Appeals Partially Allowed: Service Charges Confirmed, Foreign Incentives Dropped

The Tribunal partly allowed both appeals. The demand for convention services and the 10% service charge under Mandap keeper services was confirmed. The demand under Business Auxiliary Service for foreign incentives was dropped. The demand for services received from outside India was confirmed only for the period post 18.04.2006. The extended period for issuing the show cause notice was deemed applicable.

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Issues Involved:
1. Taxability of incentive received from M/s. LKP Financial Services under Business Auxiliary Service.
2. Non-payment of service tax on invoices where tea/snacks/breakfast was served under Mandap keeper services.
3. Taxability of services under convention services.
4. Taxability of 10% service charge/tips in the bills.
5. Taxability of services received from outside India.
6. Applicability of the extended period of limitation for issuing the show cause notice.

Detailed Analysis:

A. Taxability of Incentive Received from M/s. LKP Financial Services under Business Auxiliary Service:
The appellant provided a money exchange facility to its guests through M/s. LKP Financial Services after the Reserve Bank of India withdrew its authorization for the appellant to provide such services directly. The department alleged that this activity fell under Business Auxiliary Service (BAS) as per Section 65(19) of the Finance Act, 1994. However, the Tribunal found that the appellant's activity did not fit within the BAS definition since it was not acting as a commission agent for M/s. LKP Financial Services but was merely providing an in-house facility for its guests. The service of money changing is specifically covered under Banking and Other Financial Services, which came into the tax net from 16.05.2008. Therefore, the demand under BAS was set aside.

B. Non-Payment of Service Tax on Invoices Where Tea/Snacks/Breakfast Was Served under Mandap Keeper Services:
The department alleged that the appellant wrongly availed the benefit of Notification No. 12/2001 ST dated 20.12.2001 by not paying service tax on invoices where only tea/snacks/breakfast were served. The Tribunal upheld the adjudicating authority’s decision to drop this demand, relying on the precedent set in the Welcome Hotel case, where it was held that serving high tea or breakfast with snacks and coffee satisfies the condition of providing a substantial and satisfying meal, thus entitling the appellant to the exemption under the said notification.

C. Taxability of Services under Convention Services:
The appellant argued that the functions like senior management meet, dealers meet, customer meet, and medical conferences were informal and for recreation, thus not falling under convention services. The department contended that the nature of the meeting, not its duration or menu, determines its classification. The Tribunal held that these functions were indeed convention services as defined under Section 65(32) of the Act, but since the appellant had already discharged the liability under Mandap keeper services, only the differential amount, if any, would be payable under convention services. The order was modified accordingly.

D. Taxability of 10% Service Charge/Tips in the Bills:
The appellant contended that the 10% service charge was distributed as tips to the serving staff and should not be included in the taxable value. The Tribunal disagreed, holding that the service charge forms part of the gross amount charged for Mandap keeper services and is thus taxable. The adjudicating authority’s confirmation of this demand was upheld.

E. Taxability of Services Received from Outside India:
The appellant argued that services received from outside India were not taxable until 18.04.2006, following the insertion of Section 66A. The Tribunal agreed, referencing the Indian National Shipowners Association case, which held that such services were taxable only from 18.04.2006. Therefore, the demand for the period prior to this date was correctly dropped, but the demand from 18.04.2006 to March 2007 was confirmed.

F. Applicability of the Extended Period of Limitation:
The appellant claimed there was no suppression of facts, and thus the extended period for issuing the show cause notice was not applicable. The Tribunal found that the appellant had failed to comply with statutory provisions and had not disclosed the full amount of service tax due until an audit was conducted. Therefore, the department was justified in invoking the extended period of limitation.

Conclusion:
Both appeals were partly allowed. The Tribunal confirmed the demand for convention services and the 10% service charge under Mandap keeper services. The demand under BAS for foreign incentives was dropped, and the demand for services received from outside India was confirmed only for the period post 18.04.2006. The extended period for issuing the show cause notice was held applicable.

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