2019 (9) TMI 670 - AT - Service Tax

Recovery proceedings - demand of service tax - management consultancy service - fees paid to Hyatt International for the operation of Hotel - Business Auxiliary Service - miscellaneous payment to Hyatt International - Maintenance or repair service - subscription and maintenance of Software - Business Auxiliary Service - Reservation expenses, Hyatt Gold Passport, Hyatt chain services - Interior Decorator Service - penalty on Design and Consultancy charges - penalty on Advertising Agency Service - Business Auxiliary service - Currency Conversion Fee - Convention Centre Services - miscellaneous Revenue like photocopies etc - Management consultancy service - fees paid to Hyatt International for the operation of Hotel - period 18 April, 2006 to 31 March, 2007 - HELD THAT - In the present case, as the period in dispute is from 18 April, 2006 to 31 March, 2007, the definition of management consultant , as it stood prior to 01 June, 2007 would be relevant - Hyatt International carries out the operation and management of the hotel for the Appellant under the agreement. It is not engaged in providing any service in connection with the management of the hotel. It is itself running the hotel. Hyatt International also does not render any advice, consultancy or technical assistance to the Appellant. It needs to be noted that actual running or managing an organization cannot be the same as providing any service in connection with the management of the organization. It is difficult to comprehend, on a plain reading of the agreement, that Hyatt International is providing any service to the Appellant as a management consultant . - Hyatt International is not providing any service of a management consultant to the Appellant - Demand do not sustain. Business Auxiliary Service - miscellaneous payment to Hyatt International - period is from 18 April, 2006 to 31 March, 2007 - HELD THAT - Only such amount is subject to service tax which represents consideration for provision of service and any other amount which is not a consideration for provision of service cannot be subjected to service tax - the service tax is on the value of taxable services and, therefore, it is the value of the services which are actually rendered which has to be ascertained for the purpose of calculating the service tax - the value of material which is supplied free by the service recipient cannot be treated as gross amount charged as that is not a consideration for rendering the service - the expenses which are reimbursed, cannot be subjected to levy of Service Tax under business auxiliary service - demand do not sustain. Maintenance or repair service - subscription and maintenance of Software - period 18 August, 2006 to 31 March, 2007 - HELD THAT - The impugned order has taken into consideration the Explanation that provides that goods would include Computer Software , even though this Explanation was added w.e.f 01 June, 2007 and the period in dispute is from 18 August, 2006 to 31 March, 2007 - It is, therefore, not possible to sustain the demand made by the Commissioner under this head. Business Auxiliary Service - Reservation expenses, Hyatt Gold Passport, Hyatt chain services - period involved is from 18 April, 2006 to 31 March, 2007 - HELD THAT - It is seen that M/s Hyatt Chain Services Ltd. undertakes certain promotion activities for the Hyatt Chain of hotels and thereafter passes on the cost to the hotels on actual basis. Thus, the arrangement is of sharing of joint promotional expenses at a global level. Even under the Hyatt Gold Passport Program , the members of the program are provided exclusive services, benefits, and promotions at the Hyatt hotels. The participating hotels are jointly promoting their business by organizing the said program and offering bonus points to guests availing facilities in their hotels. The settlement between the hotels where the bonus points are earned and the hotel where the bonus points are redeemed is facilitated by Hyatt Corporation - It was found that the arrangement was such that all the group companies would benefit for such expenses which, though initially borne by the Appellant, were subsequently shared. Thus, there was no scope for imposition of tax liability on the Appellant under the category of business auxiliary service - In the present case the Commissioner after noticing the contention of the Appellant merely observed, without giving any reasons, that all the services were covered under the definition of business auxiliary service . This apart, no particular clause of the definition of business auxiliary service was referred to - it is not possible to sustain the confirmation of demand under this head. Imposition of penalty - Interior Decorator Service - Design and Consultancy charges - HELD THAT - The taxable service under the aforesaid Section 66A has to be treated as if the recipient had himself provided the service in India. The impugned order seeks to levy Service Tax upon the Appellant as a service recipient. There was a confusion regarding imposition of tax on reverse charge basis and the legal position was finally settled by the Bombay High Court in INDIAN NATIONAL SHIPOWNERS ASSOCIATION VERSUS UNION OF INDIA 2008 (12) TMI 41 - BOMBAY HIGH COURT - the imposition of penalty under the impugned order under this head is not justified. Imposition of penalty - Advertising Agency Service - Reverse charge mechanism - HELD THAT - The submissions advanced by the learned Counsel for the Appellant for contesting the penalty under this head are the same as advanced for contesting the penalty under the earlier head Design and Consultancy Charges . For the reasons stated, while dealing with imposition of penalty under the said head, the imposition of penalty under this head cannot also be sustained. Business Auxiliary service - Currency Conversion Fee - period is from 01 April, 2003 to 31 March, 2003 - HELD THAT - In M/S MARUDHARA MOTORS VERSUS CCE JAIPUR 2018 (1) TMI 1216 - CESTAT NEW DELHI a Division Bench of the Tribunal examined whether document processing charges received from the buyer of the vehicle could be subjected to levy of Service Tax under business auxiliary services . The Tribunal found that service was being provided to a client for and on behalf of the financial institutions or banks. It was for providing documentation that charges were claimed from the customers and since there was no involvement of any third party on whose behalf service could be said to have been provided to the customers, Service Tax could not have been demanded under business auxiliary services - demand set aside. Convention Centre Services - miscellaneous Revenue like photocopies etc - period is from 01 October, 2002 to 31 March, 2004 - HELD THAT - The aforesaid charges collected by the Appellant from the hotel guests do not in any manner whatsoever relate to holding of a convention. Convention, means a formal meeting or assembly which is not open to the general public. The levy of charges under this head, therefore, cannot be sustained. Appeal allowed in part.

