Custom, Excise & Service Tax Tribunal
Inox Leisure Ltd vs Commissioner Of Cgst--Mumbai East on 18 October, 2023
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL
MUMBAI
REGIONAL BENCH
Service Tax Appeal No. 86675 of 2018
(Arising out of Order-in-Original No. ME/COMM/VR/37-39/2017-18 dated 7th
February 2018 passed by the Commissioner of CGST & Central Excise, Mumbai.)
M/s. Inox Leisure Ltd. ........Appellant
5th Floor, Viraj Tower, Western
Express Highway, Andheri (E),
Mumbai - 400 093
VERSUS
Commissioner of CGST, Mumbai East ........Respondent
9th Floor, Lotus Parel, Lotus Info Centre,
Near Parel Station, Parel (East),
Mumbai - 400 012
WITH
Service Tax Appeal No. 86671 of 2018
(Arising out of Order-in-Original No. ME/COMM/VR/37-39/2017-18 dated 7th
February 2018 passed by the Commissioner of CGST & Central Excise, Mumbai.)
Mr. Upen Shah ........Appellant
th
5 Floor, Viraj Tower, Western
Express Highway, Andheri (E),
Mumbai - 400 093
VERSUS
Commissioner of CGST, Mumbai East ........Respondent
th
9 Floor, Lotus Parel, Lotus Info Centre,
Near Parel Station, Parel (East),
Mumbai - 400 012
AND
Service Tax Appeal No. 86106 of 2019
(Arising out of Order-in-Original No. 193/VR/COMMR/ME/2018-19 dated 22nd
January 2019 passed by the Commissioner of CGST & Central Excise, Mumbai.)
M/s. Inox Leisure Ltd. ........Appellant
5th Floor, Viraj Tower, Western
Express Highway, Andheri (E),
Mumbai - 400 093
VERSUS
Commissioner of CGST, Mumbai East ........Respondent
9th Floor, Lotus Parel, Lotus Info Centre,
Near Parel Station, Parel (East),
Mumbai - 400 012
ST/86671 & 86675/2018
ST/86106/2019
2
APPERANCE:
Shri Rohan Shah, Advocate with
Shri Gopal Mundar, Advocate,
Ms. Ginita Bodhani, Advocate and
Shri Shrey Bhardwaj, Advocate for the Appellants
Shri Anand Kumar, Commissioner, Authorised Representative for the
Respondent
CORAM:
HON'BLE DR. SUVENDU KUMAR PATI, MEMBER (JUDICIAL)
HON'BLE MR. ANIL G. SHAKKARWAR, MEMBER (TECHNICAL)
FINAL ORDER NO. 87004-87006/2023
Date of Hearing: 01.08.2023
Date of Decision: 18.10.2023
PER: DR. SUVENDU KUMAR PATI
Issue involved in these appeals is levy and confirmation of
Service Tax demand with interest and penalties on sale and supply of
food as well as beverages in the multiplex theatre premises.
2. Facts of the Appellants' case, in a nutshell, is that Appellants
are engaged in the business of operating cinema multiplexes in
various locations pan-India. Appellant company also undertakes sale
of certain food and beverage items over the counter in its air-
conditioned premises. It has been paying VAT on the entire value of
food and beverages sold by it as "sales of goods". Respondent-
Department claimed that such activity of the Appellants constitutes
"declared services" under Section 66E(i) of the Finance Act, 1994.
ST/86671 & 86675/2018
ST/86106/2019
3
Accordingly show-cause cum-demand notice dated 08.10.2014 and
27.09.2018 were issued for the period from 01.04.2013 to
30.09.2015 and from 01.10.2015 to 30.06.2017 respectively
demanding Service Tax of Rs.23,60,44,800/- and Rs.29,37,52,642/-
for the corresponding periods alongwith interest and penalties under
various provisions of the Finance Act, 1994. Chief Finance Officer Mr.
