Whether the rooms booked on account of wedding ceremony was chargeable to service tax under mandap keeper service?

CASE STUDY
Prepared By- CA Preksha Jain and Bhavika
Introduction:-
M/s Marudhar Hotels Pvt. Ltd.-Umaid Bhawan Palace(hereinafter referred to as appellant) are engaged in providing the taxable services namely Mandap Keeper Service, Internet cafe services, renting of immovable property service etc. and are having Service Tax Registration No. AABCM0773GST001. The appellant are a leading hotel in the city of Jodhpur. The Department issued show cause notices no. V(ST)Adj-II/JDR-II/57/2012/647, dated 22.09.2015. In the show cause notice it was alleged that the appellant have not paid service tax amounting to Rs. 19,64,019/- payable on the Mandap Keeper Services provided by them to organizers of various wedding functions for the period from 01.04.2010 to 30.04.2011. It was alleged that the rooms booked on account of wedding ceremony were part and parcel of Mandap and therefore the amount received towards the said booking of rooms was chargeable to service tax under the Mandap Keeper Service. The show cause notice proposed to recover service tax under the category of Mandap Keeper Service along with interest along with penalty. The learned Adjudicating Officer did not adhere to the submissions made by the appellant and passed the impugned order in original no. 105/ST/JDR/2016-ADDITIONAL COMMISSIONER, DATED 23.08.2016, confirming the demand of service tax and interest and penalty under section 78. However, Penalty under Section 76 has been dropped. Aggrieved by the Order in Original confirming the demand of service tax, interest and penalty and is liable to be set aside.

M/s MARUDHAR HOTELS PVT. LTD.

Relevant Legal Provisions:

Section 3 of the Transfer of Property Act, 1882.-(66) "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 outfor consideration for organizing any official, social or business function;
Interest payable under Section 75 of the Finance act, 1994
Penalty under Section 76 of chapter V of the finance act ,1994
Section 77(2) of the chapter V of the finance act ,1994- Penalty for not showing the full detail in the ST-3 returns contravening the provision of Rule 7 of the service tax rules,1994 read with section 70 of chapter V of the finance act,1994
Section 78 of chapter V of the finance act, 1994- Penalty for willful suppression of the facts/intentional evasion of service tax & contravention of any of the provision of this chapter or rules made there under with an intent to evade payment of service tax.

Issue Involved:-
Whether the rooms booked on account of wedding ceremony was chargeable to service tax under mandap keeper service?
Brief Facts:-
M/s Marudhar Hotels Pvt. Ltd.-Umaid Bhawan Palace(hereinafter referred to as appellant) are engaged in providing the taxable services namely Mandap Keeper Service, Internet cafe services, renting of immovable property service etc. and are having Service Tax Registration No. AABCM0773GST001. The appellant are a leading hotel in the city of Jodhpur. The Department issued show cause notices no. V(ST)Adj-II/JDR-II/57/2012/647, dated 22.09.2015. In the show cause notice it was alleged that the appellant have not paid service tax amounting to Rs. 19,64,019/- payable on the Mandap Keeper Services provided by them to organizers of various wedding functions for the period from 01.04.2010 to 30.04.2011.
The appellant replied to the above show cause notice vide letter having reference as PJ/SCN/M-81/15-16/2743 dated 13.10.2015. The learned Adjudicating Officer did not accept the submissions made by the appellant and passed the order in original no. 105/ST/JDR/2016-ADDITIONAL COMMISSIONER, dated 23.08.2016 confirming the demand of Service Tax under proviso to Section 73 (1) of the Finance Act, 1994 along with interest under Section 75 of the Finance Act, 1994. Penalty of Rs. 19,64,019/- under Section 78 and penalty of Rs. 10,000/- under section 77(2) of the Finance Act, 1994 was also imposed. Aggrieved by the impugned Order in Original, appellant submit that the Order-In-Original passed by the learned adjudicating authority is wholly and totally erroneous and is liable to be set aside.The assessee put forwarded his contentions before Commissioner (Appeals) and the appeal decided by The Commissioner (Appeals) Central Excise & CGST, Jodhpur. The Commissioner (Appeals) Central Excise & Central Goods And Service Tax, Jodhpur vide order-in-appeal no. 619(CRM)/ST/JDR/2018 dated 20.06.2018 accept the appeal and set aside the impugned order. Therefore, the assessee have filed refund claim for Rs. 147301/-.

Assessee’s Contentions:-

The appellant submit that the Order-In-Original passed by the learned adjudicating authority is wholly and totally erroneous and is liable to be set aside.

The appellant submit that in the impugned order the learned Additional Commissioner has held that “Mandap” is defined as any immovable property as defined in Section 3 of the Transfer of Property Act, 1882 and thus, meaning of ‘Mandap’ is very wide in its coverage and includes all immovable properties let out for organizing social, official or business functions. It was further held that the rooms were let out by the appellant for the wedding ceremonies. Thus, it is alleged that appellant had let out garden as well as rooms for wedding ceremonies and arranged to raise separate bills to evade payment of service tax on the charges collected for letting out the rooms.

In this regard, the appellant submit that the definition of “Mandap” is defined as any immovable property as defined in Section 3 of the Transfer of Property Act, 1882. The definition is produced as follows:-

(66) "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 outfor consideration for organizing any official, social or business function;

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

The analysis of above definition makes it clear that an immovable property will be termed as “Mandap” if all of the following conditions are satisfied: -

The immovable property is of nature as defined in section 3 of Transfer of Property Act, 1882.
It will include any furniture, fixtures, light fittings and floor coverings therein.
It should be let out for consideration.
The purpose for which the property is let out should be organizing of any official, social or business function.

Thus, the definition says that an immovable property will be termed as Mandap if all the above conditions are satisfied. Merely because it is an immovable property and is let out for a consideration would not tantamount to “mandap” unless any Official, Social or Business function is performed. It is submitted that the entire definition is to be read as a whole. And on reading the definition it becomes clear that the not only the area but the functionality also required to be seen for deciding whether a particular premises was let out for marriage ceremony. It is submitted that the marriage ceremony and all the related functions were held in the garden area of the appellant. Therefore, only the garden area can be said to be let out for Mandap Keeper Service. However, the rooms let out to the party were only for resting or refreshing purpose. It cannot by any stretch of imagination be said that the Marriage ceremony or any related function was held in the rooms let out. It is submitted that the use of the Rooms is also required to be seen as to ascertain whether any function was held there. However, it is clear that no marriage ceremony or any related function was held in the rooms let out. Therefore, the letting out of said rooms cannot be held to fall under the category of ‘Mandap Keeper Service’ and no service tax can be demanded from the appellant on letting out of the said rooms.

However, the learned Additional Commissioner has not taken the fact of usage/functionality aspect into consideration before holding that the rooms let out were for the wedding ceremonies. If the contention of the impugned order that rooms will also fall under the definition of mandap is accepted even for the sake of argument also, then the closing phrase of this definition – “for organizing any official, social or business function” will loose its relevance. If any immovable property let out for consideration is deemed as mandap then what will be use of adding the above phrase. It has been held by hon’ble Supreme Court that legislature never wastes its words and where language of any provision is plain and unambiguous, no other meaning is to be taken. It has been held in the following case –

BRITISH AIRWAYS PLC VS UNION OF INDIA [2002 (139) ELT 6 (S.C.)]:-

“8. While interpreting a statute the court should try to sustain its validity and give such meaning to the provisions which advance the object sought to be achieved by the enactment. The court cannot approach the enactment with a view to pick holes or to search for defects of drafting which make its working impossible. It is a cardinal principle of construction of a statute that effort should be made in construing the different provisions so that each provision will have its play and in the event of any conflict a harmonious construction should be given. The well-known principle of harmonious construction is that effect shall be given to all the provisions and for that any provision of the statute should be construed with reference to the other provisions so as to make it workable. A particular provision cannot be picked up and interpreted to defeat another provision made in that behalf under the statute. It is the duty of the court to make such construction of a statute which shall suppress the mischief and advance the remedy. While interpreting a statute the courts are required to keep in mind the consequences which are likely to flow upon the intended interpretation.”

