Service Tax on Entry Fee Limited to Appellant's Share Under Revenue Sharing Agreement per CESTAT

CESTAT held that service tax liability on the entry fee is limited to the appellant's share as per the revenue sharing agreement with NHPL. Both parties discharged their respective service tax liabilities, resulting in the Revenue receiving tax on the entire amount. The appellant was not prejudiced by this arrangement. The tribunal ruled in favor of the appellant on merits, rendering issues of limitation, interest, and penalty unnecessary to consider. The impugned order was set aside and the appeal allowed.

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1. ISSUES:

1.1 Whether the appellant is required to pay service tax on the entire amount collected as entry fee from non-resident guests or only on the share of the entry fee retained by the appellant after remitting the balance to the other party providing accommodation and restaurant services.

1.2 Whether the sharing of the entry fee between the appellant and the other party constitutes "consideration" for a "service" under Section 67 of the Finance Act, 1994.

1.3 Whether the appellant's act of collecting the entry fee on behalf of the other party amounts to providing a taxable service to that party.

2. RULINGS / HOLDINGS:

2.1 The appellant is liable to pay service tax only on the share of the entry fee retained by it and not on the entire amount collected, as the other party pays service tax on the accommodation and restaurant services provided to the non-resident guests.

2.2 The sharing of the profit under the agreement does not amount to "consideration" for the provisions of service between the appellant and the other party, as both act on a principal-to-principal basis and neither provides a service to the other.

2.3 The appellant's collection of the entry fee on behalf of the other party cannot be considered a "service" provided to the other party, and hence, no service tax liability arises on the entire amount collected by the appellant.

3. RATIONALE:

3.1 The Court examined the Revenue Sharing Agreement clauses which clearly delineate the rights and obligations of both parties, including the adjustment of entry fee against accommodation or restaurant services and the sharing of the entry fee accordingly.

3.2 The Court noted that the other party pays service tax on accommodation and restaurant services enjoyed by the non-resident guests, while the appellant pays service tax only on the amount retained by it, consistent with the agreed terms.

3.3 The Court emphasized that the Revenue cannot add terms to the agreement contrary to the parties' intention and that the contractual arrangement reflects a joint venture with mutual interests rather than a provider-recipient service relationship between the appellant and the other party.

3.4 The Court relied on the principle that "no consideration has been provisioned in favour of the appellant for collecting entry fee," negating the characterization of the appellant's collection activity as a taxable service to the other party.

3.5 The Court referred to a subsequent Commissioner (Appeals) decision upholding the same interpretation, which was not challenged by the Revenue, thereby reinforcing the settled position on the merits.

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