Upen Shah was also noticed with charge of personal penalty. Upon
responses received from them, matter was adjudicated upon by the
Commissioner confirming duty, interest and penalties as proposed
vide two separate orders dated 07.02.2018 and 22.01.2019
respectively. He also confirmed personal penalty on the then Chief
Finance Officer Mr. Upen Shah. The said orders are assailed herein in
these three appeals.
3. Both sides contested on both facts and points of law.
Constitutional validity of the provision introduced under Section 66E
of the Finance Act, 1994 vis. a. vis. vires of Rule 2C of the Service
Tax (Determination of Value) Rules, 2006 were also questioned
before the Commissioner with reference to judicial decisions and
answered by him as per his own understanding. We, therefore, take
up this issue of legality of the introduction and operation of Section
66E of the Finance Act, 1994 read with Rule 2C of the Service Tax
(Determination of Value) Rules, 2006 vis. a. vis. Constitutional
provision contained in Article 366(29-A)(f) in its entirety and with
reference to the judicial decisions of the Hon'ble Supreme Court
delivered on the issue.
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4
4. To start with the definition of 'service', as has been given in
Section 65B(44) of the Finance Act 1994, service means any activity
carried out by a person for another for consideration and includes a
declare service, but shall not include -
(a) an activity which constitute merely, - - -
(i) transfer of title in goods or immovable property by way of sale,
gift or in any other manner or
(ii) such transfer, delivery or supply of any goods which is deemed to
be a sale within the meaning of Clause (29A) of Article 366 of the
constitution. (Underlined to emphasise)
4.1 A bare reading of sub sub-section (i) and (ii) of Section
65B(44)(a) would clearly indicate that transfer of goods by way of
sale etc. as well as transfer, delivery or supply of goods as explained
under Clause 29A of Article 366 'as deemed sale' are not services
within the definition of Section 65B(44) of the Finance Act, 1994.
Having gone through the definition of service as narrated above one
would be tempted to find out the provisions contained in Clause 29A
of Article 366 of the Constitution that explained as to what kind of
transfer, delivery or supply of goods were treated as deemed sale and
not subjected to Service Tax.
4.2 Article 366 of the Constitution explains the meaning of the
expressions assigned to various terminologies including "agricultural
income", "corporate tax", "estate duty" etc. Clause (29A) that was
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ST/86106/2019
5
introduced through 46 Amendment Act of the Constitution, in 1982
explains "Tax on sale or purchase of goods" which includes within it
various things like transfer of property, delivery of goods on hire
purchase system etc. and its sub-Clause (f) covers Tax on the supply
of goods namely food or other article of human consumption or any
drink. It would be worthwhile to reproduce (29A)(f) of the Article 366
of the Constitution of India that reads:-
"(29A)(f) a tax on the supply, by way of or as
part of any service or in any other manner
whatsoever, of goods, being food or any other
article for human consumption or any drink
(whether or not intoxicating), where such supply
or service, is for cash, deferred payment or other
valuable consideration,
(Underlined and highlighted to emphasise)
and such transfer, delivery or supply of any goods
shall be deemed to be a sale of those goods by
the person making the transfer, delivery or supply
and a purchase of those goods by the person to
whom such transfer, delivery or supply is made."
(This seconds paragraph is meant for all sub-Clauses of Article
366(29A) and not meant for sub-Clauses (f) alone as the terminating
Clause)
Again a close reading of the above referred provision would clearly
indicate that 'supply' which includes "any service in any manner
whatsoever of goods being food" or any other article for human
consumption or any drink shall be deemed to be a sale of goods by
the person making such transfer, delivery or supply (that includes
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6
service of any kind) in any manner. This constitutional provision
remains in force in its present form till date.
5. At this juncture, it is worthwhile also to reproduce the provision
of Section 66E(i) of the Finance Act, 1994, and to compare if there
exist any contradiction between both the Constitutional provision and
the Finance Act, 1994. It reads:-
66E - Declared Services
The following shall constitute declared services, namely
...
