Case Note & Summary
The appellant, a charitable trust registered under the Bombay Public Trust Act, owned a building with halls that were hired out for official, social, and business functions. The trust entered into two separate contracts with M/s.Saideep Caterers and Decorators, granting them exclusive rights to provide catering and decoration services to the hirers of the halls. In return, the trust received a consideration described as a donation. The Commissioner of Central Excise sought to levy service tax on this consideration under Section 65(90)(m) of the Finance Act, 1994, which defines 'catering service'. The Customs, Excise and Service Tax Appellate Tribunal (CESTAT) held that the trust was rendering catering/decoration services and thus liable to service tax. The trust appealed to the Bombay High Court. The High Court framed two substantial questions of law: (i) whether the consideration received for granting monopoly rights is chargeable to service tax under Section 65(90)(m), and (ii) whether the Tribunal was correct in holding that the trust was rendering catering/decoration services. The court noted that the trust itself did not provide any catering or decoration services; it merely granted exclusive rights to a third party. The consideration was for the monopoly rights, not for any service rendered by the trust. The court held that the trust was not a 'caterer' and the consideration was not for 'catering service' as defined. Consequently, the court allowed the appeal, set aside the Tribunal's order, and answered both questions in favor of the appellant, holding that the consideration was not chargeable to service tax.
Headnote
A) Service Tax - Catering Service - Section 65(90)(m) Finance Act, 1994 - Consideration for Exclusive Rights - The appellant, a charitable trust, gave exclusive catering and decoration rights to a third party for its halls. The consideration received was not for rendering catering service but for granting monopoly rights. Held that such consideration is not chargeable to service tax under Section 65(90)(m) as the trust did not render catering service itself. (Paras 1-3)
Issue of Consideration
Whether the consideration (donation) received by the appellant from M/s.Saideep Caterers and Decorators under two separate contracts giving monopoly rights for catering and decoration to the hirer of the appellant's hall is chargeable to service tax within the meaning of section 65(90)(m) of the Finance Act, 1994.
Final Decision
The appeal is allowed. The order of the Customs, Excise and Service Tax Appellate Tribunal is set aside. The consideration received by the appellant from M/s.Saideep Caterers and Decorators is not chargeable to service tax under Section 65(90)(m) of the Finance Act, 1994.
Law Points
- Service tax
- Catering service
- Mandap keeper
- Monopoly rights
- Consideration
- Finance Act 1994 Section 65(90)(m)
Case Details
2006 LawText (BOM) (04) 22
Central Excise Appeal No.76 of 2005
R.M. Lodha, J.P. Devadhar
Arun Sathe, S.S.Phadkar, Aarti Sathe, Mandar Vaidya for appellant; A.J.Rana, R.C.Master for respondent
The Commissioner of Central Excise, Mumbai-IV
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Nature of Litigation
Service tax appeal against order of Customs, Excise and Service Tax Appellate Tribunal
Remedy Sought
Appellant sought to set aside the Tribunal's order holding that consideration received for granting exclusive catering/decoration rights is chargeable to service tax
Filing Reason
The appellant challenged the Tribunal's decision that the consideration (donation) received from M/s.Saideep Caterers and Decorators for monopoly rights was chargeable to service tax under Section 65(90)(m) of Finance Act, 1994
Previous Decisions
The Customs, Excise and Service Tax Appellate Tribunal held that the appellant was rendering catering/decoration services and liable to service tax
Issues
Whether the consideration (donation) received by the appellant from M/s.Saideep Caterers and Decorators under two separate contracts giving monopoly rights for catering and decoration to the hirer of the appellant's hall is chargeable to service tax within the meaning of section 65(90)(m) of the Finance Act, 1994?
Whether in the facts and circumstances of the case, the Customs, Excise and Service Tax Appellate Tribunal was right in law in holding that the appellant was rendering catering/decoration services within the meaning of section 65(90)(m) of the Finance Act, 1994?
Submissions/Arguments
Senior counsel for the appellant argued that the consideration was for granting monopoly rights, not for rendering catering service.
Senior counsel for the respondent argued that the consideration was for catering/decoration services and thus chargeable to service tax.
Ratio Decidendi
The consideration received by the appellant for granting exclusive catering and decoration rights to a third party does not constitute 'catering service' as defined under Section 65(90)(m) of the Finance Act, 1994, because the appellant itself did not render any catering or decoration service; it merely granted monopoly rights.
Judgment Excerpts
Whether the consideration (donation or by whatever name called) received by the appellant from M/s.Saideep Caterers and Decorators under the two separate contracts giving M/s.Saideep Caterers and Decorators monopoly rights for catering and decoration to the hirer of the appellant's hall (mandap) for official, social and business functions is chargeable to service tax within the meaning of section 65(90)(m) of the Finance Act, 1994?
Procedural History
The appellant, a charitable trust, received consideration for granting exclusive catering/decoration rights. The Commissioner of Central Excise sought to levy service tax. The Customs, Excise and Service Tax Appellate Tribunal upheld the levy. The appellant appealed to the Bombay High Court.
Acts & Sections
- Finance Act, 1994: 65(90)(m)