An analysis of this decision makes it clear that the various provisions of an enactment should be so interpreted that every provision is effective and if there is any conflict, the harmonious interpretation should be given effect. Similar decision has been given by larger bench of Mumbai Tribunal in the case of CCE, MUMBAI -V VS M/S GTC INDUSTRIES LTD [2008-TIOL-1634-CESTAT-MUM-LB.]. The verdicts of hon’ble Tribunal are produced as follows:-

“It is well settled that every clause of the Statute should be construed with reference to the context in which it is issued. A bare mechanical interpretation of words and application of legislative intent is devoid of concept and purpose will reduce most of the remedial and beneficial legislations to futility. To be literal in meaning is to see the skin and miss the soul.

The legislature never wastes its words or says anything in vain and a construction which attributes redundancy to legislation will not be accepted, as has been observed by the Supreme Court in the case of Union of India vs. Hansoli Devi 2002 7 SCC 273”

Therefore, it is clear that any interpretation which leads to redundancy is to be avoided. In the light of above decisions, the contention of the impugned order that rooms will also be termed as mandap (inspite of the fact that no social, official or business function was organized there) will lead to redundancy of use of phrase “for performing the social, official or business function”. Therefore, such an interpretation is not sustainable and is liable to be set aside.

The appellant further submit that merely because the bills/invoices issued for letting out the rooms have been issued in the name of wedding party does not by itself prove that the Mandap Keeper Service was provided by the appellant in the said rooms. Here again it is required to be ascertained the usage of the said rooms. It is submitted that it is clear that no marriage ceremony can be said to be held in a room which has very limited space. Therefore, it cannot be said that any social function related to marriage was held in the small spaced room. It is reiterated that whether an immovable property is mandap or not is required to be ascertained with the help of determinants set out in the definition of the “mandap”. As such, the finding in this regard is liable to be set aside and the appeal should be allowed.

The appellant further submits that the impugned order in original is relying on the Circular no. 96/7/2007-ST dated 23.8.2007, the relevant part of which reads as follows:-

“Halls, rooms, etc. let out by hotels / restaurants for a consideration for organizing social, official or business functions are covered within the scope of “Mandap” [section 65(66)], and such hotels and restaurants are covered within the scope of “Mandap keeper” [section 65(67)]
Accordingly, service tax is leviable on services provided by hotels and restaurants in relation to letting out of halls, rooms, etc. for organizing any official, social or business function under Mandap Keeper service [section 65(105)(m)].”
The above Circular says that the hotels / restaurants are covered under the scope of Mandap Keeper if they let out any hall or rooms for the purpose of organizing any official, social or business function. Here again, the emphasis is to be supplied on the purpose for which the space is let out. In order to attract the service tax liability, the function to be performed in the hall/room should be in nature of official, social or business function. The rooms are not in any manner used for organizing any such function. The wedding function, conference or events can be held in the banquet hall on which the appellant have paid the service tax under the said service. But the rooms of the hotel were given for temporary residence of the persons of the wedding party/conference/events. Therefore, the rooms of the hotel cannot be said to be the rooms let out for use as Mandap and accordingly, no service tax is payable on the amount received towards the booking of the room. The rooms did not play any role in the wedding function and in conference or events held in appellant’s hotel. As such, this circular also follows the analogy drawn by the charging section no. 65(66) & 65(67). Therefore, no service tax is payable by the appellant and the impugned order in original should be set aside.

The impugned order in original has also held that on similar issue, show cause notice was issued to the appellant for the period from 10.02.2007 to 31.03.2010 and the matter was held against them by the Additional Commissioner by placing reliance on the Supreme Court decision in the case of Tamil Nadu Kalyana Mandapam Association Vs UOI [2006 (3) STR 260 (SC)] and the appeal filed to the Commissioner Appeals has also been dismissed vide OIA No. 117 (RDN) ST/JPR-II/2012 dated 16.10.2012. In this regard, the appellant wish to point that although the appeal filed by them has been rejected by the Commissioner Appeals but they have not accepted the said order and have further filed appeal against the said OIA to the Tribunal. It is also pertinent to mention that the Hon’ble Delhi Tribunal has also granted them unconditional stay from depositing the concerned service tax demand vide Stay Order No. ST/SO/58488/2013, ST/MO/58487/2013-CU [DB] dated 25.07.2013 and this fact was also brought notice to the learned adjudicating authority but inspite of it, the reliance placed on the Stay Order has been simply ignored while passing the impugned order. Moreover, the appellant also once again place reliance on stay order passed in case of M/s Taj Hari Mahal, Jodhpur by the same Hon’ble Delhi Tribunal having Stay Order No. SO/59218-59219/2013-CU[DB] dated 16.09.2013 wherein also, the Delhi Tribunal allowed the stay application by placing reliance on the earlier decisions given in the case of Rambagh Palace and Merwara Estates. The appellant submit that these stay orders also clearly indicate that the issue as regards inclusion of room rent charges in the mandap keeper service is primarily not tenable and so the impugned order should be quashed and the appeal should be allowed.

The appellant further submit that the impugned order has alsoplaced reliance on the decision given by Hon’ble Delhi Tribunal in the case of Sayaji Hotels Ltd. Vs Commissioner of Central Excise, Indore [2011-TIOL-226-CESTAT-DEL] wherein reliance was placed on Supreme Court decision in the case of Tamil Nadu Kalyana Mandapam Association [2004-TIOL-36-SC-ST]. In this regard, the appellant submits that erroneous reliance has been placed on the decision given in the case of Sayaji Hotels Ltd. and the decision is clearly distinguishable. In the case of Sayaji Hotels, the issue was whether assessee can avail the benefit of notification no. 12/2003-ST by treating the portion of food and beverages supplied as ‘sale’ as separate billing was done for renting of Mandap and that for supply of food and beverages. The revenue department objected availment of benefit under notification no. 12/2003-ST and contended that abatement benefit may be availed as catering is incidental service to Mandap keeper service. Hence, in the case of Sayaji Hotels Ltd., the issue was altogether different and the ratio of the decision cannot be made applicable in the present case. This is for the reason that catering is incidental to Mandap keeper services but letting of rooms cannot be considered as incidental activity by a hotel which is primarily engaged in service of renting of rooms. Therefore, the impugned order has placed erroneous reliance on the decision as the same is not applicable in the present case.

The appellant further submit that the learned Additional Commissioner has relied upon the judgment of the Hon’ble Supreme Court given in the case of TAMIL NADU KALYANA MANDAPAM ASSOCIATION V/S UNION OF INDIA [2006 (3) STR 260 (SC)]to hold that the appellant has provided access to halls and rooms for wedding purposes and the rent amount received for rooms is chargeable to service tax.