Summary

Issues Involved:
1. Miscellaneous revenue like photocopier etc. under Convention Service
2. Currency conversion fee under Business Auxiliary Service
3. Advertising agency services under Advertising Agency Service
4. Design and consultancy charges under Interior Decorator Service
5. Reservation expenses, Hyatt Gold Passport, Hyatt Chain services under Business Auxiliary Service
6. Subscription and maintenance of software under Management or Repair Service
7. Fee paid to M/s Hyatt International Asia Pacific Ltd. for operation of the hotel under Management Consultancy Service
8. Miscellaneous payments to M/s Hyatt International Asia Pacific Ltd. in connection with operation of the hotel under Business Auxiliary Service

Detailed Analysis:

1. Miscellaneous revenue like photocopier etc. under Convention Service:
The Tribunal found that the charges collected by the appellant from hotel guests for services like courier, photocopy, lost key, and secretarial services do not relate to holding a convention. The definition of 'convention' under Section 65(32) and 'taxable service' under Section 65(105)(zc) were examined, and it was concluded that these miscellaneous charges are not connected to convention services. Therefore, the levy of charges under this head was not sustained.

2. Currency conversion fee under Business Auxiliary Service:
The Tribunal determined that currency conversion charges received from hotel guests cannot be subjected to levy of Service Tax under 'business auxiliary services'. The service was rendered independently and not on behalf of any third party. Several case laws, including Marudhara Motors and Molight Shipping Services Limited, were cited to support this conclusion. Hence, the confirmation of demand under this head was not justified.

3. Advertising agency services under Advertising Agency Service:
The appellant did not dispute the liability to pay Service Tax under this head but contested the imposition of penalty. The Tribunal acknowledged the confusion regarding the imposition of tax on reverse charge basis and referred to the legal position settled by the Bombay High Court in Indian National Shipping Owners Association. Consequently, the imposition of penalty under this head was not sustained.

4. Design and consultancy charges under Interior Decorator Service:
Similar to the advertising agency services, the appellant did not dispute the liability but contested the penalty. The Tribunal referred to the same legal confusion and the settled position by higher courts, concluding that the imposition of penalty under this head was also not justified.

5. Reservation expenses, Hyatt Gold Passport, Hyatt Chain services under Business Auxiliary Service:
The Tribunal found that M/s Hyatt Chain Services Ltd. undertakes promotion activities for the Hyatt Chain of hotels and passes on the cost to the hotels on an actual basis. The arrangement was of sharing joint promotional expenses at a global level. The Tribunal referred to the case of Historic Resort Hotels Pvt. Ltd., where similar arrangements were not considered taxable under 'business auxiliary service'. Therefore, the confirmation of demand under this head was not sustained.

6. Subscription and maintenance of software under Management or Repair Service:
The Tribunal noted that maintenance of software was not covered under 'maintenance or repair services' prior to 01 June 2007, when an Explanation was added to include 'computer software' as 'goods'. The Tribunal referred to several decisions, including Kasturi & Sons Limited and Ruchi Infotech Limited, which supported the appellant's contention. Hence, the demand under this head was not sustained.

7. Fee paid to M/s Hyatt International Asia Pacific Ltd. for operation of the hotel under Management Consultancy Service:
The Tribunal concluded that Hyatt International was managing the hotel and not providing any consultancy or advice. The Tribunal referred to decisions in Basti Sugar Mills Co. Ltd. and Indian Hotels Co. Ltd., which distinguished between actual management and consultancy services. Therefore, the confirmation of demand under this head was not sustained.

8. Miscellaneous payments to M/s Hyatt International Asia Pacific Ltd. in connection with operation of the hotel under Business Auxiliary Service:
The Tribunal found that the expenses reimbursed to Hyatt International were not towards any 'business auxiliary service' but were part of the overall agreement for the operation and management of the hotel. The Tribunal referred to the Supreme Court's decision in Intercontinental Consultants & Technocrats Private Limited, which clarified that reimbursed expenses cannot be subjected to Service Tax. Hence, the demand under this head was not sustained.

Conclusion:
The Tribunal set aside the confirmation of demand under the heads except for the services at Serial Nos. 3 (Advertising agency services) and 4 (Design and consultancy charges), where only the levy of penalty was set aside. The appeal was allowed to the extent indicated.