2019 (9) TMI 670 - AT - Service Tax

Tribunal rules in favor of appellant, overturning some charges and penalties

M/s Asian Hotels Ltd. Versus Commissioner of Service Tax, New Delhi

M/s Asian Hotels Ltd. Versus Commissioner of Service Tax, New Delhi - 2019 (30) G.S.T.L. J141 (Tri. - Del.)] Issues Involved:1. Miscellaneous revenue like photocopier etc. under Convention Service2. Currency conversion fee under Business Auxiliary Service3. Advertising agency services under Advertising Agency Service4. Design and consultancy charges under Interior Decorator Service5. Reservation expenses, Hyatt Gold Passport, Hyatt Chain services under Business Auxiliary Service6. Subscription and maintenance of software under Management or Repair Service7. Fee paid to M/s Hyatt International Asia Pacific Ltd. for operation of the hotel under Management Consultancy Service8. Miscellaneous payments to M/s Hyatt International Asia Pacific Ltd. in connection with operation of the hotel under Business Auxiliary ServiceDetailed Analysis:1. Miscellaneous revenue like photocopier etc. under Convention Service:The Tribunal found that the charges collected by the appellant from hotel guests for services like courier, photocopy, lost key, and secretarial services do not relate to holding a convention. The definition of 'convention' under Section 65(32) and 'taxable service' under Section 65(105)(zc) were examined, and it was concluded that these miscellaneous charges are not connected to convention services. Therefore, the levy of charges under this head was not sustained.2. Currency conversion fee under Business Auxiliary Service:The Tribunal determined that currency conversion charges received from hotel guests cannot be subjected to levy of Service Tax under 'business auxiliary services'. The service was rendered independently and not on behalf of any third party. Several case laws, including Marudhara Motors and Molight Shipping Services Limited, were cited to support this conclusion. Hence, the confirmation of demand under this head was not justified.3. Advertising agency services under Advertising Agency Service:The appellant did not dispute the liability to pay Service Tax under this head but contested the imposition of penalty. The Tribunal acknowledged the confusion regarding the imposition of tax on reverse charge basis and referred to the legal position settled by the Bombay High Court in Indian National Shipping Owners Association. Consequently, the imposition of penalty under this head was not sustained.4. Design and consultancy charges under Interior Decorator Service:Similar to the advertising agency services, the appellant did not dispute the liability but contested the penalty. The Tribunal referred to the same legal confusion and the settled position by higher courts, concluding that the imposition of penalty under this head was also not justified.5. Reservation expenses, Hyatt Gold Passport, Hyatt Chain services under Business Auxiliary Service:The Tribunal found that M/s Hyatt Chain Services Ltd. undertakes promotion activities for the Hyatt Chain of hotels and passes on the cost to the hotels on an actual basis. The arrangement was of sharing joint promotional expenses at a global level. The Tribunal referred to the case of Historic Resort Hotels Pvt. Ltd., where similar arrangements were not considered taxable under 'business auxiliary service'. Therefore, the confirmation of demand under this head was not sustained.6. Subscription and maintenance of software under Management or Repair Service:The Tribunal noted that maintenance of software was not covered under 'maintenance or repair services' prior to 01 June 2007, when an Explanation was added to include 'computer software' as 'goods'. The Tribunal referred to several decisions, including Kasturi & Sons Limited and Ruchi Infotech Limited, which supported the appellant's contention. Hence, the demand under this head was not sustained.7. Fee paid to M/s Hyatt International Asia Pacific Ltd. for operation of the hotel under Management Consultancy Service:The Tribunal concluded that Hyatt International was managing the hotel and not providing any consultancy or advice. The Tribunal referred to decisions in Basti Sugar Mills Co. Ltd. and Indian Hotels Co. Ltd., which distinguished between actual management and consultancy services. Therefore, the confirmation of demand under this head was not sustained.8. Miscellaneous payments to M/s Hyatt International Asia Pacific Ltd. in connection with operation of the hotel under Business Auxiliary Service:The Tribunal found that the expenses reimbursed to Hyatt International were not towards any 'business auxiliary service' but were part of the overall agreement for the operation and management of the hotel. The Tribunal referred to the Supreme Court's decision in Intercontinental Consultants & Technocrats Private Limited, which clarified that reimbursed expenses cannot be subjected to Service Tax. Hence, the demand under this head was not sustained.Conclusion:The Tribunal set aside the confirmation of demand under the heads except for the services at Serial Nos. 3 (Advertising agency services) and 4 (Design and consultancy charges), where only the levy of penalty was set aside. The appeal was allowed to the extent indicated.