...
(i) Service portion in an activity wherein goods, being food or any other article of human consumption or any drink (whether or not intoxicating) is supplied in any manner as a part of the activity.
(Emphasis supplied)
6. Looking at both the provisions it would appear that they are contradictory to each other for the reason that Article 366 Clause (29A)(f) puts any and every kind of service portion associated with food, beverages and drink meant for human consumption within the definition of 'deemed sale' and with the presence of the constitutional provision such a provision in the Finance Act under Section 66E(i) would not stand, as apparently seems to be violative of the constitutional provision. However, constitutional validity of the said provision of the Finance Act, 1994 was never challenged except that its vires was questioned before the Hon'ble Supreme Court in Writ ST/86671 & 86675/2018 ST/86106/2019 7 Civil Appeal No. 2727/2002, by the Tamil Nadu Kalyana Mandapam Association, findings of which will be dealt in the later part of this order since it is imperative at this point to deal with the prelude and genesis of introduction of Clause (29A) of the Article 366 of the Constitution through 46 Amendment Act, at the first instance.
7. It would be interesting to know that the purpose of introduction of Article 366(29-A)(f) was to get over the judgment of Northern India Caterer (India) Ltd. Vs. LT Governor of Delhi, reported in (1978) 4 SSC 36 which dealt with service element contained in a bill for food or drinks being consumed in Restaurants and, therefore, the expression "in any other manner whatsoever" was purposefully put to re-emphasize that whatever food (goods) were supplied in such Restaurants, then the service element would not interfere with the States' Legislative Power in taxing food etc. under Article 366(29- A)(f). In other words, to ensure that for both sale of food/drinks and its associated services required to be extended in a Restaurant but the payments collected by way of sales tax would go to the State Exchequers and primarily for this reason Composite activity of both sale and service were put under the category of 'deemed to be sale'. It would be appropriate to reproduce relevant part of the concurring judgment, authored by Hon'ble Justice Lakshmanan in BSNL Vs. Union of India reported in (2006) 3 SCC 1, 2006 (2) STR 161 (SC) that would enlighten us about the amendment to Article 366 and introduction of sub-Section (29-A) into it "105. The amendment introduced fiction by which six instances of transactions were treated as ST/86671 & 86675/2018 ST/86106/2019 8 deemed sale of goods and that the said definition as to deemed sales will have to be read in every provision of the Constitution wherever the phrase "tax on sale or purchase of goods" occurs. This definition changed the law declared in the ruling in Gannon Dunkerley & Co. [State of Madras v.
Gannon Dunkerley & Co. (Madras) Ltd., (1958) 9 STC 353 : AIR 1958 SC 560 : 1959 SCR 379] only with regard to those transactions of deemed sales. In other respects, law declared by this Court is not neutralised. Each one of the sub-clauses of Article 366(29A) introduced by the Forty-sixth Amendment was a result of ruling of this Court which was sought to be neutralised or modified. Sub-clause (a) is the outcome of New India Sugar Mills Ltd. v. CST, [(1963) 14 STC 316 : 1963 Supp. (2) SCR 459] and Vishnu Agencies (P) Ltd. v. CTO, [(1978) 1 SCC 520 : 1978 SCC (Tax) 31 : AIR 1978 SC 449]. Sub-clause (b) is the result of Gannon Dunkerley & Co. [State of Madras v.
Gannon Dunkerley & Co. (Madras) Ltd., (1958) 9 STC 353 : AIR 1958 SC 560 : 1959 SCR 379].
Sub-clause (c) is the result of K.L. Johar and Co. v. CTO, [(1965) 2 SCR 112 : AIR 1965 SC 1082] .
