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2024 (1) TMI 84 - AT - Service TaxRecovery of service tax alongwith interest and penalty - hotel services - reimbursement expenses - period commencing from October, 2014 to June, 2017 - invocation of extended period of limitation - HELD THAT - From the terms of the Agreement and the documents on record it is more than apparent that the appellant was providing business support service to PI and the finding to the contrary recorded by the Commissioner in the impugned order that the service provided is hotel service and had been wrongly classified as business support services by the appellant is not justified. The Commissioner was also not justified in holding that the appellant was liable to pay service tax on reimbursement of expenditure in terms of rule 5(1) of the Service Tax (Determination of Value) Rules, 2006. 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, 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. The Supreme Court in COMMISSIONER OF SERVICE TAX ETC. VERSUS M/S. BHAYANA BUILDERS (P) LTD. ETC. 2018 (2) TMI 1325 - SUPREME COURT clearly held that consideration should be for taxable services provided or to be provided and there should be a nexus between the consideration and the services provider. The Supreme Court in UNION OF INDIA AND ANR. VERSUS M/S. INTERCONTINENTAL CONSULTANTS AND TECHNOCRATS PVT. LTD. 2018 (3) TMI 357 - SUPREME COURT also held that the value of taxable services should be the gross amount charged by the service provider for such service and the valuation cannot be anything more or less than the consideration to be paid for quid pro quo for running such service. The reimbursable expenses have not been incurred by the appellant in exchange of the taxable service provided by it. The same cannot, therefore, be treated as a consideration for the taxable services - The Commissioner was, therefore, not justified in confirming the demand on reimbursements received from HLL. Extended period of Limitation - HELD THAT - As both the demands cannot be confirmed and have to be set aside, it would not be necessary to examine the contentions advanced by the learned counsel for the appellant that the extended period of limitation could not have been invoked in the facts and circumstances of the case or that mere sharing of revenue cannot be said to have been made towards a provision of service. The impugned order dated 04.04.2022 passed by the Commissioner is, accordingly, set aside - Appeal allowed.
Issues Involved:
1. Classification of services provided by the appellant. 2. Liability to pay service tax on reimbursement of expenses. 3. Invocation of the extended period of limitation. Summary: 1. Classification of Services Provided by the Appellant: The appellant, Quality Life Enterprises (India) Pvt Ltd., contested the order dated 04.04.2022 by the Commissioner of CGST, which treated the services provided under the category of a "hotel providing accommodation" taxable under section 65(105)(zzzzw) of the Finance Act. The appellant argued that it provided "business support services" to PI, not hotel accommodation services. The agreement between the appellant and PI indicated that PI, as the sole owner, allowed the appellant to operate and maintain the hotel. The revenue from the hotel was deposited in PI's bank account, operated jointly by PI and the appellant. The appellant's share was the remaining amount after deducting hotel expenses and PI's fixed share. The Tribunal found that the agreement was a management and operations agreement, and the appellant provided business support services to PI. The Commissioner's finding that the appellant was liable for service tax was deemed perverse and contrary to the agreement's terms. 2. Liability to Pay Service Tax on Reimbursement of Expenses: The appellant had an agreement with HLL to provide managerial and consultancy services. The appellant incurred expenses on behalf of HLL for the residence and transportation of HLL employees, which were reimbursed by HLL. The Tribunal held that these reimbursements were not consideration for any service provided by the appellant. The Supreme Court in Bhayana Builders and Intercontinental Consultants and Technocrats Pvt Ltd. ruled that consideration should be for taxable services provided, and there must be a nexus between the consideration and the services provided. The Tribunal concluded that the Commissioner was not justified in confirming the demand on reimbursements received from HLL. 3. Invocation of the Extended Period of Limitation: As both the demands were set aside, the Tribunal did not find it necessary to examine the contention regarding the invocation of the extended period of limitation. Conclusion: The impugned order dated 04.04.2022 was set aside, and the appeal was allowed.
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