In this regard, the appellant submit that in the case of Tamil Nadu Kalyana Mandapam Association, the appeal was filed by the said Association to challenge the levy of service tax on Mandap Keeper services. The issue to be decided by the hon’ble Supreme Court was - whether the levy of service tax on “Mandap Keeper services” was within the constitutional powers of the government? Thus, the said decision is wrongly relied upon in the case of appellant as the appellant is not challenging the constitutional validity of the service tax on mandap keeper services. Further, in this case, the hon’ble Supreme Court has held as follows:-

“taxable services could include mere providing of premises on a temporary basis for organizing any official, social or business functions, but would also include other facilities supplied in relation thereto. There is no distinction from restaurants, hotels etc. which provide limited access to property for specific purpose.”

The appellant submits that hon’ble Supreme Court has held that the letting of premises should be for organizing any official, social or business function. It is further held that this would be applicable on hotels and restaurants which casually let out their premises, however, such letting out should be for the specific purpose. Here specific purpose means organizing the official, social or business function. Thus, in the above decision, hon’ble Supreme Court has held that the service tax would also be levied on hotels and restaurants besides ordinary mandap keepers, if they let out their premises for organizing any social, official or business function. The appellants are providing mandap keeper services in their garden/banquet halls and are prompt in paying the service tax as applicable to them. But the case has been made against them for paying the service tax on room charges when the rooms were occupied for the purpose of residence/accommodation. Neither any social nor official or business function was organized in the said rooms. Therefore, the contention of the impugned order is baseless. Further, the decision cited by the adjudicating authority also says that the purpose of letting should be organizing of specified function – social, official or business. Since no such function was performed in the rooms, the impugned order has wrongly placed the reliance upon the above judgment of Supreme Court. It is further held in the said decision that in addition to letting out the Kalyana Mandaps, the Mandap Keepers also provide other facilities such as tents, catering, electricity, water etc. to their clients. It was held that even if the assessees therein were providing such services along with the Mandap, all these services will fall under the scope of Mandap keeper Service. The appellant too agrees on the same and they are also paying the service tax on the same if they provide these services along with letting out of garden/banquet halls. However, this is not applicable in case of rooms as no official, Social or business function was held therein. As such, the definition of mandap keeper is not applicable on the rooms. In the light of above discussion, it is ample clear that the impugned order is incorrect in placing reliance on the above decision and this decision is not applicable in the case of appellant. Therefore, the impugned finding is not sustainable and it liable to be set aside.

The appellant further submits that the reliance placed by the appellant on number of decisions rendered by Tribunal has been rejected simply by stating that the decisions cannot be considered because they have been passed without considering the decision of the Hon’ble Apex Court in case of TAMIL NADU KALYANA MANDAPAM ASSOCIATION V/S UNION OF INDIA [2006 (3) STR 260 (SC)]. In this regard, it is reiterated that the Apex Court decision was not considered in the decisions relied upon by the appellant as the issue pertaining to the present case is entirely different. The Apex Court has only confirmed constitutional validity of service tax under Mandap Keeper Services and outdoor catering services whereas the issue under consideration is whether consideration for letting out rooms is includible in the taxable value of Mandap keeper service rendered by the appellant. The issue under dispute is entirely different and the appellant have placed reliance on the decisions most directly attributable to the case on hand. However, the learned adjudicating authority has simply denied its applicability by placing reliance on Supreme Court decision which is rendered on altogether different issue. The appellant submits that the adjudicating authority does not has right to deny applicability of decisions rendered by Tribunal on identical issue on the ground that another decision rendered in totally different context was not considered by the Tribunal. As such, the rejection of reliance placed on number of decisions on the issue by Tribunal on futile grounds is not tenable and the appeal should be allowed by setting aside the order in original.

The appellant once again wish to place reliance on number of decisions passed on the issue in their favour. The appellant submit that there have been a number of decisions in their favour that the room charges with respect to rooms given on rent along with hall/mandaps are not leviable to service tax under the category of mandap keeper services and so the benefit of all such decisions should be extended to them. In this regard, they wish to first place reliance on the prima facie view taken in the case of MERWARA ESTATE VERSUS COMMISSIONER OF C. EX., JAIPUR [2007 (5) S.T.R. 103 (Tri. - Del.)]which was later on confirmed by the same Delhi Tribunal. They submit that it was held that the room charges collected in a joint premises cannot be strictly fall within the four walls of the definition of ‘mandap keeper’ as hotel has an identity, ‘personality’ and function quite distinguishable from that of a ‘mandap’. While a ‘mandap’ is not a residential property, ‘hotel’ is used for residence, though temporarily. Unlike in a ‘mandap’ no public activity can be said to take place in the privacy of a hotel room. Thus, there is no reason in bringing out the tentacles of tax from a ‘mandap’ to a ‘hotel room’, when the definition is clear and concise.

The facts of the said case are that the assessee owned a hotel and two gardens situated adjacent to hotel building. Bookings of hotel and said two gardens were made by customers for which separate bills were raised by the assessee. It paid service tax in respect of bookings of gardens as ‘mandap keeper’. Revenue demanded service tax from assessee alleging that it had provided services in respect of property comprising of hotel and said gardens. The Delhi Tribunal held that the assessee was not liable to pay service tax in respect of charges recovered which were attributable to renting of hotel rooms.

It is pertinent to note that the prima facie view taken in the above referred case was confirmed during the course of final hearing and reported as MERWARA ESTATES VERSUS COMMISSIONER OF CENTRAL EXCISE, JAIPUR [2009 (16) S.T.R. 268 (Tri. - Del.)]wherein it was held that:-
Valuation (Service tax) - Abatement - Renting of hotel room - Hotel rooms with gardens rented out - Service tax liability not disputed under Mandap Keeper service when gardens rented out - Service tax contended as not leviable on amount attributable to renting of hotel rooms - Tribunal decision in 2006 (4) S.T.R. 370 (Tribunal) authorizes Service tax levy on renting of halls attached to hotel but not in respect of renting of hotel rooms - Prima facie view taken by Tribunal that Service tax not payable on charges for renting of hotel, confirmed - Impugned order set aside - Section 67 of Finance Act, 1994. [paras 2, 4]
The appellant submit that in light of the above cited decision, it is crystal clear that the letting of rooms along with halls cannot be considered to be covered under the taxable service of mandap keeper service and cannot be levied to service tax. Therefore, the benefit of the above cited decision should be extended and the impugned order in original should be quashed.

