2017 (6) TMI 223 - AT - Service Tax

Refund claim - Franchisee Service - Mandap Keeper Service - Management, Repair & Maintenance Service - case of appellant is that the Original Authority should have examined their service tax payment in total, under various taxable categories, before issue of SCN and should have adjusted the amount properly allowing the refund of excess paid wherever applicable - Section 11 B of the CEA, 1944 - Held that - wherever the appellant have deposited the service tax, the same has been against the past liability. Such payment is made by the appellant, on being informed during the course of enquiry, by the officers. The same is towards specific past liabilities towards service tax, not a lump sum deposit of undeterminable tax liability - no suo moto refund is possible in such a scenario. However, the eligibility of the appellant, if any, wherever excess payment is proved with supporting documents, along with fulfillment of other conditions, required to be examined by the jurisdictional officer separately. Club or Association Service - Held that - the appellants have promoted a loyalty programme for their customers and on payment of some consideration, their customers become members of such programme. The said membership entitles the customers for various discounted services in the affiliated hotels - such programmes does not lead to formation of any club or association and the members of such programme cannot be considered as a member of club or association, to be taxed under the taxable category of club or association . Exhibition service - Held that - the appellant permitted HSBC to display its board in their premises. There is no evidence of appellant s holding any business exhibition and allowing HSBC as exhibitor. We find that display of an advertisement board in the premises of the appellant does not make the appellant as an organisor of a business exhibition - there is no service tax liability on such activities under business exhibition services. Extended period of limitation - Held that - the allegation of fraud or suppression cannot be sustained in respect of the said service - the service tax liability in respect of Franchise services shall be from 18.04.2006 on reverse charge basis. However, demand shall be restricted to normal period only. No penalty is liable in respect of this demand of service tax. Appeal allowed - decided in favor of appellant.

Summary

Issues Involved: Franchisee Service, Mandap Keeper Service, Management, Repair and Maintenance Service, Club or Association Service, Business Exhibition Service, Extended Period Demand, Refund of Excess Payment.

Issue-wise Detailed Analysis:

1. Franchisee Service:
The appellants contested the service tax liability on Franchisee Service, arguing that it is subject to reverse charge mechanism under Section 66A of the Finance Act, 1994, which was introduced from 18.04.2006. They cited the Hon'ble Bombay High Court's decision in the Indian National Shipowners Association Ltd. case, which clarified that service recipients are not liable to pay service tax before this date. The tribunal agreed, restricting the demand to the period post-18.04.2006 and exempting penalties due to the bonafide belief regarding the tax liability.

2. Mandap Keeper Service:
The appellants argued that the value of food and beverages should not be included in the service tax calculation due to VAT payments and the benefit of Notification No.12/2003. However, the tribunal upheld the service tax liability, noting that the appellants failed to include service charges in their tax calculations, constituting suppression of material facts.

3. Management, Repair and Maintenance Service:
The appellants paid most of the service tax before the show cause notice was issued, except for a minor calculation error. The tribunal upheld the service tax liability and penalties, as there was no bonafide belief or legal interpretation issue to justify non-payment.

4. Club or Association Service:
The appellants' loyalty program was argued not to constitute a club or association. The tribunal agreed, stating that the program did not form a club or association as defined under Section 65(25a) of the Act. Consequently, no service tax liability was confirmed under this category.

5. Business Exhibition Service:
The appellants allowed HSBC to display a board on their premises, which the tribunal ruled did not constitute organizing a business exhibition. Therefore, no service tax liability was confirmed under this category.

6. Extended Period Demand:
The appellants contested the extended period demand, arguing there was no willful misstatement or suppression of facts. The tribunal partially agreed, noting a bonafide belief regarding Franchisee Service but upheld the extended period demand for Mandap Keeper and Management, Repair, and Maintenance Services due to clear tax liabilities and lack of reasonable explanations for non-payment.

7. Refund of Excess Payment:
The appellants sought refunds for excess service tax payments. The tribunal noted that any excess payment should be claimed as a refund under Section 11B of the Central Excise Act, 1944, as applicable to service tax, and not as automatic refunds.

Conclusion:
The tribunal upheld the service tax liabilities and penalties for Mandap Keeper and Management, Repair, and Maintenance Services. It restricted the Franchisee Service liability to the period post-18.04.2006 without penalties, and set aside the liabilities and penalties for Club or Association Service and Business Exhibition Service. The appeal was disposed of in these terms, with excess payments to be addressed under statutory refund provisions.