service tax was not payable on income from bowling alley – Supreme Court

No service tax was payable on income from bowling alley as it is covered under section 66D(j) of the Finance Act under negative list – SC 

In a recent judgment, the Hon’ble Supreme Court has affirmed that income received from bowling alley earmarked separately was covered as amusement park or amusement arcade under section 66D(j) of the Finance Act under negative list and, therefore, was not be leviable to service tax.

ABCAUS Case Law Citation:
4298 (2024) (10) abcaus.in SC

In the instant case, the service tax authorities had challenged the order passed by the Custom Excise Service Tax Tribunal (CESTAT) in holding that income received from bowling alley would be covered under section 66D(j) of the Finance Act and, therefore, would not be leviable to service tax.

service tax bowling alley

The respondent assessee was engaged in operating five centres providing recreational facilities to customers by offering bowling alley, video and other fun games, restaurant facility, sale of socks and supply of shoes; all the said facilities were independent of each other and chargeable separately, depending on the services availed by the customer; such recreational facilities have a proper demarcation for access; as an example a customer may choose to access only restaurant services at the dining section of the Centre in which case he would be invoiced only for the food and/or beverages consumed by him; and separate entry/admission fee is not collected for entering the Centre.

With respect to income from Bowling Alley the assessee did not pay any service tax till 30.06.2015 on charges received against access provided to bowling alley facility as the access to such amusement facility was covered under the Negative List of services. With effect from 01.06.2015, service tax was paid at the applicable rate as the services provided by way of access to amusement facilities was deleted from the Negative List.

Dispute arose on the liability of the assessee to pay service tax on income from bowling alley and department sought to recover service tax and impose penalty on the allegation that the term ‘amusement facility’ had been defined under section 65B of the Finance Act. Since the appellant provided bowling alley, video/fun games, restaurant services facilities in common premises with a single entry and exit gate, it would not qualify as an ‘amusement facility’. Accordingly, service tax was recoverable on the income from bowling alley along with interest.

The demand was confirmed by the order passed by the Commissioner holding that only the activity of admission to entertainment events or access to amusement facilities is covered under section 66D(j) of the Finance Act. Charges collected for any other activity would not be covered under the said entry. Since the appellant was not charging any entry/admission fee for entering the Centre, income earned from bowling alley would not be covered under section 66D(j) of the Finance Act as such income pertained to an activity other than ‘access to amusement facilities.

The CESTAT/Tribunal noted that as per the Department a place where ‘other services’ are also provided will not qualify as an ‘amusement facility’ under section 65B(9) of the Finance Act, and would be excluded from the scope of ‘amusement facility’.

The CESTAT observed that ‘Amusement facility’ has been defined under section 65B(9) to mean a facility where recreation or fun is provided by means of bowling alleys. However, a place within such facility where services other than bowling alley are provided would not be 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, and not ‘facility’. Once ‘bowling alley’ qualifies as a facility, only a place within such bowling alley where other services are provided would not be covered under the definition of amusement facility. However, the bowling alley itself would be covered. In an amusement park or amusement arcade, there may be numerous rides and other places of fun, and there may also be designated areas for food and beverages or conference hall. In such cases, access to such restaurant or conference hall would be excluded from the Negative List and the amount charged towards access to fun or recreation facilities would be taxable.

The CESTAT noted that the assessee had earmarked space for fun or recreation such as bowling alley or video games. In such an area, no other services are provided. Further, charges to such areas are also separate. Thus, provision of access to such a facility (bowling alley) would be covered under the Negative List.

The CESTAT further observed that in a bowling arcade, amount is charged for entering the bowling premises. Once such entry fee or access charge is paid, the customer is free to bowl in the available alley. The respondent assessee had not collected charges for ‘playing bowling alley’. The CESTAT held that ‘access to’ an amusement facility would also mean the permission to use such facility against payment of an amount.

Accordingly, the CESTAT had held that the income received by the assessee from bowling alley would be covered under section 66D(j) of the Finance Act and, therefore, would not be leviable to service tax.

Aggrieved by the order of the Tribunal, the service tax authorities challenged it before Hon’ble Supreme Court.

The Hon’ble Supreme Court observed that in the facts of the case, the view taken by the Tribunal was correct. Hence, there was no reason to interfere in the Appeal.

Accordingly, the appeal was dismissed by the Hon’ble Supreme Court.

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