Brothers Dhaba Vs Commissioner of Central Excise (CESTAT Chandigarh)
The Chandigarh bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) has held that for restaurant services, the 60% abatement provided by law should be excluded when calculating a business’s turnover for the purpose of the Small Scale Industry (SSI) exemption. This ruling came in the case of Brothers Dhaba vs. Commissioner of Central Excise Goods & Service Tax, where the Tribunal set aside a tax demand, interest, and penalties that had been confirmed by both the adjudicating authority and the Commissioner (Appeals).
The dispute centered on the correct method for applying the SSI exemption limit of ₹10 lakh to a business providing restaurant services. The appellant, Brothers Dhaba, was a registered service provider in the “Restaurant Services” category. A departmental scrutiny of their service tax returns for the financial year 2014-15 revealed a total turnover of ₹24,75,391. Based on this figure, the department concluded that the business was not eligible for the SSI exemption, which has a mandatory limit of ₹10 lakh. Subsequently, a show cause notice was issued, leading to a confirmed demand for service tax of ₹72,944, along with interest and a penalty of ₹7,294.
The appellant’s counsel, Mr. Singh, argued that this calculation was incorrect. He contended that the business was entitled to an abatement of 60% on its turnover, as per Notification No. 33/2012. This abatement meant that only 40% of the total turnover was subject to service tax. Mr. Singh asserted that for the purpose of determining eligibility for the SSI exemption, the turnover should be considered after applying this 60% abatement. When this calculation was performed on their total turnover of ₹24,75,391, the taxable value fell below the ₹10 lakh SSI exemption threshold, making the appellant eligible for the exemption.
