2016 (4) TMI 290 - AT - Service Tax

Change of classification of the service from Management Consultancy Service to Business Auxiliary Service - Providing hospitality services under Management or Business Consultant s Service - Held that - the nature of service provided by IHCL is of the kind of advice, consultancy and assistance which are directly in connection with management of the respective hotels. It is clear from the submissions and the records that IHCL is not managing or conducting the hotel business of Piem on their behalf, but are only providing the management consultancy and advice by posting only key senior personnel to assist Piem to conduct their hotel business with their own infrastructure and manpower. Further, it is noticed that IHCL is not providing any service on behalf of Piem to Piem s customers, nor are IHCL promoting the hotel business of Piem. Therefore, the services provided by IHCL to Piem cannot be termed as Business Auxiliary Service and the services provided by IHCL is squarely covered under Management or Business Consultant s Service, classifiable under Section 65(105)(r) of Finance Act, 1994, supported by the Tribunal judgments in RPG Enterprise Ltd. Vs CCE, Mumbai 2008 (4) TMI 168 - CESTAT MUMBAI and Shervani Indus Syndicate Vs CCE, C & Service Tax, Allahabad 2009 (1) TMI 44 - CESTAT, NEW DELHI . Also, the change of classification at the end of IHCL would be prospective and cannot have retrospective operation, as held by this Tribunal in various judgments. So, the services provided by IHCL is correctly and appropriately classifiable under Management & Business Consultant s Services and not under Business Auxiliary Service and the jurisdictional officers at recipient s unit are not empowered to review or revise the classification at supplier/ provider s end. Denial of Cenvat credit - Being recipient of such service, appellant took the credit of service tax paid on such services under Rule 6(5) of Cenvat Credit Rules - Held that - since Piem Hotels have taken credit during the period April 2005 to September 2010 and the classification has been changed at IHCL s end, such change in classification would not affect the credit taken by Piem during the period prior thereto. Therefore, the jurisdictional authorities at Piem Hotels have committed an apparent error in denying the credit and it is well settled position of law that jurisdictional officers at recipient s end are not empowered to question or change the classification or valuation at supplier s end based on various judgments of Hon ble Apex Court. So, Cenvat credit cannot be denied. - Decided in favour of appellant

Summary

Issues involved:
1. Classification of services provided by IHCL as Management or Business Consultant's Service or Business Auxiliary Service.
2. Eligibility of Piem Hotels Ltd. to claim credit of service tax paid by IHCL.

Analysis:

Issue 1: Classification of services provided by IHCL
The appeal involved a dispute regarding the classification of services provided by IHCL to Piem Hotels Ltd. IHCL claimed that the services fell under "Management or Business Consultant's Service" under Section 65(105)(r) of the Finance Act, 1994. On the other hand, the Department contended that the services should be classified as "Business Auxiliary Service" under Section 65(105)(zzb). The Tribunal analyzed the nature of services provided by IHCL, emphasizing that IHCL was offering advice, consultancy, and assistance directly related to the management of hotels, rather than managing the hotel business on behalf of Piem. The Tribunal concluded that the services provided by IHCL were indeed covered under "Management or Business Consultant's Service" and not under "Business Auxiliary Service." This decision was supported by previous Tribunal judgments and established legal principles. The Tribunal further clarified that any change in classification at IHCL's end would be prospective and not retrospective, ensuring that Piem Hotels Ltd.'s credit claims for the period prior to the classification change remained valid.

Issue 2: Eligibility of Piem Hotels Ltd. to claim credit
The Tribunal addressed the issue of Piem Hotels Ltd.'s eligibility to claim credit for the service tax paid by IHCL. It was determined that Piem Hotels Ltd. had rightfully claimed credit during the period from April 2005 to September 2010, as the services provided by IHCL were correctly classified as "Management or Business Consultant's Service." The Tribunal emphasized that jurisdictional officers at the recipient's end were not authorized to question or alter the classification made by the service provider. Therefore, Piem Hotels Ltd.'s credit claims were upheld, and it was established that the denial of credit by the jurisdictional authorities was erroneous. The Tribunal's decision was based on legal precedents and the principle that the classification at the supplier's end cannot be revisited or revised by officers at the recipient's unit.

In conclusion, both appeals were allowed in favor of the appellants, emphasizing the correct classification of services provided by IHCL and affirming Piem Hotels Ltd.'s right to claim credit for the service tax paid. The Tribunal's decision highlighted the importance of accurate classification and the limitations on jurisdictional officers to alter classifications made by service providers.