Apart from the above decision, reliance is also placed on following judicial pronouncements rendered in appellant’s favour as follows:-

RAMBAGH PALACE HOTELS PVT. LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE, JAIPUR [2013 (31) S.T.R. 480 (Tri. - Del.)]wherein it was held that:-

Valuation (Service Tax) - Mandap Keeper services - Inclusion of renting charges of rooms booked for marriage, conference and meetings under composite contract - HELD : Activity of giving hotel rooms organizing function in hotel entirely different from Mandap Keeper activity - Mandap Keeper service definition nowhere covers temporary occupation of hotel rooms for boarding, temporary residence- Lower authorities order holding inclusion of impugned rent in value of service rendered unsustainable - Impugned order set aside - Sections 67, 65(67) and 65(105)(m) of Finance Act, 1994. [paras 3, 4]

CHOKHIDHANI RESORTS (P) LTD. VERSUS COMMISSIONER OF C. EX., JAIPUR [2013 (32) S.T.R. 465 (Tri. - Del.)]wherein it was held that:-

Stay/Dispensation of pre-deposit - Convention service - Valuation (Service Tax) - Inclusion of room rent and food charges - Reliance placed on Tribunal’s decision in Rambagh Palace Hotels Pvt.Ltd. [2013 (31) S.T.R. 480 (Tribunal)] wherein demand seeking inclusion of hotel room rent in Mandap Keeper service set aside holding Mandap Keeper service definition nowhere covers temporary occupation of hotel for boarding and temporary residence - HELD : Issue decided in Mandap Keeper service equally applicable to impugned service - Assessee eligible to unconditional stay - Section 35F of Central Excise Act, 1944 as applicable to Service Tax vide Section 83 of Finance Act, 1994 - Sections 65(32) and 65(105)(zc) of Finance Act, 1994. [paras 1, 2, 3]
The above decisions leave no room for doubt that the appellant is not liable to pay service tax on the consideration received on account of letting of hotel rooms under the category of Mandap keeper services. Therefore, the impugned order should be set aside and the appeal should be allowed.

The appellant also wish to place reliance on the favourable order passed in the case of M/s Taj GVK Hotels & Resorts, Chandigarh vide Order in Appeal no. CHD-EXCUS-000-APP-161-13-14 dated 12.11.2013 wherein the service tax demand amounting to Rs. 21,60,093/- was dropped and the appeal was allowed on the same issue by the learned Commissioner Appeals by placing reliance on the decision of the Delhi Tribunal in the case of Merwara Estates. They submit that the benefit of this decision should be extended to them and the impugned order in original should be quashed.

Similarly, reliance is also placed on decisions passed by Service Tax Commissionerate-Jodhpur in case of M/s TAJ HARI MAHAL, JODHPUR as follows:-

Order in Original No. 32/2012/S.T./JPR-II/Commissioner dated 17.09.2012wherein it was held that:-

“…….. an activity which becomes a complementary obligation for discharging/availing the service of Mandap, will be required to be added to the taxable value for the purpose of discharging service tax. It is also confirmed in this judgement that rooms of the hotel are not necessary for the use of the Mandap. As already observed above the department would have had a case if it was established that renting of rooms was essential for holding the social or official functions and that each such function was held by the assessee by compulsorily having a fixed number of rooms on rent alongwith the Mandap where functions were held. Based on the above findings I do not hold that the show cause notice dated 23.08.2011 has any legs to stand on merits. The demand is, therefore, required to be discharged on merits and accordingly no interest under section 75 of the Finance Act, 1994 can also be held as leviable.”

Order in Original No. 36/ST/JPR-II/2013-Addittional Commissioner dated 27.02.2013wherein it has been held that:-

“The assessee has argued that the rooms, rented out to the persons organizing the functions, are not used for organising the specified functions. It is not brought out in the show cause notice dated 03.04.2012 that the rooms rented out to the persons are in fact used for organising the specified functions. It is not the case of the department that it is compulsory for the persons organising functions to take the rooms on rent when a function is being organised in the ‘Mandap’ of the assessee and that always a fixed number of rooms were taken by the persons when organising specified functions. Further, in the absence of any documentary evidence to the fact that no official, social, or business functions were held in the rooms were in the rooms rented out by the assessee, CBEC Circular no. 96/7/2007-ST will not be applicable to the assessee’s case. Further, I find force in the averments of the assessee that the service tax on renting of mandap attached to the hotel but not in respect of renting of the hotel rooms as has been maintained by the CESTAT double bench in the case of Merwara Estate vs CCE Jaipur in which the CESTAT has not found taxable and the same view has been taken by the Commissioner of Central Excise, Jaipur-II vide Order in Original No. 32/2012/S.T./JPR-II/Commissioner dated 17.09.2012. Therefore, I am of the confirmed view that the assessee is not required to add room rents to the taxable value when rooms are simultaneously rented out to the persons for holding conference, events & wedding ceremonies under the category of ‘Mandap Keeper Services’.
I observe that the show cause notices issued in the instant case is not sustainable and the same deserves to be dropped……”
In the light of the above cited orders, it is crystal clear that the adjudicating authorities, themselves have accepted in the past that the value of room rent should not form part of the taxable value under ‘mandap keeper services’ and so the above cited orders should also be considered for deciding the issue in the present case also so that consistency is maintained. Hence, the impugned order in original is not at all sustainable and is liable to be set aside.

The appellant submit that by passing this order, learned adjudicating officer has confirmed a time barred demand which is not justified. It is further submitted that invoking of extended period of limitation under proviso to Section 73(1) of the Finance Act, 1994 was not sustainable in their case as the essential ingredients of fraud, collusion, suppression or willful misstatement were not present. They further submit that the audit of their unit has been conducted regularly from time to time but such a point was never raised inspite of the fact that a show cause notice was already issued for non inclusion of room charges in the taxable value of mandap keeper services during the period from 10.02.2007 to 31.03.2010.They submit that the audit for the period from October, 2007 to September, 2010 was conducted by the department on 20-24.12.2010 and thereafter, audit for the financial year 2010-11 was again conducted wherein para was issued vide RA/INDT/CEAP-7/2011-12/A.Q. No. 3 dated 09.02.2012. We submit that when audit of a unit is being conducted regularly and no such point was raised in the earlier audit, the said point cannot be raised in the subsequent audit by invoking extended period of limitation. In this regard, the appellant wish to place reliance on the latest decision given by the Hon’ble Mumbai Tribunal in the case of TRANS ENGINEERS INDIA PVT. LTD having citation as [2015-TIOL-1947-CESTAT-MUMBAI] wherein it was concluded that the revenue cannot invoke extended period of limitation when records of the assessee were audited by officers once but no short payment was noticed. The synopsis of the case is produced for convenient reference as follows:-

ST - Revenue cannot invoke the extended period of limitation when the records of the assessee were audited by the officers once but no short payment was noticed from records - Assessee audited in 2006 and again in 2008 for same/overlapping period and demand issued in 2009 invoking extended period of limitation - Entire demand set aside and appeal allowed: CESTAT [para 10, 11, 12]

The appellant submit that when the audit team conducting audit on 24.12.2010 could not notice any short payment with respect to mandap keeper services, then the revenue department cannot allege short payment in the subsequent audit conducted by them and cannot invoke larger period of limitation. Therefore, the service tax demand is clearly barred by limitation and the impugned order in original deserves to be set aside.

The appellant further submit that this is the second show cause notice on this issue. The appellant have been issued show cause notice having no. as V (ST) Adj-II/JPR-II/204/10/4071 dated 23.09.2010 which was adjudicated vide order in original no. 05/C.K./JP-II/2012 ADC dated 16.01.2012. They submit that the said order in original was appealed to Commissioner Appeals wherein the appeal filed by them was rejected vide Order in Appeal no. 117 (RDN) ST/JPR-II/2012 dated 11.10.2012. They submit that the appeal filed in Tribunal against the said order in appeal is pending in the Delhi Tribunal for which they have also been granted stay vide Stay Order no. ST/SO/58488/2013, ST/MO/58487/2013-CU [DB] dated 25.07.2013. They submit that as the show cause notice was already adjudicated against appellant on the same issue, it cannot be said that there was any suppression of facts on their part so as to invoke the extended period of limitation. In this respect, reliance is also placed on the following cases:-
GUJARAT AMBUJA EXPORTERS LTD VERSUS UNION OF INDIA[2012 (26) S.T.R. 165 (Guj.)]

