Get hot inside restaurants, thanks to ST

TIOL-DDT 2082
10.04.2013
Wednesday

DDT recently asked a foodie friend to file a report on the impact of Service Tax on air-conditioned restaurants. This is the dish he served us -

Restaurateur Janardhanan Nair is unhappy these days. To cater to the burgeoning IT population residing in the posh colonies near the Kinfra Hi-tech Park at Kalamassery, Kochi, he had only recently renovated his pure vegetarian eatery and installed a couple of split-air conditioners. Little did he know that the Hon'ble Finance Minister was closely watching his move.

Prior to 1st April, 2013 air-conditioned or centrally heated restaurants having licence to serve liquor were required to pay Service Tax of 4.92% on the bill amount. Thanks to the Union Budget, 2013 w.e.f 1st April, 2013 all Air conditioned restaurants serving food or beverages are required to pay Service Tax.

Janardhanan found a novel solution to avoid this tax. “I cannot lose clientele by charging a 5% service tax on the bill so I got rid of the air-conditioners and got portable air-coolers¶ he said, adding that many restaurants in his area have either been considering or have already taken off ACs.

It is learnt that multiplexes have already started collecting Service Tax from cinema goers. An accountant from a city-based multiplex said, ¶I received a note from our head office informing that service tax is imposed by service tax department and hence I have instructed all the eating joints and ice cream parlours operating within our centrally air conditioned multiplex to collect the same from our customers.¶Even take-away parcels from food counters are to be billed with service tax of 5%, he said. We cannot shut down the Air-conditioning for we will lose out on our cinema business. Considering our ticket prices, 5% extra on the food price, our customers won't complain. After all, we charge Rs.50/- for a bottle of mineral water, he quipped.

So, be prepared to break into a sweat while eating out at Nair's restaurant for the coolers do not cool you enough.

Last heard was that Nair had some visitors from the department trying to impress upon him that air-cooling and air-conditioning are one and the same!

Now, that would make another story for DDT

Trade Credits for Imports into India - Review of all-in-cost ceiling

AUTHORIZED Dealer Category-I banks are informed that the all-in-cost ceiling as specified under paragraph 4 of Circular No.28 dated September 11, 2012 will continue to be applicable till June 30, 2013.

Circular No. 98/RBI., Dated: April 9, 2013

While rejecting refund claim, penalty imposed u/s 11AC - since there is no demand, pre-deposit of penalty waived

IT is a miracle that assessees survive the idiosyncrasies of the adjudicating and lower appellate authorities and manage to tell their tale.

In the present case, the assessee paid duty on the element of freight charges TWICE.

Realizing their mistake, they filed a refund claim for the excess amount of excise duty paid of Rs.1,27,229/-.

The adjudicating authority rejected their refund claim and also imposed equivalent amount of penalty u/s 11AC of the CEA, 1944. Madness, one may say, but then this order was upheld by the lower appellate authority too!

So, the appellant is before the CESTAT with an application for waiver of pre-deposit of penalty.

The appellant explained the facts and also submitted that since there is no demand of duty as the case relates to a refund claim filed of the duty paid twice, there is no reason to impose any penalty.

The Bench found this submission tenable and accordingly granted a waiver from pre-deposit of the penalty imposed and stayed the recovery.

See 2013-TIOL-581-CESTAT-MUM

Merely because Tribunal confirmed findings of lower appellate authority it does not mean that Tribunal has acted illegally or irregularly: Delhi HC

REVENUE is in appeal against the Tribunal order.

It is the contention of the revenue that it was incumbent upon the Tribunal to have recorded its own findings rather than merely confirming the findings of the CIT (Appeals).

To this submission, the respondent assessee drew the attention of the Bench to the Supreme Court decision in the case of CIT v. K.Y. Pilliah and Sons: (2002-TIOL-882-SC-IT), wherein, on a similar point having been raised, the Supreme Court observed as under: -

“The Income-tax Appellate Tribunal is the final fact-finding authority and normally it should record its conclusion on every disputed question raised before it, setting out its reasons in support of its conclusion. But, in failing to record reasons, when the Appellate Tribunal fully agrees with the view expressed by the Appellate Assistant Commissioner and has no other ground to record in support of its conclusion, it does not act illegally or irregularly, merely because it does not repeat the grounds of the Appellate Assistant Commissioner on which the decision was given against the assessee or the department. The criticism made by the High Court that the Tribunal had “failed to perform its duty in merely affirming the conclusion of the Appellate Assistant Commissioner” is apparently unmerited.”

