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of <h1>Tribunal rules applicant must pay tax under reverse charge for foreign services.</h1> <h3>M/s. Malabar Hotels Pvt. Ltd. (Asiana Hotels) Versus Commissioner of Central Excise (Service Tax), Chennai-III</h3> The Tribunal held the applicant liable to pay tax under reverse charge mechanism for services provided by foreign companies, amounting to Rs. 56,88,431/- ... Waiver of pre deposit - ‘Management or Business Consultancy Service’ and ‘Business Auxiliary Service’ - Held that:- Preamble of the agreement indicates that the other company took fees to assist, manage and operate the hotel. The other company also received consideration as Management Fees as is evident from Para 1.1(5) of the Agreement. Prima facie, it appears that the other company rendered the service as Management Consultant. The applicant failed to make out a strong prima facie case for waiver of pre-deposit of the entire amount of dues. Applicant is directed to make a pre-deposit of ₹ 12,00,000 within a period of eight weeks. Upon deposit of the same, the balance adjudged dues shall remain waived and stay recovery thereof till disposal of the appeal. Partial stay granted. Issues:1. Tax liability under reverse charge mechanism for services provided by foreign companies.2. Interpretation of agreements for determining the nature of services provided.3. Prima facie case for waiver of pre-deposit of dues.Analysis:1. The judgment deals with the tax liability of an applicant operating a hotel for services provided by foreign companies. The Adjudicating authority categorized the services under 'Management or Business Consultancy Service' and 'Business Auxiliary Service,' holding the applicant liable to pay tax under reverse charge mechanism for the period 2007-08 to 2011-12. The demand amounted to Rs. 56,88,431/- along with interest and penalty equal to tax.2. The applicant contended that the services provided were not in the nature of 'advice' or 'consultancy' but part of a joint venture system. The Counsel argued based on the agreements with the foreign companies, highlighting specific clauses to support their position. On the other hand, the Revenue's Representative pointed out clauses indicating that the services rendered were indeed as Management Consultant, citing legal precedents to support their argument.3. After considering the submissions, the Tribunal found that the preamble and specific clauses of the agreements indicated that the foreign company provided services as a Management Consultant, receiving fees for assisting, managing, and operating the hotel. The Tribunal directed the applicant to make a pre-deposit of Rs. 12,00,000/- within eight weeks, with the balance dues waived pending appeal disposal. The applicant's miscellaneous application for additional evidence was disposed of to be considered during the appeal hearing. Compliance was set for a specific date.This judgment clarifies the tax liability under reverse charge mechanism for services provided by foreign companies, emphasizing the importance of interpreting agreements to determine the nature of services rendered. It also underscores the requirement for a strong prima facie case for waiver of pre-deposit of dues pending appeal disposal.
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