Demand - Limitation - Suppression - Facts stated in earlier show cause notices as well as allegations made therein and in present show cause notices are more or less similar - Only difference is that in impugned show cause notices there is a reference to intelligence gathered by Central Excise authorities and statements recorded - Though there is a reference of visit by Central Excise officers to factory of petitioner the date of such visit has not been mentioned -Impugned show cause notices were issued after most of the statements were recorded and as such, the reference to intelligence in the impugned show cause notices is of no consequence, since all the said facts were already before Central Excise authorities at the time when earlier show cause notices came to be issued - Impugned show cause notices not based on new or different facts than earlier ones - Extended period of limitation cannot be invoked in respect of earlier periods by issuing impugned show cause notices- Section 11A of Central Excise Act, 1944.

NIZAM SUGAR FACTORY VERSUS COLLECTOR OF CENTRAL EXCISE, A.P.[ 2006 (197) E.L.T. 465 (S.C.)]-

Demand - Limitation - Suppression of facts - All relevant facts in knowledge of authorities when first show cause notice issued - While issuing second and third show cause notices,same/similar facts could not be taken as suppression of facts on part of assessee as these facts already in knowledge of authorities - No suppression of facts on part of assessee/appellant - Demands andpenalty dropped - Sections 11A and 11AC of Central Excise Act, 1944.[paras 9, 10]

HYDERABAD POLYMERS (P) LTD. VERSUS COMMISSIONER OF C. EX., HYDERABAD [2004 (166) E.L.T. 151 (S.C.)]-

Demand - Limitation - Suppression of fact - Earlier show cause notice raising demand on similar issue and for identical amount dropped, subsequent show cause notice cannot allege suppression of fact or material - Extended period of limitation under Section 11A of Central Excise Act, 1944 not available - Department’s contention that earlier show cause notice was for subsequent period and it was not known when show cause notice was dropped, such plea rejected as it was for the department to prove that earlier show cause notice was not relevant or was not applicable. [paras 6]

ECE INDUSTRIES LIMITED VERSUS COMMISSIONER OF CENTRAL EXCISE, NEW DELHI [2004 (164) ELT 236 (SC)]

Demand and penalty - Limitation - Extended period of limitation not invocable in subsequent proceedings when earlier proceedings on same subject matter pending/decided - Suppression or misstatement - Second show cause notice alleging suppression - Earlier show cause notice for demand of duty and imposition of penalty for wrong availment of Modvat and its non-reversal adjudicated - Extended period of limitation not invocable for wilful suppression or misstatement in the second show cause notice - No penalty imposable.
In the above cases, it is held by the Apex Court that the subsequent show cause notice cannot allege the suppression of facts on parts of the assessee as the facts are already in knowledge of the department from the time when the first show cause notice was issued. Thus, all the facts are well within the knowledge of the department from the date of first show cause notice. Thus, the allegation of suppression is not sustainable and so the demand is barred by the clause of limitation.

Even otherwise, they submit that nothing was suppressed from the revenue department and the fact that they were providing exempted services was also duly reflected in the ST-3 return filed by them. They submit that in the ST-3 return, they are only required to submit consolidated amount of exempted services provided by them and are not required to give individual details. Therefore, when there is no requirement of furnishing certain details, it cannot be said that non-furnishing of the same amounts to suppression. Further, there is no provision in the service tax law which states that each and every act and procedure followed by the assessee should be intimated to department and that too suo motu as alleged in the impugned show cause notice. It has been held by hon’ble Gujarat High Court in the case of APEX ELECTRICALS PVT. LTD. VERSUS UNION OF INDIA [1992 (61) E.L.T. 413 (Guj.)] that non-furnishing of the information not required under law does not amount to suppression. The verdicts of hon’ble High Court are given as follows:-

“Demand - Limitation - Suppression - Information not required to be supplied under law if not supplied does not amount to suppression - Proviso to Section 11A(1) of Central Excises and Salt Act, 1944.”

Similar decision was given in the following cases:-

Gufic Pharma Vs. CCE - 1996 (85) ELT 67 (T) [Affirmed by Supreme Court at 1997 (93) ELT A186]
Prolite Engineering Co. Vs Union Of India [1995 (75) ELT 257 (GUJ.)]
Unique Resin Industries Vs. CCE - 1995 (75) ELT 861 (T)

In all the above cases, it was held that the information not required to be submitted under law, if not submitted, will not amount to suppression of facts. Thus the impugned order in original confirming the demand of service tax on the grounds of non-furnishing of information (that was not required to be submitted under law), is not sustainable and is liable to be set aside.

It is further submitted that the learned Additional Commissioner has rejected the contention of the appellant that no penalty is imposable on them as they have acted under bona fide belief that no service tax is payable on the booking amount of rooms as the same were not occupied for providing the wedding ceremony. Their contention that the issue involved was of interpretation of legal provisions and therefore, no penalty can be imposed was also rejected. The ground taken by the learned Additional Commissioner was that despite the clarification of the Board on the issue, the appellant have deliberately arranged to raise separate bills letting out gardens and the rooms of hotel with intent to evade payment of Service tax on the charges collected for letting out of rooms.

In this regard, the appellant submit that the clarification given in the Circular was not applicable in case of appellant as this circular merely clarified that the rooms or halls will fall in the definition of mandap keeper only if any of the specified functions are organized there. However, no such function was performed in the rooms and these were used only for the purpose of resting or refreshing. Therefore this circular was not applicable. Even if it was applicable, then too they have liberty to disagree the same. Therefore, the finding of the Additional Commissioner in this regard is not acceptable. Further, they had placed reliance on a no. of case laws as cited in the reply to show cause notice wherein it was stated that the service tax is not payable unless a social, business or official function is organized at that place. Thus, they had a no. of case laws to support their act on which they bonafidely believed. Hence penalty is not warranted in the instant case as held by hon’ble Supreme Court in the case of COMMISSIONER OF CENTRAL EXCISE, TRICHY VERSUS GRASIM INDUSTRIES LTD. [2005 (183) E.L.T. 123 (S.C.)] . In this case it was held that where the act of assessee is based on the interpretation taken by the Tribunal, penalty cannot be imposed as the act is based on bonafide belief. In support of this contention, following cases were also relied upon in the reply to show cause notice:-

SRI KRISHNA ALLOYS VS COMMISSIONER OF CENTRAL EXCISE, SALEM [2006 (200) ELT 158 (TRI.-CHENNAI)]
PRAKASH DECORATORS V/S COMMISSIONER OF CENTRAL EXCISE, JAIPUR [2008 (088) RLT 0559 (CESTAT-DEL.)]

However, none of these cases have been discussed and distinguished while passing the impugned order. Further, following decisions were also cited wherein it was held that where the issue pertains to interpretation of legal provisions no penalty is warranted:-

M/S ITEL INDUSTRIES LTD V/S CCE, CALICUT [2010-TIOL-236-CESTAT-BANG]
CCE, LUCKNOW V/S M.S ROSA SUGAR WORKS [2010-TIOL-82-CESTAT-DEL]
M/S HINDUSTAN LEVER LTD V/S CCE, LUCKNOW [2009-TIOL-1795-CESTAT-DEL]
M/S GHCL LTD V/S CCE, BHAVNAGAR [2009 (16) STR 588(TRI-AHND.)]

