set aside by Bombay High Court. *  Retracted statements can’t be relied upon without cross-examination: CESTAT quashes gold confiscation. *  Burden to prove misclassification lies on customs department: CESTAT. *  CESTAT quashes Rs. 98 lakh excise demand on clearance of used refractory brick scrap. *  Service tax demand on irrigation works quashed: Karnataka High Court rules sale of goods component not taxable as service. *  GSTAT restores tax and penalty for transporting iron scrap without E-way bill citing intent to evade tax. *  Madras High Court stays GST recovery from directors without opportunity to show cause under section 89. *  Madras high court stays GST recovery notice against directors; finds prima facie case on applicability of section 79(1)(c). *  Procedural lapses can’t justify harsh punishment without serious customs breach: CESTAT quashes customs broker licence revocation. *  Service tax payable on land leasing and sports complex charges: CESTAT. *  Settled customs dispute can’t be reopened through Article 226 challenge to interest liability: Delhi High Court. *  Mere facilitation of customs clearance can’t establish knowledge of smuggling: Madras High Court. *  GST registration cancellation stayed: Allahabad High Court questions 99% ITC utilisation cap under rule 86B. *  Composition scheme lapses automatically on crossing Rs. 1.5 crore turnover: GSTAT. *  Gujarat High Court quashes GST cancellation orders after officer relied on non-existent AI-generated case laws. *  Importers liable for customs duty benefits availed through manipulated scrips: Delhi High Court. *  Procedural E-way bill lapse alone can’t justify penalty where genuine transaction and absence of tax evasion are established: GSTAT.
Subject News *  Documentary evidence dominates probe, further custody unwarranted: mumbai court grants bail in Rs. 22.44 crore customs duty evasion case. *  Business premises can’t remain sealed for non-participation in GST search: Allahabad High Court. *  GST pre-deposit must be refunded proportionately when taxpayer partly succeeds in appeal: Bombay High Court. *  Supreme Court grants 30 days to file GST appeal; keeps pre-deposit issue open due to deposit in parallel CGST proceedings. *  GST demand can’t exceed amount proposed in SCN: Allahabad High Court quashes Rs. 20.47 Crore order. *  Hundreds-of-crores GST demand and heavy 10% pre-deposit no ground to bypass statutory appeal: Punjab & Haryana High Court. *  Delhi High Court refuses to entertain challenge to gold confiscation due to statutory appeal remedy and unexplained delay. *  Procedural error in customs broker licence inquiry can be rectified through remand: Delhi High Court. *  GSTR-2A mismatch alone can’t justify ITC denial without invoice-wise verification; personal hearing mandatory: GSTAT. *  GST order passed without uploading personal hearing notices violates sec. 75(4): Allahabad High Court. *  TAX EVASION - Sec. 74 GST SCN quashed for not spelling out fraud, wilful misstatement or suppression: Allahabad High Court. *  STPI’s SOFTEX certification and NoC charges taxable as business support services: CESTAT. *  Suspicion can’t replace proof: CESTAT quashes penalty in alleged gold-smuggling operation. *   Limitation runs from communication of order: Madras High Court upholds rejection of delayed GST Appeals. *  Rajasthan High Court quashes GST demand over unsigned show cause notice. *  ITC recovery upheld where supplier failed to deposit GST: Rajasthan High Court. *  Customs commissioner’s empowered to make port trust liable for duty on pilfered goods: Supreme Court. *  Rectification proceedings can’t be used to challenge an uncontested GST assessment through a writ petition: Andhra Pradesh HC. *  GST proceedings against deceased proprietor unsustainable without notice to legal heir: GSTAT. *  Mere availment of ineligible self-assessed ITC doesn’t amount to suppression without evidence of fraud or wilful misstatement: GSTAT. *  Disposal of mining overburden by entity authorised by mining lease holder constitutes taxable service: CESTAT. *  Toll plaza data not mandatory for ITC refund: GSTAT. *  Disputed GST fraud allegations require investigation: Punjab and Haryana High Court makes interim bail absolute in alleged fraud and GST fraud case. *  Non-manufacturer contractor liable to deposit excess excise duty collected from buyer: CESTAT. *  GST order can’t reject taxpayer’s reply as “not satisfactory” without reasons: Madhya Pradesh High Court. *  Uncorroborated statements can’t establish alleged diversion of duty-free goods: CESTAT. *  Erection services were not liable to service tax prior to 10th september 2004: CESTAT. *  Sec. 74 GST notice must spell out statutory ingredients for invoking extended tax demand proceedings: Allahabad High Court. *  No jurisdictional bar under section 6(2)(b) in parallel CGST SGST proceedings: Delhi High Court refuses to bypass GST appeal remedy. *  Madras High Court remits GST demand for fresh adjudication after taxpayer claims it was unaware of SCN following business closure.  

