2025 (1) TMI 990 - AT - Service Tax

Classification of service - Renting of Immovable Property Service or hotel services - building used solely for accommodation including hotels - HELD THAT - Allegation in the show-cause notice and findings in the Order-in-Original and Order-in-Appeal are based on the premises that Appellant was engaged in hotel business. The conducting agreement annexed to the appeal memo and relied upon by the parties indicates that Appellant was owner of the premises that was leased for the purpose of hotel business. This Section 85(zzzz) was brought into the statute book on 08.05.2010 with retrospective effect from 01.06.2007. Therefore the demand made under the category of renting of immovable property services since covered in the exclusion Clause is not in conformity to the Finance Act as well as Article 265 of the Constitution of India. Service that has been provided by the Appellant could have been termed as hotel accommodation service as provided under Section 65(105)(zzzzw) that was brought into the statute book through amendment in the Finance Act 1994 on 08.04.2011 which provides that service provided or to be provided to any person by a hotel inn guest-house club or composite by whatever name called for providing of accommodation for a continues period of less than three months is a taxable service but in the instant case no such demand is made on this classification of service and the conducting agreement has not made any stipulation that hotel services are to be provided for less than three months. Conclusion - The demand made under the category of renting of immovable property services since covered in the exclusion Clause is not in conformity to the Finance Act as well as Article 265 of the Constitution of India. The demand confirmed against the Appellant on Renting of Immovable Property Service is unsustainable both in law and fact - Appeal allowed.

1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered in this judgment are:

Whether the services provided by the Appellant fall under the category of "Renting of Immovable Property Service" as defined under Section 65(105)(zzzz) of the Finance Act, 1994.
Whether the exclusion clause for buildings used solely for accommodation, including hotels, applies to the Appellant's case.
Whether the demand for service tax under "Renting of Immovable Property Service" is sustainable in light of the classification of services as "hotel accommodation service" under Section 65(105)(zzzzw).

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Classification under "Renting of Immovable Property Service"

Relevant legal framework and precedents: The definition under Section 65(105)(zzzz) includes services related to renting immovable property for business or commerce. The exclusion clause specifies that buildings used solely for accommodation, including hotels, are excluded.
Court's interpretation and reasoning: The Tribunal noted that the Appellant was engaged in the hotel business, which is explicitly excluded from the "Renting of Immovable Property Service" category. The court emphasized that the definition and exclusions under the Finance Act must be strictly interpreted.
Key evidence and findings: The conducting agreement indicated that the Appellant owned premises leased for hotel business purposes. This supported the Appellant's claim that the property was used solely for accommodation.
Application of law to facts: The Tribunal applied the exclusion clause, concluding that the Appellant's services were not taxable under the "Renting of Immovable Property Service" category.
Treatment of competing arguments: The Respondent's argument that the services fell under the taxable category was dismissed based on the clear exclusion for hotel accommodations.
Conclusions: The demand for service tax under this category was deemed unsustainable as it contradicted the statutory exclusion.

Issue 2: Potential Classification under "Hotel Accommodation Service"

Relevant legal framework and precedents: Section 65(105)(zzzzw) defines "hotel accommodation service" as taxable when provided for less than three months.
Court's interpretation and reasoning: The Tribunal observed that no demand was made under this classification, and the conducting agreement did not specify short-term accommodation.
Key evidence and findings: The absence of any stipulation for accommodation of less than three months in the agreement was critical.
Application of law to facts: The Tribunal found that the classification under "hotel accommodation service" was not applicable due to the lack of relevant demand and contractual terms.
Treatment of competing arguments: The Tribunal did not need to address competing arguments extensively, as the issue was not raised in the demand notice.
Conclusions: The Tribunal concluded that the demand under "Renting of Immovable Property Service" was unsustainable, and no alternative classification was applicable.

3. SIGNIFICANT HOLDINGS

Preserve verbatim quotes of crucial legal reasoning: "From the above referred provision, it would appear that building used solely for accommodation including hotels are excluded from the purview of 'Renting of Immovable Property Service'. Since allegation in the show-cause notice and findings in the Order-in-Original and Order-in-Appeal are based on the premises that Appellant was engaged in hotel business."
Core principles established: The exclusion clauses in tax statutes must be strictly interpreted, and demands for service tax must align with statutory definitions and exclusions.
Final determinations on each issue: The appeal was allowed, and the order demanding service tax under "Renting of Immovable Property Service" was set aside, providing consequential relief to the Appellant.

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