In the case of appellant, the issue is whether the room charges fall under the definition of mandap keeper services or not. Thus, it is all about interpretation of definition of mandap and mandap keeper. Therefore, the above decisions were to be discussed and distinguished before confirming the penalty. But it has not been done. Thus, the order has proved to be a non speaking order which is not sustainable in the light of following decision:-

CC VS ESSAR OIL LIMITED [2010-TIOL-560-HC-AHM-CUS]:-

“CESTAT is required to pass reasoned speaking orders - while setting aside the order of the Commissioner the Tribunal has not recorded any finding as to in what manner the findings recorded by Commissioner are erroneous or as to why it was required to take a different view.
It is a matter of regret that the Tribunal still continues to ignore the same: Despite there a being plethora of precedents holding that an appellate authority is required to record facts, contentions as well as reasons for arriving at its conclusions, it is a matter of regret that the Tribunal still continues to ignore the same and pass orders like the present one without recording facts or reasons.

In the light of above decision, since the impugned order is a non reasoned and non speaking, it is liable to be set aside.

They further submit that the impugned order has imposed penalty under section 78 of the Finance Act, 1994. In this respect, they submit that the penalty under this section is imposable only if there is any fraud or collusion or wilful mis-statement or suppression of facts with the intention to evade payment of service tax. In absence of any of these ingredients the penalty under section 78 is not imposable. It is submitted that the word “suppression” means to retain any fact from being revealed, i.e. something which is undisclosed. On the other hand, in the present case, the fact of letting out rooms is well within the knowledge of the department as show cause notice was already been issued on this matter for previous period also which was adjudicated against them and is currently pending with Delhi Tribunal. When the facts are already in the knowledge of the department from the time when the first show cause notice was issued, it cannot be said that there is any suppression for which penalty under section 78 is imposable. The impugned order has not been able to clearly establish that any of the elements for imposing penalty under section 78 were in existence in the present case. On the other hand, the appellant have proved their bonafides as categorically discussed here above. It is submitted that when no such element was there, the penalty under Section 78 of the Act is not required to be imposed on us. It has been held in the case of HINDUSTAN STEEL V. STATE OF ORISSA [1978 2 ELT J 159 (SUPREME COURT)] that an order imposing penalty for failure to meet statutory obligation is a result of proceedings which are quasi judicial in nature and penalty should not ordinarily be imposed unless the person acted deliberately in defiance of law or was guilty of misconduct or dishonest or acted in conscious disregard of his obligation. It is further held in the case of ORIENT CERAMICS AND INDUSTRIES [1987 (32) ELT 218 (I)] that words ‘with intent to evade payment of duty’ are very significant and unless and until the intention to evade payment of tax is proved on part of assessee, no penalty can be imposed. Similar view has been taken by hon’ble High Court in the following case:-

COMMISSIONER OF CENTRAL EXCISE V/S ESS ESS ENGINEERS [2011 (23) S.T.R. 3 (P & H)]:-

“The High Court observed that the Tribunal had held that short payment was mainly due to the appellant’s understanding that they were not liable to pay service tax on fabrication and dismantling charges. As regards penalty under Section 78 is concerned, the same is imposable in a case where service tax has not been levied or paid or has been short levied or short paid or erroneously refunded, by reason of fraud; or collusion; or willful misstatement; or suppression of facts; or contravention of any of the provisions of this Chapter or of the rule made thereunder with intent to evade payment of service tax. It was noted that the fact of non-payment of service tax was discovered during the course of audit.
The High Court held that the submission of Revenue that appellant was guilty of mis-declaration was not acceptable as the Tribunal had given a finding of fact that assessee did no have requisite mens rea to evade payment of service tax. The assessee had duly paid the service tax with interest and also made full and true disclosure in the return. The finding of fact of Tribunal was not shown to be perverse in any manner. Hence no question of law arises.”
Thus, mens rea is an essence of invoking the penal provisions. Reliance is also placed on the following judgments:-

2010 (258) ELT 465 (SC) – Sanjiv Fabrics
2007 (207) ELT 27 (P &H) – UT Ltd
2007 (5) STR 251 (P & H) – Kamal Kapoor
2009 (238) ELT 3 (SC) – Rajasthan Spinning & Weaving Mills
2009 (238) ELT 209 (P&H) – J. R. Fabrics
2009 (238) ELT 226 (Mad) – Thirumala Alloys Castings
2008 (228) ELT 31 (Del) – K. P. Pouches

In view of these judgments, no penalty can be imposed unless mens rea or intention to evade payment of duty/service tax is proved. In the instant case, the appellant have correctly discharged our service tax liability under the category of mandap keeper services and have correctly not paid service tax on the room rent received by them. Therefore, the intention to evade payment of service tax cannot be alleged. Also, the impugned order has not otherwise proved the malafide intention; therefore, in view of these judgments the impugned order imposing penalty is liable to be quashed.

The appellant also reiterate submissions which were made in their reply to the show cause notice but have not been discussed by the learned adjudicating authority as follows:-
It was submitted that the appellant are registered as Hotel Industry providing rooms for occupation on rental purposes and room rent has been exempted from service tax. On room rent, the service tax liability has been affixed after Budget, 2011 for temporary occupation of room for less than 3 months. Therefore, when they are registered as Hotel providing rooms for occupation, liability cannot be fixed on us under the category of Mandap Keeper service. In this regard, reliance is placed on the Apex Court judgment given in the case of COMMISSIONER OF C. EX. & CUS., KERALA VERSUS LARSEN & TOUBRO LTD. [2015 (39) S.T.R. 913 (S.C.)wherein the Supreme Court concluded that since works contract are leviable to service tax with effect from 01.06.2007, composite contracts cannot be bifurcated so as to levy service tax on the service portion prior to 01.06.2007. The Apex Court overruled the Delhi High Court decision given in the case of G.D. Builders wherein the High Court concluded that composite contracts are leviable to service tax even prior to 01.06.2007. However, the Apex Court held that since works contract services were taxable with effect from 01.06.2007, the said services cannot be taxed under any other category prior to 01.06.2007.

Similar decision has been given in the following cases:
M/S KAVERI COAL SUPPLIERS & ANOTHER V/S CCE, KANPUR [2011-TIOL-1593-CESTAT-DEL]=[2011 (23) S.T.R. 35 (Tri.-Del)] wherein it was held as under:
Service Tax – Appellants engaged in financing clients for purchase of coal and also arranging for transportation of coal – Liability to pay service tax under C & F Agents service for the period from 2000-01 to 2003-04 – Appellants registered and paying tax under BAS from 2004 – Tax paid under protest and penalties levied under Section 75A, 76, 77 & 78 – When appellants are currently registered under BAS, Revenue cannot contend that for the prior period they were providing services of Clearing & Forwarding Agents – SCN also time barred – Impugned orders set aside.
SAP INDIA PRIVATE LIMITED V/S CCE, BANGALORE [2010-TIOL-1569-CESTAT-BANG]=[2011(21)S.T.R. 303 (Tri.-Bang)]
Service Tax – maintenance and Repair of Software – taxable only from 16.05.2008, when IT Software Service was introduced – The maintenance charges collected by the appellant from their customers during the period from 09.07.2004 to 31.01.2006 are not liable to be subjected to levy of Service Tax under the head ‘maintenance or repair service’ under Section 65 (105) (zzg) read with Section 65 (64) of the Finance Act, 1994. The services rendered by the appellant to their customers are in the nature of information technology software service, which was made taxable w.e.f. 16.05.2008 only. Such service is not to be subjected to levy of Service Tax under any other entry. Therefore, the demand of Service tax and the connected penalties are only liable to be set aside.
M/S PRINCE FOUNDATIONS (P) LTD V/S CST, CHENNAI [2009-TIOL-1103-CESTAT-MAD]=[2009 (16) S.T.R. 149 (Tri-Chennai)]:-
“No tax on ‘works contract’ priorto 1.6.2007 - Appellants carried out the construction activity, finishing work etc., in respect of which demands have been raised, in execution of works contracts. ‘Works contract service’ was brought under tax net on 1.6.2007, after the impugned activities were undertaken by PFL. As rightly argued by the appellants, the Tribunal had held in Diebold Systems case that activity such as erection/commissioning forming part of a works contract could not be taxed under erection/commissioning service prior to 1.6.2007. The contracts basic to the construction of commercial premises/residential premises were indivisible and involved a service element. In view of the ratio of the decision of the Tribunal, prima facie, the impugned demand is not sustainable”.
Accordingly, it is submitted that the appellant have been paying service tax on providing rooms which are taxable by virtue of Budget, 2011. In the light of above decisions, the receipts from room rent cannot be made taxable prior to this period under any other head. Therefore, the impugned order in original is not sustainable and is liable to be set aside.