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Publish Date: 02 Mar, 2013
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SERVICE TAX ON RESTAURANT: A SMALL AMENDMENT MAKES A BROADER SCOPE OF SERVICE TAX


An article by:-
 
CA. Pradeep Jain
CA. Preeti Parihar
CA. Shubham Sancheti
 
Introduction:-
 
Under negative list regime, the service tax was introduced on restaurants, eating joints and mess which have licence to serve the liquor and facility of central heating or Air conditioning at any time during the previous year. However, this budget has removed the condition regarding the licence to serve the liquor. Thus, now the service tax is leviable on all the types of AC restaurants, eating joints or mess. However, some lacuna was there in the language of this levy since its inception which was supposed to be cleared in this budget; but this lacuna still exists even after widening of the scope of this levy. Herein we have looked into this entry as contained in the mega exemption notification prior to and after the amendment.    
 
 
Previous Provision:-
                                           
Vide notification no. 25/2012 ST dated 25.06.2012,Central Government exempted the service provided in relation to serving of food or beverages by a restaurant, eating joint or a mess, other than those having (i) the facility of air conditioning or central air heating in any part of the establishment, at any time during the year, and (ii) A license to serve alcoholic beverages.
 
In this notification the central government exempted only those restaurants, mess who do not have any air conditioner with a license to serve the alcoholic beverages. It means that the restaurants or a mess who have air conditioner with a license to serve alcoholic beverages are liable to pay service tax.
 
Amendment:-
 
The Hon’ble Finance Minister has announced the Union Budget 2013-14 on 28/02/2013. In this budget, notification no. 03/2013 ST Dt. 01.03.2012 has been issued to amend the above serial no. of the mega exemption notification and now the exemption is applicable in relation to the service provided in relation to serving of food or beverages by a restaurant, eating joint or a mess, other than those having the facility of air conditioning or central air-heating in any part of the establishment, at any time during the year. This notification has abolished the condition of license to serve the alcoholic beverages along with air conditioner.
 
It means that restaurants or a mess, not having the license to serve the alcoholic beverages, but having air conditioner in any part of establishment, at any time during the yearare liable to pay service tax. Simply speaking, all the AC restaurants or restaurants with central air heating facilities are liable to service tax w.e.f. 1.4.2013.
 
Lacuna as exists before as well as after the amendment:-
 
The language of the mega exemption notification uses the words “the service provided in relation to serving of food or beverages by a restaurant, eating joint or a mess, other than those having the facility of air conditioning or central air-heating in any part of the establishment, at any time during the year. The above language has been disputable since its inception as the department is interpreting the term “establishment” as entire building, not the restaurant itself. The authors of this article have come across a recent case of their client where demand was raised even on the non AC restaurant of the hotel by alleging that since AC is being installed in another restaurant (which is also the part of the establishment, i.e. hotel). It was alleged that due to this, the above condition that “the AC can be installed in any part of the establishment” is fulfilled. This is how the simple language can be mis-interpreted. On the other hand, phrase “by whatever name called, having facility of air conditioning in any part of the establishment” is preceded by the word “restaurant”. As such, the word establishment is also used in context of the restaurant, irrespective of the fact that the restaurant is situated in a large building with a no. of other restaurants therein. The intention of the government is to tax the AC restaurants only and due to this, the above language has been used. However, the word “establishment” has been mis-interpreted by the revenue officers. This lacuna is there right from the beginning; however, even after broadening the scope to this levy, this lacuna has not been removed.
 
While Concluding:-
 
Government is very quick in broadening the scope of any levy as well as the service tax law as whole. However, the quickness is not reflected in bridging the lacunas that still remain ever after some amendment in the same provision. The instant case is the perfect example of this truth. We have to see how long this lacuna continues.
 

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