Sub-clause (d) is consequent to A.V. Meiyappan v. CCT, [(1967) 20 STC 115 (Mad.)]. Sub-clause (e) is the result of CTO v. Young Men's Indian Assn. (Regd.), [(1970) 1 SCC 462]. Sub-clause (f) is the result of Northern India Caterers (India) Ltd. v. Lt. Governor of Delhi, [(1978) 4 SCC 36 : 1978 SCC (Tax) 198] and State of Punjab v. Associated Hotels of India Ltd. [(1972) 1 SCC 472 : (1972) 29 STC 474]".
(Emphasis added)
8. It would be appropriate now to refer to the order passed by the Commissioner relating to the constitutional validity of Section 66E(i) of the Finance Act, 1994 and his findings with reference to the judgment of BSNL Vs. Union of India, cited supra in which he observed that in view of the judgment of Hon'ble Supreme Court in ST/86671 & 86675/2018 ST/86106/2019 9 the above referred BSNL case, Union has remained well within its legislative power while enacting Section 66E(i), as the said provision read with Valuation Rule 2C provides for inclusion and charging of Service Tax only on the service portion associated with sale and not on the sale of goods portion and that charging of VAT on service portion is beyond the legislative competence of the States, in terms of the said judgment, for which noticee's contention that they were not liable to pay Service Tax on the service portion of the instant case was unacceptable. However, the above observation seems to have not been reflecting the ratio of the judgment of BSNL since the issue in the judgment that was came up for consideration in BSNL case was whether electro-magnetic waves can be said to be "goods", so as to subject the same to taxation within Section 366 as sale of goods was answered in a negative manner, as has been observed by the Hon'ble Supreme Court in the case of State of West Bengal and Ors. Vs. Calcutta Club Ltd. reported in 2019 (29) G.S.T.L. 545 (S.C.), while referring to BSNL judgment. Para 71 of BSNL judgment is reproduced in this Calcutta Club case as hereunder:-
"71. For the reasons stated by us earlier we hold that the electromagnetic waves are not "goods"
within the meaning of the word either in Article 366(12) or in the State legislations. It is not in the circumstances necessary for us to determine whether the telephone system including the telephone exchange is not goods but immovable property as contended by some of the petitioners." The findings of BSNL was that electromagnetic waves were not goods therefore, it has got nothing to do with 'deemed to be sale' of goods ST/86671 & 86675/2018 ST/86106/2019 10 or food items if it encompasses within itself the service component of it.
9. The issue of taxability on food items has covered a checkered path and no definite reason can be attributed to it as to why the item is sometimes considered as sale of goods or service offered during supply of goods. As has been pointed out in the preceding paragraph, to curtail the avoidance of payment of tax in the restaurants against supply of food, by claiming the same to be not sale of goods, amendment to Article 366 of the Constitution was brought into force in putting the entire service component required for preparation and sale of food into the category of deemed to be sale and subjecting the same to be taxed by the states/federating units but subsequent changes introduced through legislation in stretching and including various activities as service and taking it out from the concept of 'deemed sale' to 'pure sale' and excluding its associated service component despite a clear constitutional mandate has created a lot of hegemony that could only be addressed by the highest legislative or judicial wing of the country. Before coming to the present position of law it is imperative to have a look at para 9 of the judgment of Hon'ble Supreme Court passed in the case of K. Damodaraswamy Naidu & Bros. and Ors. Vs. State of T.N. and Anr. Reported in (2000) 1 SCC 527 in which the reason has been elaborated that prompted introduction of deeming friction also for sub-Clause (f) relating to food and drink supplied in Hotels and Restaurants. It reads:-
ST/86671 & 86675/2018 ST/86106/2019 11 "9. The provisions of sub-clause (f) of clause (29A) of Article 366 need to be analysed. Sub-
clause (f) permits the States to impose a tax on the supply of food and drink. The supply can be by way of a service or as part of a service or it can be in any other manner whatsoever. The supply or service can be for cash or deferred payment or other valuable consideration. The words of sub- clause (f) have found place in the Sales Tax Acts of most States and, as we have seen, they have been used in the said Tamil Nadu Act. The tax, therefore, is on the supply of food or drink and it is not of relevance that the supply is by way of a service or as part of a service. In our view, therefore, the price that the customer pays for the supply of food in a restaurant cannot be split up as suggested by Learned Counsel. The supply of food by the restaurant-owner to the customer though it may be a part of the service that he renders by providing good furniture, furnishing and fixtures, linen, crockery and cutlery, music, a dance floor and a floor show, is what is the subject of the levy. The patron of a fancy restaurant who orders a plate of cheese sandwiches whose price is shown to be Rs.50 on the bill of fare knows very well that the innate cost of the bread, butter, mustard and cheese in the plate is very much less, but he orders it all the same. He pays Rs. 50 for its supply and it is on Rs. 50 that the restaurant-owner must be taxed."
