TaxTMI 
TaxTMI 
2024 (1) TMI 84
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....owned subsidiary of Hitachi Life Ltd., Japan HLL, claims that it is primarily engaged in providing management services and support services to hotel owners in running their business. The appellant entered into an agreement dated 06.08.2012 the Agreement with M/s Punihani International PI, which as the sole and absolute owner of the hotel was running and maintaining it in the name of "Park Premier" situated in Gurugram. The appellant offered PI to jointly explore the optimum commercial utilization of the hotel by providing dedicated hospitality services, primarily but not limited to Japanese visitors or officials working in India. In terms of the PI Agreement, PI was obliged to allow the appellant to operate and maintain the hotel, while the actual possession of the hotel was always to remain with PI. The revenue earned from the hotel was to be deposited in a separate bank account of PI, which was to be operated under joint signatories of appellant and PI. The amount in the bank account was to be utilized firstly towards running the hotel; secondly towards the fixed monthly share of PI; and the balance amount (inclusive of service tax) was to be the revenue share of the appellant. T....
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.... but penalty under section 76 of the Finance Act was dropped. 9. This appeal has, accordingly, been filed to assail the aforesaid order. 10. Shri B L Narasimhan, learned counsel for the appellant assisted by Shri Dhruv Tiwari, made the following submissions: (i) The appellant is not liable to pay service tax as it did not provide hotel accommodation services to the guests. On the other hand, the appellant provided business support services to PI. In this connection, learned counsel for the appellant referred to various clauses of the Agreement, to which reference shall be made at the appropriate stage; (ii) The finding recorded in the impugned order that the appellant was required to pay service tax is perverse, as it is contrary to the terms of the Agreement which clearly requires all the taxes to be paid from the account of PI; (iii) The revenue generated from the hotel was deposited by PI in the designated bank account and after deducting the statutory liabilities and expenses of the hotel, a fixed amount of such revenue was transferred to another account of PI. The appellant received the balance amount towards consideration for providing the bus....
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....vided. In this connection, reliance has been placed by the learned counsel for the appellant on the judgments of the Supreme Court in Commissioner of Service Tax, vs. Bhayana Builders (P) Ltd. 2018 (10) GSTL 118 (SC) and in Union of India vs. Intercontinental Consultants and Technocrats Pvt Ltd. 2018 (10) GSTL 401 (SC); and (ix) The extended period of limitation could not have been invoked in the facts and circumstances of the case. 11. Shri Manoj Kumar, learned authorized representative appearing for the department has, however, supported the impugned order and made the following submissions: (i) Various clauses of the Agreement do not support the case of the appellant that it was providing "business support services" to PI. On the other hand, they do support the contention of the department that the appellant was providing hotel accommodation services; (ii) The Commissioner has correctly confirmed the demand of service tax on the reimbursement received by the appellant from HLL; and (iii) The contention of the appellant that the extended period of limitation could not have been invoked is incorrect and the Commissioner was justified in invok....
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....xxx 2. OBLIGATIONS OF THE PARTIES The obligations of the Parties are mentioned below : (a) xxxxxxxxxxxx (b) QLEIPL shall independently determine the tariff to be charged to the Guests for the rooms and the facilities to be provided in the Hotel. QLEIPL shall carry out all the correspondence and dealing concerning bookings with guests both at the Hotel as well as outside India. (c) QLEIPL shall supervise the front desk at the Hotel with the concerned staff of PI who shall be on regular duty. (d) QLEIPL shall at its discretion and cost provide all necessary assistance to Guests including providing translation and other assistance at the Hotel. (e) QLEIPL may, at its discretion, develop suitable marketing material in which registered proprietary logo/trademarks of PI may be used provided that such marketing material should comply with and should not violate the applicable laws, by laws, rules, regulations enunciated by the ' Government of India/ state government/local governmental bodies. (h) It is clearly agreed between the parties that except for the property tax which shall be borne by PI and unless otherwise p....
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....hich shall be inclusive of applicable service tax. (iv) For the sake of clarity, PI shall be entitled to the below mentioned amount from the Bank Account during the term of the Agreement: S. NO. Period Amount Per Month 1. 01st December, 2012-31st May, 2013 57,50,000/- 2. 01st June, 2013-31st May, 2014 72,50,000/- 3. 01st June, 2014- till termination of contract 67,50,000/- ( emphasis supplied ) 14. A perusal of the aforesaid terms of the Agreement indicate that PI is the sole and absolute owner of the hotel and is running and maintaining it in the name and style of "Park Premier". The parties had agreed between themselves that PI shall allow the appellant to operate and maintain the hotel and that they shall use their respective resources and expertise to tap the potential hospitality market requirements for the guests. Under clause 3 of the Agreement, the entire revenue of the business of the Hotel including the revenue from the guests shall be received and deposited in a separate new account of PI to be referred to as the Bank Account and PI shall ensure that it is operated under joint signatures of PI and the appellant. Sub-clau....
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....ced the relevant clauses of the Agreement, including clause 2.1 (h), the Commissioner still concluded that liability to pay tax, excluding property tax, lies with the appellant. It is this finding which has again been reiterated by the Commissioner in paragraph 18 of the order to conclude that service tax was not paid by PI. 18. The appellant had also pointed out that a show cause notice dated 28.09.2020 was issued to PI proposing to demand service tax by alleging that PI had provided the service of right to use property and trade-mark to the appellant against a fixed consideration. Paragraph 3 of the said show cause notice dated 28.09.2020 specifically mentions that from the ST-3 returns filed by PI it was clear that it had deposited service tax on accommodation and other services and, in fact, a year wise summary of the returns for the period from 2014-15 to June, 2017 was also provided. 19. Despite this fact having been pointed out, a finding has been recorded by the Commissioner in paragraph 18 of the order that ; " 18. The notice further contended that PI has already discharged service tax in respect of accommodation service provided by it to the guest of the ho....
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....les. The appellant had entered into an Agreement dated 01.02.2015 with HLL under which HLL was required to provide managerial and consultancy services with respect to the management of the hotel. The appellant had agreed to pay a fixed monthly amount to HLL as a consideration for management services. The appellant discharged service tax liability on this amount under the reverse charge mechanism. The appellant claims that it had also incurred certain expenditure on behalf of HLL towards residence and transportation of the employees of HLL visiting India for the management services. These expenses were reimbursed by HLL to the appellant on actual basis in foreign currency. It is, therefore, clear that the reimbursements were not towards any consideration for any service provided by the appellant. The appellant, which was the service recipient under the Agreement, paid the expenses for the employees of HLL and HLL, as a service provider, reimbursed such expenses. There is no payment of any consideration, which is an essential requirement for a service to attract the levy of service tax under the Finance Act. 23. The Supreme Court in Bhayana Builders clearly held that consideration....