Service Tax Payable On Income Received By Smaaash From Bowling Alley Would Be Covered Under Amusement Facility: CESTAT

The Delhi Bench of Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) has held that the income received by the Smaaash from bowling alley would be covered under Section 66D(j) of the Finance Act and, therefore, would not be eligible for service tax.

The bench of Justice Dilip Gupta (President) and P.V. Subba Rao (Technical Member) has observed that Section 66D(j) of the Finance Act covers admission to an amusement 'facility' from the levy of service tax. An 'amusement facility' has been defined as a 'facility' where fun or recreation is provided. None of the provisions state that admission or access to a 'place' would only be excluded from the levy of service tax. Once an amount has been recovered for accessing a facility, such as a bowling facility, the same would be covered under Section 66D(j) of the Finance Act.

The appellant/assessee is in the business of operating 'Blu-O Centers' at five locations. The appellant claims that the centre provides recreational facilities to customers by offering bowling alleys, video and other fun games, a restaurant facility, the sale of socks, and the supply of shoes. All the facilities are independent of each other and chargeable separately, depending on the services availed by the customer. The recreational facilities have a proper demarcation for access. As an example, it has been stated that a customer may choose to access only restaurant services in the dining section of the centre, in which case he would be invoiced only for the food and/or beverages consumed by him, and a separate entry/admission fee is not collected for entering the centre.

A show cause notice for the period from July 1, 2012, to January 31, 2017 was issued to the appellant, proposing to recover service tax on the income earned by the appellant from the bowling alleys. It was alleged that Section 66D(j) of the Finance Act covers admission to an amusement facility. The term 'amusement facility' has been defined under Section 65B of the Finance Act. Since the appellant provides bowling alleys, video/fun games, and restaurant services facilities on common premises with a single entry and exit gate, it would not qualify as an 'amusement facility'. The service tax was recoverable on the income from the bowling alley, along with interest. The appellant had intentionally and wilfully suppressed the receipt of payment for bowling alley with the intent to evade payment of service tax. Hence, the extended period of limitation was invokable under the proviso to Section 73(1) of the Finance Act. Penalties would also be imposable under sections 76, 77(2), and 78 of the Finance Act.

The appellant contended that the understanding of the department is incorrect to the extent that it has disallowed the appellant from being covered under the scope of Section 66D(j) of the Finance Act since it provides services other than amusement activities at the Center. The definition of 'amusement facility' does not disqualify a facility from being covered under its scope only because services other than fun or recreation are provided in any part or place of such facility. The definition only excludes such other places from the scope of amusement facilities, which means that charges recovered for access to the excluded premises would continue to be taxable.

The appellant urged that 'amusement facility' has been defined as a facility where recreational or fun is provided by means of bowling alleys. However, a place within such a facility where other services are provided (other than fun or recreation by means of rides, gaming devised, or bowling alley) is not covered under the definition of 'amusement facility'. The word 'where' in the last portion of the definition of 'amusement facility' means the 'place' where other services are provided, not 'facility'. Once the 'bowling alley' qualifies as a facility, only a place within such a bowling alley where other services are provided would be covered under the definition of amusement facility, but the bowling alley itself would be covered.

The department contended that the contention of the appellant that during the disputed period service relating to 'admission of entertainment events or access to amusement facilities' was included under the Negative List of services provided under Section 66D(j) of the Finance Act is incorrect as the service provided by the appellant does not qualify to be an 'amusement facility' defined under Section 65B(9) of the Finance Act.

The tribunal held that 'access to' an amusement facility would also mean permission to use a facility against payment of an amount.

Counsel For Appellant: V. Lakshmikumaran

Counsel For Respondent: Rajeev Kapoor

Case Title: M/s Smaaash Leisure Limited Versus Commissioner of Central Goods & Service Tax, New Delhi

Case No.: Service Tax Appeal No. 51632 of 2019

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