(Emphasis added) From the above paragraph it is very much clear that the entire service component against supply of food in a Restaurant, though charged as a composite fee against sale of food was treated entirely as taxable for it from the Restaurant's owner and apparently the purpose of introduction of sub-Clause (f) to Article 366(29-A) was to treat the entire event of 'supply' and 'sale' as one component by ST/86671 & 86675/2018 ST/86106/2019 12 introduction of terminology called "deemed to be sale". However, introduction of Section 66E(i) in Finance Act, 1994 w.e.f. 1st July, 2012 read with mega exemption Notification No. 25/2012-ST dated 20th June, 2012 that exempted payment of Service Tax by Restaurants, eating joints or mess providing service in relation to food or beverages other than those having facilities of air conditioning or central air heating at any part of the establishment and subsequent Circular No. 334/3/2011 & Circular No. 173/8/2013 on Service Tax that had pin pointed on the exact nature of service offered in specific type of Restaurant, so as to cover them under Service Tax network would go to say that sale of food is completely separated from the rest of services associated with it to make the same complete and thereby the deeming provision attached to such sale is taken away without making any alteration or amendment in the Constitutional provision. It is interesting to note that gist of specific paragraph of K. Damodaraswamy Naidu & Bros. and Ors. judgment, cited supra explaining the nature of service offered at Restaurant that was taken to be included under deemed sale in Article 366(29-A)(f) is re-phased in Circular No. 334/3/2011-TRU dated 28.02.2001 to make those activities taxable under Service Tax to be legislated by the Union. Para 1.1 of the said Circular, which is relied upon by the learned Counsel for the Appellant for another porpose namelyto justify its applicability, is reproduced below for a comparison with para 9 of K. Damodaraswamy Naidu & Bros. and Ors. judgement already noted above.
"The term "restaurant" is not defined under Service Tax law. However, the scope of the said ST/86671 & 86675/2018 ST/86106/2019 13 term has been set out by way of the CBIC Circular 334/3/2011 TRU dated 28.02.2011 for the purposes of the levy of Service Tax, in the following terms -
1.1 Restaurants provide a number of services normally in combination with the meal and/or beverage for a consolidated charge. These services relate to the use of restaurant space and furniture, air-conditioning, well-trained waiters, linen, cutlery and crockery, music, live or otherwise, or a dance floor. The customer also has the benefit of personalized service by indicating his preference for certain ingredients e.g. salt, chillies, onion, garlic or oil. The extent and quality of services available in a restaurant is directly reflected in the margin charged over the direct costs. It is thus not uncommon to notice even packaged products being sold at prices far in excess of the MRP."