In continuation to the above, they further submit that the revenue authorities have raised service tax demand on the rooms let out to the customers availing mandap keeper services under the category of mandap keeper services only for the period prior to 01.05.2011 because the service tax on letting out of rooms was taxable with effect from 01.05.2011. As prior to 01.05.2011, there was no service tax on short term accommodation services, service tax demands were raised under the category of ‘Mandap keeper services’. However, after 01.05.2011, no show cause notices were issued to any of the assessee belonging to hotel industry because in any case, service tax was paid on the short term accommodation services. Such and act depicts the revenue collecting nature of the department even if it is illegal. The appellant submit that after 01.05.2011, every assessee belonging to hotel industry is paying service tax under accommodation services for renting of rooms even if rooms were let to the customers availing mandap keeper services. This is for the reason that renting of rooms is an entirely distinct and separate activity and cannot be considered as part and parcel of the mandap keeper services. It is worth observing that the revenue department is also not objecting this practice even when there is a concept of ‘bundled services’ in the negative list tax regime wherein one or more services provided together. In this regard, reference may also be made to illustration no. 2 given in para 9.2.1 of the Service Tax Education Guide which is produced as follows:-

A 5 star hotel is booked for a conference of 100 delegates on a lump sum package with the following facilities:

Accommodation for the delegates
Breakfast for the delegates
Tea and coffee during conference
Access to fitness room for the delegates
Availability of conference room
Business centre

As is evident a bouquet of services is being provided, many of them chargeable to different effective rates of tax. None of the individual constituents are able to provide the essential character of the service. However, if the service is described as convention service it is able to capture the entire essence of the package. Thus the service may be judged as convention service and chargeable to full rate. However it will be fully justifiable for the hotel to charge individually for the services as long as there is no attempt to offload the value of one service on to another service that is chargeable at a concessional rate.
They submit that the Education Guide clearly expresses that even in cases where more than one services are being provided together, it is fully justifiable for the hotel to charge individually for the services as far as there is no malafide intent. They submit that the Education Guide released by the Board clarifies the above situation thereby meaning that there is no contravention in hotel issuing separate bills for different services provided by them. They submit that when this clarification is applicable in the negative list tax regime wherein there is concept of bundled services, the allegation that the appellant were required to pay service tax under the category of ‘Mandap Keeper Services’ on the rooms let out by them to the parties availing mandap keeper services is totally erroneous and improper. As such, when a situation is accepted by the revenue department in the present scenario, the revenue department cannot take a contrary stand for the prior period merely to collect more revenue. They submit that as there was no service tax on letting of rooms prior to 01.05.2011, the contention of the revenue department that the room charges are includible in the value of mandap keeper services is not at all sustainable and is liable to be quashed.

They further submit that the service tax demand is neither sustainable on merits nor tenable on the grounds of limitation. They submit that the demand raised by the impugned show cause notice is barred by the clause of limitation as extended period of limitation is not invocable in the present case. They submit that this is the second show cause notice on the same issue but inspite of this fact, there has been inordinate delay in issuing show cause notice to them. They submit that the show cause notice itself mentions in para 3.1 that on audit of the records of the assessee for the financial year 2010-11, para was raised vide RA/INDT/CEAP-7/2011-12/A.Q. No. 3 dated 09.02.2012. Furthermore, the details in this regard were submitted by the appellant vide their letter dated 13.02.2012 but the present show cause notice is issued to the appellant on 22.09.2015, after a period of more than 3.5 years of the objection and details submitted by them. The show cause notice issued after such a long period is not justified and is liable to be set aside in view of following decisions:-
GAMMON INDIA LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE, GOA [2002 (146) E.L.T. 173 (Tri. - Mumbai)]:-

Demand - Limitation - Delay in issue of show cause notice - Show cause notice issued after two years of completion of enquiry - Suppression of facts - Appellants’ contention that the construction of bridge was before the eyes of the general public hence no suppression, accepted - Period of delay in issuing show cause notice being identical to the period of delay in J.S.L. Industries Ltd. v. CCE, Ahmedabad [1999 (109) E.L.T. 316 (Tribunal)], demand being time barred, not sustainable - Section 11A of Central Excises Act, 1944. [para 4]
This judgment was affirmed by hon’ble Supreme Court and it was cited as COMMISSIONERV. GAMMON INDIA LTD. - 2002 (146) E.L.T. A313.

COMMISSIONER OF CENTRAL EXCISE, INDORE VERSUS PRASHANT ELECTRODE [2006 (196) E.L.T. 297 (Tri. - Del.)]:-

Demand - Limitation - Delay in issue of show cause notice - Show cause notice issued after two years of completion of investigation - Delay not properly explained by Revenue - Demand time-barred - Section 11A of Central Excise Act, 1944.- The Department had ascertained that there is shortage of finished goods as well as inputs as on 28-1-2000. The statement of the partner was recorded on the same day who admitted the facts of the shortages. This being the fact before the authorities, the authorities did not move in action till 16-4-2002 to issue a show cause notice to the respondents. In the absence of any continued investigation from 28-1-2000 to 16-4-2002, the plea of the Revenue that the investigation was in process, cannot be accepted. Further thereafter, the statement of the partner admitting the shortages is itself an end of investigation inasmuch as there was no further requirement of any investigation. Since the investigation was complete on 28-1-2000 itself and the issuance of the show cause notice on 16-2-2002, delay has not been properly explained by the Revenue, and more particularly, in the absence of any investigation being continued, the demand is time-barred. [2002 (146) E.L.T. 173 (Tribunal); 2002 (146) E.L.T. A313 (S.C.) relied on]. [paras 4, 5]

NEMINATH FABRICS VERSUS COMMISSIONER OF CENTRAL EXCISE, SURAT-I[2009 (234) E.L.T. 525 (Tri. - Ahmd.)]:-

Demand - Limitation - Clandestine removal - Central Excise Officers visiting appellant’s factory, recording appellant’s Director’s statement, recording last statement of Director on 19-12-2003 and completing the investigation and Department issuing show cause notice on 9-5-2005 - Show cause notice barred by limitation - Law on the issue settled by several decisions of the Tribunal and Supreme Court holding that show cause notice issued six months after completion of investigation barred by limitation - Impugned order set aside - Section 11A of Central Excise Act, 1944. [paras 5, 6]