The High Court, therefore, observed -

“4. In view of the observations of the Supreme Court in the case of K.V. Pilliah and Sons (supra) it is apparent that merely because the Tribunal confirmed the findings of the lower appellate authority it does not mean that the Tribunal has acted illegally or irregularly. In the present case, we find that the Tribunal had examined the findings of the Commissioner of Income Tax (Appeals) in detail and had given an opportunity to the departmental representative to controvert or rebut the findings and conclusions arrived at by the CIT (Appeals). However, despite that opportunity, it is recorded in the order, a portion whereof was extracted above, that the departmental representative had not been able to controvert those findings and point to any material to enable the Tribunal to take a view other than the view taken by the CIT (Appeals). It is in these circumstances that the Tribunal concurred with the view taken by the CIT (Appeals). It is also not the case of the revenue that the departmental representative had made certain points controverting the findings of the CIT (Appeals), which have not been taken into account by the Tribunal. Had that been done, possibly, the revenue would have filed an application under section 254 of the Income Tax Act, 1961 for rectification but that has also not been done. In these circumstances, we do not find any substantial question of law which arises for our consideration in these appeals….”

In fine, the Revenue appeals were dismissed.

See 2013-TII-06-HC-DEL-TP

Jurisprudentiol - Thursday's cases

Service Tax

Construction of Roads on BOT basis and collecting toll - not liable to ST under BAS - in spite of clear instructions issued by Board vide Circular 152/3/2012-ST dated 22/02/2012, which are binding on departmental officers, contrary view has been taken by adjudicating authority for reasons best known only to him - Appeals allowed with consequential relief: CESTAT

THE nine appellants were awarded contracts for the construction of roads by Maharashtra State Road Development Corporation, National Highway Authority of India, Government of Maharashtra and also Government of India. These contracts were on Build, Operate and Transfer (BOT) basis. The consideration for the services rendered under these contracts were allowed to be recovered by collection of toll charges for a fixed tenure and appropriating the same towards the cost incurred. The case of the Revenue is that collection of toll charges by the appellants under these contracts comes within the purview of ‘Business Auxiliary Services'. Notices were issued and demands for service tax along with interest were confirmed apart from imposing equivalent amounts of penalty.

Income Tax

Whether for purpose of exemption u/s 10(23), collection of donation from students by educational body amounts to profit, and thus, calls for rejection of exemption application - YES: HC

ASSESSEE is an educational society. It has filed the present writ petition against the order of the CCIT rejecting its application for exemption under Section 10(23C) (vi). It was submitted by the assessee's counsel that the CCIT having considered all relevant material documents such as the memorandum of bylaws of the Society and the rules and regulations attached thereto, in addition to, the books of accounts for the three years preceding the application, though observed that there was no monetary profits in the activity of imparting education, nevertheless, rejected the application on an unjustifiable ground that the collection of donations from pupils would amount to an act for the purpose of profit and therefore it did not fulfill the objectives mentioned in Section 10(23C)(vi).

Central Excise

In case of default, prohibition under Rule 8(3A) of CER, 2002 from utilizing CENVAT Credit account is not with reference to arrears but entire credit lying in account - assessee to pay excise duty through account current for each consignment at time of removal - Pre-deposit correctly ordered by Commissioner(A) - Petition rejected: HC

THE Petitioner was issued a SCN dated 04/01/2012 alleging default in payment of Central excise duty during the period from December 2010 to May 2011 requiring the payment of excise duty on each consignment in cash, without utilizing CENVAT Credit until payment of outstanding amount together with interest.In response to the SCN, the Petitioner replied that the prohibition from utilizing CENVAT Credit account under Rule 8(3A) of CER, 2002 is with reference to arrears and not the entire credit and, therefore, an amount of Rs.6,29,750/- has been correctly utilized.

See our Columns Tomorrow for the judgements

Until Tomorrow with more DDT

HAVE A NICE DAY

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