(Underlined in bold letters to emphasise) It is perhaps for this reason that Section 65(105)(zzzzv) of the Finance Act, 1994 that had defined the 'Restaurant service with air conditioning facility', has been held as unconstitutional by the Hon'ble Kerala High Court in the matter of Kerala Classified Hotels and Reserves Association case in W.P.(C.) 10405 of 2021. However, when K. Damodaraswamy Naidu & Bros. and Ors. moved to the Hon'ble Supreme Court challenging the order of the Hon'ble Madras High Court on the constitutionality of Section 66E of the Finance Act, Hon'ble Supreme Court, in exercise of its Appellate jurisdiction, had confirmed the order passed by the Hon'ble Madras High Court and dismissed the appeal of the K. Damodaraswamy Naidu & Bros. and Ors.challenging Service Tax on catering. Going by para 43 of the said order, it can be noticed that supply of any goods which is referred at the end of sub-Clause 29-A of Article 366 covering 6 components ST/86671 & 86675/2018 ST/86106/2019 14 under sub-heading (a) to (f) (reproduced in the preceding paragraph no. 4) was taken and applied to sub-Clause (f) originally meant for supply of goods being food and drinks, that specified supply by way of or as part of any service in any other manner whatsoever, was missing out from the analysis apparently for the reason that sub- Clause 29-A was not placed before the Hon'ble Court in its proper prospective or else it was not argued in the way it was required to be argued. However, we lack both competency and jurisdiction to deal with the legality of the statutory provisions in the absence of empowering/enabling provision like order XXVII-A, XLVI and Section 113 of the Civil Procedure Code as available to the Civil Courts when both judicial discipline and binding precedent dictate us to go with the findings that service component towards supply of goods being food and other articles can be taxed separately even with the presence of Article 366(29-A)(f) in the Constitution of India, for the reason that Section 66E(i) has not yet been declared as invalid nor repealed or amended.
10. Now going by the above findings that service component of sale of food in a Restaurant is taxable @ 40% of the value as per Rule 2C of the Service Tax (Determination of Value) Rules, 2006 and going by the kind of Restaurants excluded from mega Notification No. 25/2012 as well as meaning of Restaurant elaborated to CBIC Circular No. 334/3/2011, it can be said that application of Service Tax to a particular establishment from where food is sold/served would require factual analysis and not to be determined from the 'Wikipedia ST/86671 & 86675/2018 ST/86106/2019 15 website', which cannot be considered as an authentic source in which every private individual is allowed to upload data/information in the way they intend, as has been done by the learned Commissioner. 10.1 During the course of hearing of these appeals learned Counsel for the Appellant Mr. Rohan Saha submitted that the activities undertaken by the Appellant were captured at para 15 of the Order- in-Original-2 in appeal No. 86106 of 2019 and against the entire sale of goods VAT was paid by the Appellants, since there was no element of service involved in the activities carried out by the Appellants. In referring to the judgment of Union of India Vs. Playworld Electronics Pvt. Ltd. reported in 1989 (41) ELT 268 (SC) and Sundaram Finance Ltd. Vs. The State of Kerala reported in 1996 ALJ 408 SC, he also argued that the true nature and category of transaction is essential to determine taxability and Appellants having operated like a pickup/venue counter having no involvement in relation to consumption of food and beverages without an ambience akin to Restaurant, without well demarcated siting arrangements like table & chair and in the absence of well trend waiters, cutlery/crockery/linen etc. and where sale of food items in seal packets having MRP or out sourced were sold over the counter like take away of food parcels from pickup counters, it cannot be considered as service offered by air conditioned Restaurants, in view of Circular No. 173 and 334 referred above and trade notice No. ST-20/STD/MISC dated 13.08.2015 as well as several decisions of various courts on the issue. However, going by the Order-in-Original and as pointed out by ST/86671 & 86675/2018 ST/86106/2019 16 the learned Authorised Representative for the Respondent- Department Mr. Anand Kumar, entire premises of the Appellant was air conditioned, it has facility for heating and cooling the food on demand, provision for serving of food on plates with fork and spoon, addition of taste enhancer like chutney, mayonnaise and having facility for service of food inside theatre screen (through waiters/suppliers) and also permission for consumption of food and beverages therein and, therefore, the same fulfils the condition of a Restaurant with air conditioned ambience. Cleaning of area after consumption was also done by the Appellant's staff. This being so we have got no hesitation to go with the findings of the learned Commissioner that Service Tax for supply of food in an air condition Restaurant is leviable on the Appellant. Placing reliance on the judgment of Commissioner of CGST, CST, Delhi East Vs. Haldiram Marketing Pvt. Ltd. reported in 2023 (2) TMI 783-CESTAT NEW DELHI also affirmed by the Hon'ble Supreme Court, (2023) 11 Centax 23 (S.C.) will be of no help to the issue in hand since taxability on pickup/take away of packed food items without offering dining facility are dealt therein as sale of goods whereas in the case in hand, provision for supply and consumption of food items inside the Cinema Hall in the centrally air conditioned premises are available which can be equated with restaurant or eating joint hence, meeting the requirement of proviso to mega Notification No. 25/2012-ST.
