2018 (12) TMI 1127 - AT - Service Tax

Classification of services - Business Auxiliary services or otherwise - incentive received from M/s. LKP Financial Services - Held that - Business Auxiliary Service does not cover the aforesaid activity of Money Changing Facility, while Banking Other Financial Services specifically covers Money Changing Business , that too w.e.f 16.05.2008, Nomenclating the very same under Business Auxiliary Service for the purpose of charging service tax is therefore not proper and legal - the demand on account of foreign exchange of incentives from M/s. LKP Financial Services is liable to be set aside irrespective the commission received by appellant from M/s LKP for providing premises to render banking financial services is taxable provided it had been so demanded - demand set aside. Demand of service tax - Mandap keeper services - non-payment of service tax on the invoices where the tea/ snacks/ breakfast was served - Held that - In the present case, the appellant hotel being registered as the Mandap keeper is providing the catering service. The invoices so raised by him show that the same were inclusive of charges of catering services. It is clear from the language of the notification that the nature of menu is not the criteria for availing the exemption but the menu served has to be substantial and satisfying - demand set aside. Taxability - convention services - Held that - While holding senior management meet, dealer meet, customer meet, medical conference etc the appellants were providing the services and that of convention services and not the Mandap keeper services. The fact that those meetings continued till late hours and liquor in addition was served there does not alter the fact that these still were the meetings for the specific group of people for the professional/ official objective and were not open to general public - The findings of the Commissioner are therefore opine incorrect to this effect - However, since the liability while treating them as Mandap keeper service had admittedly been already, discharged, the differential, if any, shall only be payable under this head order accordingly is set aside to this extent. Taxability - 10% services charge/tips in the bills - Held that - Section (65)67 defines Mandap keeper as a person who allows temporary occupation of a Mandap for a consideration for organizing any official, social or business function. For such services all such charges as are related to the use of a Mandap by a Mandap keeper are to be included towards gross amount and are chargeable to service tax as per the above said provisions - The appellant is admittedly providing the Mandap keeper services. Since 10 % of the service charge/ tip is also one of the charges of services included essentially towards providing the Mandap Keeper Service the same has to be included in the gross amount - demand upheld. Taxability - services received from outside India - Held that - Undisputedly, for the period 2003-04 and 2006-07, the amounts were remitted on account of services received on account of overseas travel agents (commission), advertisement sales paid to foreign parties including fees paid to international travel agent group for which participation of hotel is mandatory for securing business, payments made for participation in Frequent Flyer Programmes made outside India, Membership outside India i.e. all the services provided and consumed outside India. These servies came into tax net only w.e.f. 18.04.2006 - demand on this count has correctly been dropped by the Ld. Commissioner but only for the period prior 18.04.2006. Time limit of issuing SCN - Held that - It is apparent from record that the appellant had not paid the, whatever tax, by the prescribed date. They had not disclosed the amount paid towards these services till the date the audit was conducted. There is no communication on record seeking clarification on account of pleaded bonafide confession - the department was entitled to invoke the extended period of limitation. Appeal allowed in part.

Summary

Issues Involved:
1. Taxability of incentive received from M/s. LKP Financial Services under Business Auxiliary Service.
2. Non-payment of service tax on invoices where tea/snacks/breakfast was served under Mandap keeper services.
3. Taxability of services under convention services.
4. Taxability of 10% service charge/tips in the bills.
5. Taxability of services received from outside India.
6. Applicability of the extended period of limitation for issuing the show cause notice.

Detailed Analysis:

A. Taxability of Incentive Received from M/s. LKP Financial Services under Business Auxiliary Service:
The appellant provided a money exchange facility to its guests through M/s. LKP Financial Services after the Reserve Bank of India withdrew its authorization for the appellant to provide such services directly. The department alleged that this activity fell under Business Auxiliary Service (BAS) as per Section 65(19) of the Finance Act, 1994. However, the Tribunal found that the appellant's activity did not fit within the BAS definition since it was not acting as a commission agent for M/s. LKP Financial Services but was merely providing an in-house facility for its guests. The service of money changing is specifically covered under Banking and Other Financial Services, which came into the tax net from 16.05.2008. Therefore, the demand under BAS was set aside.

B. Non-Payment of Service Tax on Invoices Where Tea/Snacks/Breakfast Was Served under Mandap Keeper Services:
The department alleged that the appellant wrongly availed the benefit of Notification No. 12/2001 ST dated 20.12.2001 by not paying service tax on invoices where only tea/snacks/breakfast were served. The Tribunal upheld the adjudicating authority’s decision to drop this demand, relying on the precedent set in the Welcome Hotel case, where it was held that serving high tea or breakfast with snacks and coffee satisfies the condition of providing a substantial and satisfying meal, thus entitling the appellant to the exemption under the said notification.

C. Taxability of Services under Convention Services:
The appellant argued that the functions like senior management meet, dealers meet, customer meet, and medical conferences were informal and for recreation, thus not falling under convention services. The department contended that the nature of the meeting, not its duration or menu, determines its classification. The Tribunal held that these functions were indeed convention services as defined under Section 65(32) of the Act, but since the appellant had already discharged the liability under Mandap keeper services, only the differential amount, if any, would be payable under convention services. The order was modified accordingly.

D. Taxability of 10% Service Charge/Tips in the Bills:
The appellant contended that the 10% service charge was distributed as tips to the serving staff and should not be included in the taxable value. The Tribunal disagreed, holding that the service charge forms part of the gross amount charged for Mandap keeper services and is thus taxable. The adjudicating authority’s confirmation of this demand was upheld.

E. Taxability of Services Received from Outside India:
The appellant argued that services received from outside India were not taxable until 18.04.2006, following the insertion of Section 66A. The Tribunal agreed, referencing the Indian National Shipowners Association case, which held that such services were taxable only from 18.04.2006. Therefore, the demand for the period prior to this date was correctly dropped, but the demand from 18.04.2006 to March 2007 was confirmed.

F. Applicability of the Extended Period of Limitation:
The appellant claimed there was no suppression of facts, and thus the extended period for issuing the show cause notice was not applicable. The Tribunal found that the appellant had failed to comply with statutory provisions and had not disclosed the full amount of service tax due until an audit was conducted. Therefore, the department was justified in invoking the extended period of limitation.

Conclusion:
Both appeals were partly allowed. The Tribunal confirmed the demand for convention services and the 10% service charge under Mandap keeper services. The demand under BAS for foreign incentives was dropped, and the demand for services received from outside India was confirmed only for the period post 18.04.2006. The extended period for issuing the show cause notice was held applicable.