Whether letting of auditorium for staging dramas leviable to service tax under ‘Mandap Keeper’?

PJ/CASE LAW/2014-15/2488

Case:- GADKARI RANGAYATAN VERSUS COMMISSIONER OF SERVICE TAX, MUMBAI-II

Citation:- 2014 (36) S.T.R. 155 (Tri. - Mumbai)

Brief fact:-The appeal is directed against the Order-in-Appeal No. SB(6)6/STC/2010, dated 12-1-2010 passed by the Commissioner of Central Excise (Appeals), Mumbai-I.
The appellants M/s. Gadkari Rangayatan, Thane are run by the Thane Municipal Corporation and they rent out their auditorium for staging dramas and other entertainments for the citizens of Thane. The issue is whether they are liable to service tax under the category of “Mandap Keeper Services” during the period from 1998-99 to 2004-05. The adjudicating authority held that they are liable to service tax under the above category and confirmed the service tax demand vide Order-in-Original dated 13-3-2006. Interest on the service tax liability was also confirmed and penalties were imposed on the appellant under Sections 76, 77 and 78 of the Finance Act, 1994. The appellant preferred an appeal before the Commissioner (Appeals) who vide the impugned order upheld the Order-in-Original. Hence the appellants are before tribunal.

Appellant’s contention:- None appeared for the appellant in spite of notice. The case was listed for hearing earlier on a number of occasions on 13-8-2012, 25-9-2012, 19-11-2012. However, none appeared for the appellant despite notice. Therefore, the appeal was taken up for consideration and disposal on the basis of the submissions made by the appellant in their appeal memo.
The main argument of the appellant is that Auditorium is rented out for conducting drama performance and other cultural entertainments. Such events cannot be considered as official, social or business function and hence, they are not liable to Service Tax under the category of Mandap Keeper Services.

Respondent’s contention:-The learned Addl. Commissioner (A.R.) appearing for the Revenue, on the other hand, contends that the issue is settled in favour of the Revenue by this Tribunal in the cases of Secretary, Town Hall Committeev. Commissioner of Central Excise, Mysore - 2007 (8)S.T.R.170 (Tri.-Bang.)and Manager, Ravindra Kalakshetrav. Commissioner of Central Excise, Bangalore - 2008 (10)S.T.R.249 (Tri.-Bang.), wherein it was held that the term ‘social function’ specified in Mandap Keeper Service is very comprehensive and would cover cultural events also and renting out the premises for cultural events would be liable to Service Tax under the category of Mandap Keeper Services.

Reasoning of judgment:- As per Section 65(105)(m) the Mandap Keeper service defined as “any service provided or to be provided to any person by a Mandap Keeper in relation to the use of Mandap in any manner including the facilities provided or to be provided to such person, in relation to such use and also the services, if any, provided or to be provided as a caterer.” Section 65(66) defines Mandap as any immovable property as defined under Section 3 of the Transfer of Property Act, 1882 and includes any furniture, fixtures, light fittings and floor coverings therein let out for consideration for organizing any official, social or business function. As per explanation thereto, social function includes marriage.
The question to be decided is when the Auditorium is rented out for conducting cultural functions, whether the same would get covered within the definition of Mandap Keeper. This very issue was considered by this Tribunal in the case of Secretary, Town Hall Committee (supra) and this Tribunal held as follows :-
“The term ‘social function’ is very comprehensive. Cultural events are only a subset of social functions. In our view, any cultural event would also be considered as a social function. In a social function like dance or drama, many people attend for watching the programme. We cannot say that there is no meeting of minds. The learned Advocate wants to restrict the scope of function only to certain ceremonies like marriage. We are afraid that there is no justifiable reason for limiting the scope of the term ‘social function’ in such a manner.”
Thus, this Tribunal held that cultural functions are also social functions and renting out the hall for cultural functions would attract Service Tax liability. The said decision of the Tribunal was also upheld by the Hon’ble High Court of Karnataka reported in 2011 (24)S.T.R.172 (Kar.). This Tribunal also followed the ratio of the said decision in the case of Manager, Ravindra Kalakshetra (supra) and also in the case of Surat Municipal Corporation v. Commissioner of Central Excise, Surat reported in 2006 (4)S.T.R.44. Thus, they are of the considered view that the activity undertaken by the appellant in the present case would get squarely covered under the category of “Mandap Keeper Services” and the appellants are liable to pay Service Tax on the said activity accordingly.
The next issue to be decided is whether the extended period of time invoked to confirm the duty demand can be sustained and whether the appellant can be charged with intention to evade payment of Service Tax? A similar issue was considered in the case of Surat Municipal Corporation case (supra) and it was held that in the case of Statutory/Government bodies, there can be no mala fide intention to evade payment of Service Tax and it can be considered only as an omission on the part of the appellants and, therefore, there is no need to impose any penalty and invoke any extended period of time. A similar view was held in the case of other Government bodies, in BEST Undertaking v. Commissioner of Central Excise, Mumbai - 2007 (213)E.L.T.202.
Following the ratios of the above decisions, in the present case also, they hold that the demand of Service Tax can be upheld only for the normal period of limitation and not for the extended period. The adjudicating authority is directed to re-compute the duty demand for the normal period of limitation and intimate the same to the appellants for payment. The appellant would also be liable to pay interest on the recomputed demand in terms of Section 75 of the Finance Act, 1994.
As regards penalties imposed on the appellants, they hold that there cannot be any mala fide intention on the part of the appellant being a Government body and, therefore, they set aside the penalties imposed on the appellants under Section 80 of the Finance Act, 1994.
The appeal is disposed of in the above terms.

Decision:- Appeal disposed of.

Comment:- The analogy of the case is that if Auditorium is rented out for conducting drama performance and other cultural entertainment shows, the same would be covered by the term ‘social function’. Cultural functions are also social functions and renting out the hall for cultural functions would attract Service Tax liability. According to various decisions on the issue under consideration, appellant was liable to pay service tax under the category of “Mandap Keeper Services”.As regards imposition of penalty was concerned, it was concluded that the appellant being a government body, there can be no intention to evade payment of service tax. Accordingly, the extended period was not invoked and the service tax demand was restricted to normal period with setting aside of penalties imposed on them.

Prepared by:- Monika Tak

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PJ/CASE LAW/2014-15/2488

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