Restaurant Services Provided in Non-Air-Conditioned Premises Remain Exempt under Mega Exemption Notification: CESTAT [Read Order]
CESTAT held that restaurant services provided in non-air-conditioned premises are exempt under the Mega Exemption Notification
Restaurant Services - Non-Air-Conditioned - Exempt - Mega Exemption Notification - CESTAT - taxscan
Restaurant Services - Non-Air-Conditioned - Exempt - Mega Exemption Notification - CESTAT - taxscan
The Allahabad Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) ruled that restaurant services provided in non-air-conditioned premises are exempt from service tax under Mega Exemption Notification No. 25/2012-ST and that service tax demands raised solely on the basis of Form 26AS data are unsustainable.
Apni Rasoi, a proprietorship firm owned by Smt. Manju Soni, operated a restaurant and outdoor catering service in Chitrakoot, Uttar Pradesh. The department compared income shown in Form 26AS with the taxable value declared in ST-3 returns and alleged short payment of service tax amounting to Rs. 3,15,482 for 2013-14 to June 2017.
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A show cause notice was issued, and the adjudicating authority confirmed the demand with penalties, later modified by the Commissioner (Appeals).
The appellant’s counsel, Shri Pranjal Shukla, argued that the restaurant was not air-conditioned and was eligible for exemption under Entry 19 of Notification No. 25/2012-ST. The counsel submitted that the department wrongly treated all income in Form 26AS as taxable without verifying exempt receipts.
They also argued that since the appellant regularly filed returns and disclosed income, the extended limitation period could not be invoked.
The revenue counsel argued that the difference between Form 26AS and the returns proved underpayment and that the appellant failed to reconcile the figures.
The single-member bench comprising Mr. P.K. Choudhary (Judicial Member) observed that the department had issued the demand merely based on Form 26AS data without confirming the nature of receipts. It explained that not all entries in Form 26AS represent taxable income and pointed out that non-air-conditioned restaurant services are specifically exempt.
Holding the demand unsustainable, the CESTAT also ruled that there was no suppression or intent to evade tax. The appeal was allowed, and the demand, interest, and penalties were set aside.
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