2018 (4) TMI 483 - AT - Service Tax

Demand of service tax - letting out the cottage/ rooms in their hotel/ resort - scope of SCN - Held that - the demand against the Appellant was proposed under the category of Business Support Service but was confirmed under category of Renting of Immovable Property Service . Clearly the demand was confirmed by going beyond the scope of show cause notice. The appellant can give room on rent to other party and it is not necessary that it is only for parties who take locations on Hire for shooting. It can be used for two different parties for two different purposes. The room/ cottages are meant for stay and not for letting out for hire for the purpose of shooting - demand of service tax set aside. Appeal allowed - decided in favor of appellant.

Summary

Issues:
Interpretation of service tax liability for letting out rooms/cottages in a hotel/resort, scope of show cause notice, applicability of deeming fiction under Section 65 (105) (zzzz), differentiation between renting of immovable property services and short term accommodation services, imposition of penalties under sections 76 and 77 of the Finance Act, 1994.

Analysis:
The case involved a dispute regarding the service tax liability of the Appellant for letting out rooms and cottages in their hotel/resort. The Appellant was discharging service tax under the category of 'Renting of Immovable Property Services' but was not paying service tax on the let-out rooms/cottages. The demand was confirmed against the Appellant, which was upheld by the Commissioner (Appeals), leading to the present appeal before the Tribunal.

The Appellant argued that the demand was not sustainable as room rent in hotels/resorts was brought into the tax net under 'Short term accommodation service' from a specific date, and thus the demand for the period before that was not justified. The Appellant also contended that the demand exceeded the scope of the show cause notice as it was proposed under 'Business Support Service' but confirmed under 'Renting of Immovable Property Services'. The Appellant highlighted the distinction between letting out rooms/cottages and letting out structures/locations for shooting, asserting that they should not be clubbed under the same category.

On the other hand, the revenue contended that the rooms were given only to those persons to whom location hire charges were applied, making them part of the taxable service under Section 65 (105) (zzzz). The revenue argued that the room charges should be included in the actual value of location hire charges, justifying the imposition of service tax.

Upon analysis, the Tribunal observed that the demand against the Appellant was confirmed under a different category than proposed in the show cause notice, indicating a lack of adherence to the scope of the notice. The Tribunal also noted that the deeming fiction under Section 65 (105) (zzzz) was not applicable in this case, as the rent of cottages/rooms could be covered under 'Renting of Immovable Property Services', constituting a separate service. The Tribunal emphasized that rooms/cottages were meant for stay, not for letting out for shooting purposes, and hence, there was no justification for upholding the service tax demand and penalties imposed on the Appellant.

In conclusion, the Tribunal set aside the impugned order, allowing the appeal with consequential reliefs to the Appellant, highlighting the differentiation between services and the lack of grounds for penalties under sections 76 and 77 of the Finance Act, 1994.

(Judgment by: Shri Ramesh Nair, Member (Judicial) and Shri Raju, Member (Technical))