11. There are two other legal issues raised by the Appellant that would be dealt in determining the legality of the levy of Service Tax ST/86671 & 86675/2018 ST/86106/2019 17 on it. Appellant has contended that when VAT on the entire value has been discharged by the Appellant, Service Tax is not leviable. Learned Counsel for the Appellants in citing judicial decisions reported in 2022 (61) GSTL (4) (SC) in the case of Commissioner of Service Tax-V, Mumbai Vs. UFO Moviez India Limited, 2016 (44) STR 161 (Bom.) in the case of Mahyco Monsanto Biotech (India) P. L. Vs. Union of India, 2016 (42) STR 823 (P & H) in the case of Idea Cellular Ltd. Vs. Union of India, and 2017 (3) GSTL 30 (A.P) in the case of Bhimas Hotels Pvt. Ltd. Vs. Union of India submitted that it is a settled law that both services tax and VAT being mutually exclusive any attempt to levy both the taxes on the same transaction would amount to double taxation. We fully agree to his submissions but in the present case the facts are dis-similar to the proposition of law expounded in those judgments for the reason that Appellant was not demanded both the Service Tax and VAT together but had paid VAT voluntary on the entire transaction amount, may be under erroneous belief that VAT alone was payable. But, having regard to the fact that validity of payment of Service Tax on supply of food in air condition ambiance in a Restaurants being held to have assumed predominance over sale of food, Appellant is liable to pay Service Tax on the service component determined through abatement procedure.
12. The other contention of the Appellant is that the subsequent show-cause notices issued by the jurisdictional Commissioner for the remaining period were issued wrongly under Section 73(1)A of the Finance Act, 1994 by referring to and relying on the earlier show-
ST/86671 & 86675/2018 ST/86106/2019 18 cause notice originally issued by the DGCI which is not in conformity to the wordings available in Section 73(1A) that pre-supposes that the same Central Excise Officer is authorised to issue subsequent notice under Section 73(1A) and, therefore, the entire proceeding was initiated by an authority having no jurisdiction to issue show- cause notice. In placing reliance on the judgment of Union of India Vs. Adani Exports Ltd. reported in 2001 (134) ELT (SC) and Deepak Agro Foods Vs. State of Rajasthan reported in 2008 (228) ELT 510 (SC), learned Counsel for the Appellant submitted that proceeding is initiated for improper application of law and jurisdiction being fundamental to the issue, the subsequent show-cause notice is bad in law and unsustainable. However, we refrain ourselves from given any finding on the issue as the Appellant was not able to substantiate that in such a circumstances the entire proceeding would be vitiated except placing reliance on the decision of the Hon'ble Supreme Court cited above where in it was observed that the said issue is required to be decided at the first instance, apart from the fact that allegation in detail is also found reflected in the subsequent show-cause notice issued on 27.09.2018 and show-cause notice dated 06.04.2016 issued by the Commissioner, which were apparently based on show- cause notice dated 08.10.2014 while no indication is available in show-cause notice dated 06.04.2015 that it was issued U/s 73(1A) of the Finance Act, 1994.
