Mandap-keeper — Segregation of food charges from banquet hall charges — Exemption on food claimed under Notification No. 12/2003 — Catering service incidental to mandap-keeping therefore deduction of food charges cannot be considered to be sale of goods and therefore not deductible under Notification 12/03.

The appellant is a company engaged in running a hotel in Indore and provided services of lodging and boarding as also rent-a-cab service, mandap- keeper service, etc. Service provided in relation to the use of the mandap was taxable service u/s.65(105)(m) of the Finance Act, 1994. However exemption Notification No. 1/06-ST entitled the assessee for abatement of 66% when catering services were also provided by the mandap-keeper, subject to certain conditions. No CENVAT credit of inputs or capital goods had been taken under the Cenvat Credit Rules, 2004. The appellant availed the benefit of Notification No. 12/03-ST by splitting the bill of charges of the mandap and charges for food and beverages. The Department was of the view that exemption under Notification No. 12/03-ST was not applicable to the appellant. The appellant contended that they paid service tax on the total amount collected towards banquet hall charges, other information and service charges for serving food and beverages, on which no abatement or exemption was claimed. This represented the value of mandap-keeper services. They were paying sales tax/VAT and were availing service tax exemption under the Notification No. 12/03-ST with respect to sale value of food and beverages and thus correctly availed exemption under Notification No. 12/03-ST. The availment of abatement applies under the Notification 1/2006-ST was always optional. The appellant raised invoice for sale of food and beverages and showed only the value of goods provided and did not include the value of service provided along with the sale of food. The charges for serving the food and drinks were already included in the charges in relation to the use of the mandap on which service tax was paid and thus the supply of food and beverages to their guest was a sale within the meaning of the Sale of Goods Act, 1930. It was also submitted that the Supreme Court had held that VAT and service tax were mutually exclusive and both could not be levied simultaneously on the same value and thus the mandap-keeper providing food and beverages also must have the option to avail of the Notification No. 1/06-ST or Notification No. 12/03-ST and contended that there was no suppression of facts or willful misstatements or fraud and therefore penalty u/s.78 of the Finance Act, 1994 was not leviable. The Revenue contended that serving of food and beverages to the guests in course of mandap is an activity ancillary to and part of the main activity of providing service in relation to the use of the mandap and thus the same cannot be split up into value of supplying food and beverages and the value of services in relation to the use of mandap and denied the benefit of the Notification No. 12/2003-ST. The Revenue submitted that through the appellant claimed that the charges for food and drink did not include the charges for service and the same were included in the charges of mandapkeeper, the invoices did not show the same and there was no evidence in this regard. Therefore in this case, serving of food and beverages by the mandap-keeper to their client’s guests in course of mandap was a pure service and the same could not be split up into catering service element and cost of food and beverages and further alleged suppression, etc.

Held:

Supply of food i.e., catering service is incidental to main service of mandap-keeping. Supply of food cannot be considered as sale of goods even if separately charged and therefore deduction under the Notification No. 12/03 is not available. It was further held that the matter was remanded to the Commissioner for re-quantifying the service tax demand after permitting abatement under the Notification No. 1/06-ST, subject to the condition that the appellant reversed the CENVAT credit availed by them and imposed penalty u/s.76 and set aside penalty u/s.78.