KATHIRAVAN PIPES LTD. VERSUS COMMISSIONER OF C. EX., COIMBATORE [2002 (147) E.L.T. 1266 (Tri. - Chennai)]:-

Demand - Limitation - Show cause notice having been issued beyond six months from date of completion of investigation by Department, demand hit by time bar - Section 11A of Central Excises Act, 1944.[1995 (75) E.L.T. 377 (Tribunal); 1996 (82) E.L.T. 323 (Tribunal); 1987 (32) E.L.T. 124 (Tribunal) relied on]. [para 11]

JETEX CABURETTORS PVT. LTD. VERSUS COMMISSIONER OF C. EX., VADODARA [2007 (210) E.L.T. 73 (Tri. - Ahmd.)] :-

Demand - Limitation - Plea taken before original authority in first round of litigation - Fact that Tribunal did not deal with same and remanded matter on other principles not means that plea of limitation stands rejected - Open for lower authorities to deal with it - Notice issued after period of 6 months from date of visit of officers barred by limitation - Section 11A of Central Excise Act, 1944. [paras 5, 6]

PRISM MILLS LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE, VAPI [2009 (233) E.L.T. 389 (Tri. - Ahmd.)]:-

Demand - Limitation - Clandestine removal - Loose documents recovered and statement recorded during visit by Departmental Officer on 19-10-2000 - Show cause notice issued after a period of 6 months from the date of visit of officers and completion of investigation barred by limitation - Section 11A of Central Excise Act, 1944. [2007 (210) E.L.T. 73 (Tribunal) followed]. [para 6]

COMMISSIONER OF C. EX., AHMEDABAD-I VERSUS NANDESHWARI PACKAGING [2009 (235) E.L.T. 697 (Tri. - Ahmd.)]:-

Demand - Limitation - Show cause notice issued after period of six months from date of search and even after completion of investigations, barred by limitation - Impugned order setting aside demand sustainable - Section 11A of Central Excise Act, 1944. [2004 (173) E.L.T. 225 (S.C.) followed]. [paras 1, 2]
In the above cited decisions it was held that the show cause notice issued after period of six months from the date of completion of investigation is barred by limitation. Though these decisions pertain to old provisions wherein the normal period of limitation under section 11A was six month; however, the ratio of these decisions is clear that the show cause notice should be issued within normal period of limitation which will be calculated from the date of completion of investigation. Under the period in issue, the normal period of limitation was eighteen months under section 73 of the Finance Act, 1994. However, the impugned show cause notice has been issued after 3.5 years from the date of completion of investigation. Therefore, the benefit of above cited decisions including the judgment of Supreme court is duly extendable to the appellant and the impugned order deserves to be set aside.

The appellant further submit that the extended period of limitation is not invokable in the present case because this issue was being raised by the service tax department for all the assessees of the hotel industry all over India. As such, non payment of service tax on room rent under the category of mandap keeper service cannot be considered as wilful suppression of facts with intend to evade payment of duty. Moreover, this aspect is well within the knowledge of the revenue department and so the allegation of suppression of facts is not at all tenable. This view is also supported by the decision given in the case of R. M. DHARIWAL (HUF) VS COMMISSIONER OF C.EX., PUNE-II & III [2009 (242) E.L.T. 391 (Tri.-Mum)] wherein it was held that when belief is based on non-payment of duty by similar assessees, extended period is not invokable. In the present case also, not even a single hotel pays service tax on the room charges by including the same under the category of mandap keeper services and so their act of non-payment of service tax cannot be considered as suppression of facts so as to invoke extended period of limitation. Moreover, non payment of service tax in the present case is also backed by a number of decisions given by various tribunals. As such, the service tax demand is barred by limitation and is not at all sustainable. Therefore, the impugned order is not at all viable and is liable to be dropped.

13) The appellant submits that the submissions reiterated in para 12 were made in their reply but they were not considered by the learned adjudicating authority while passing the order. As such, the order turns out to be a non-reasoned and non-speaking order which is not tenable in the eyes of law in light of the decision given in the case of STATE OF HIMACHAL PRADESH VS SARDARA SINGH [2008-TIOL-160-SC-NDPS] wherein it was held that:-

Even High Courts are required to pass speaking reasoned orders - The "inscrutable face of a sphinx" is ordinarily incongruous with a judicial or quasi-judicial performance. The manner in which appeal against acquittal has been dealt with by the High Court leaves much to be desired. Reasons introduce clarity in an order. On plainest consideration of justice, the High Court ought to have set forth its reasons, howsoever brief, in its order indicative of an application of its mind, all the more when its order is amenable to further avenue of challenge. The absence of reasons has rendered the High Court order not sustainable. The requirement of indicating reasons in such cases has been judicially recognized as imperative. Judicial discipline to abide by declaration of law by this Court, cannot be forsaken, under any pretext by any authority or Court, be it even the Highest Court in a State, oblivious to Article 141 of the Constitution of India. Reasons are live links between the mind of the decision taker to the controversy in question and the decision or conclusion arrived at. Reasons substitute subjectivity by objectivity. The emphasis on recording reasons is that if the decision reveals the "inscrutable face of the sphinx", it can, by its silence, render it virtually impossible for the Courts to perform their appellate function or exercise the power of judicial review in adjudging the validity of the decision. Right to reason is an indispensable part of a sound judicial system, reasons at least sufficient to indicate an application of mind to the matter before Court. Another rationale is that the affected party can know why the decision has gone against him. One of the salutary requirements of natural justice is spelling out reasons for the order made, in other words, a speaking out. The "inscrutable face of a sphinx" is ordinarily incongruous with a judicial or quasi-judicial performance.: SUPREME COURT;

Therefore, in the light of above decision, an order passed without giving reasons of non-acceptability of the submissions of the appellant is not sustainable. In the case of appellant also, the case laws submitted by them have not been discussed and distinguished. Thus, in the light of above decisions, the impugned order is not tenable in the eyes of law and is liable to be set aside.

Reasoning adopted by the appellate authority:
The learned commissioner(Appeals) have gone through the Order-in Original, corrigendum, Case records, reply to the Appeal, written submission, documents furnished by the assessee as well as the submissions made during course of personal hearing.
On perusal of records, it transpires that the issue is regarding whether the rooms booked on account of wedding ceremony was chargeable to service tax under Mandap keeper service.
He said that the reasons adopted by the lower authorities are without legal basis. The room charges for letting out rooms in the hotel cannot be included in the Mandap Keeper Services for service tax liability. Reference has been made to the decision of the Tribunal in the case of Rambagh Palace Hotels Pvt ltd Vs Commissioner of Central Excise, Jaipur,2013(31) S.T.R 480(Tri.-Del).
In view of the forgoing, impugned order is set-aside and the appeal is allowed.

Decision:-Demand dropped.
Conclusion:- An immovable property is mandap or not is required to be ascertained with the hep of determinants set out in the definition of the “Mandap”. The definition of Mandap Keeper does not include rooms. Therefore, the value of room rent should not form part of taxable value under Mandap Keeper Services.

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PJ/Case Study/2018-19/125
04 August 2018

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PJ/Case Study/2018-19/125 04 August 2018

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PJ/Case Study/2018-19/125
04 August 2018