13. Last but not the least, Appellants has urged limitation as a ground for non-sustenance of the allegations raised in the show-
ST/86671 & 86675/2018 ST/86106/2019 19 cause notice. It has stated that there was no intent to evade tax as with bonafide belief that VAT was payable on the entire transaction amount, duty liability was discharged in placing reliance on the judgment of Padmini Products Vs. Collector of Central Excise reported in 1989 (43) ELT 195 (SC). Learned Counsel for the Appellant argued that entire issue at hand is based purely on interpretation of the transaction which was to be treated as "sale of goods" or "service". Further, with reference to judicial decisions of Collector of Central Excise Vs. Chemphar Drugs & Liniments 1989 (40) ELT 276 (SC), and Aanand Nishikawa Co. Ltd. Vs. CCE, Meerut 2005 (188) ELT 149 (SC), he argued that the entire turnover of sale of food/beverages had been disclosed in periodic VAT return and ST-3 return for which allegation of suppression is not maintainable. On the other hand, learned Authorised Representative for the Respondent-Department submitted that Appellant was fully aware of the Service Tax implications but was avoiding such payment and only when investigation was conducted by the DGCI, its evasion has come to the knowledge of the concerned person, for which extended period was appropriately invoked. However, having regard to the submissions and points urged by the Appellant before the Adjudicating Authority which would go clearly to justify non-payment of Service Tax for the past period was not intended for tax evasion as after introduction of Section 66E(i) of the Finance Act, 1994, representation had been filed not only by Multiplex Association of India but by the Appellant himself in its individual capacity on 26.03.2013 before the CBEC seeking clarification as regards to applicability of Service Tax on food and ST/86671 & 86675/2018 ST/86106/2019 20 beverages sold by the Appellants and the same representation remained unanswered till Appellant received the show-cause notice for the period October, 2015 onwards (para - 1.11 and para - 1.12) of the Order-in-Original). Therefore, we are of the view that charge of suppression of fact with intention to evade payment of tax cannot be fastened against the Appellant even though it was diligently pursuing the matter before a wrong forum like CBEC and not before the concerned Commissionerate. Additionally, no penalty against CFO Mr. Upen Shah could be made out from the order of the Commissioner since it is not found from the said order about the exact nature of allegation concerning his involvement or his personal knowledge about the same as could be noticed from his order at para 10, besides the fact that they were waiting for the CBEC response to their query on taxability of sale of food made by them. Penalties against the Appellants company under Section 75 & 76 could also not stand for the reason aforesaid. Hence the order.
THE ORDER
14.
(i) Appeal in ST/86675/2018 is allowed in part, setting aside penalties imposed under Section 76, 77 and also under Section 78 of the Finance Act, 1994. The order passed by the Commissioner of CGST & Central Excise, Mumbai vide Order-in-Original No. ME/COMM/VR/37-39/2017-18 dated 7th February 2018 is hereby ST/86671 & 86675/2018 ST/86106/2019 21 modified confirming the duty, liability and interest for the normal period only.
(ii) Appeal in ST/86671/2018 is allowed and personal penalty of Rs.1,00,000/- imposed on Mr. Upen Shah, CFO by the Commissioner of CGST & Central Excise, Mumbai vide Order-in-Original No. ME/COMM/VR/37-39/2017-18 dated 7th February 2018 is hereby set aside.
(iii) Appeal in ST/86106/2019 is allowed in part, setting aside penalties imposed under Section 76 & 77 of the Finance Act, 1994. The order passed by the Commissioner of CGST & Central Excise, Mumbai vide Order-in-Original No. 193/VR/COMMR/ME/2018-19 dated 22nd January, 2019 is hereby modified confirming the duty, liability and interest for the normal period.
Consequential relief shall accordingly follow.
(Order pronounced in the open court on 18.10.2023) (Dr. Suvendu Kumar Pati) Member (Judicial) (Anil G. Shakkarwar) Member (Technical) Prasad