9911796707
TMI Blog2025 (3) TMI 1099X X X X Extracts X X X X X X X X Extracts X X X X ..... ere in the form of damages/compensation.
Thus, no service tax can be charged on the retention charges received by the respondent.
Amounts recovered by the respondents from its own employees towards the food provided to them - HELD THAT:- Labour laws require the respondent to provide subsidized food to its employees and workers. The respondent made an arrangement to cook food and supply it through its own canteen to its employees. It must be noted that the canteen for its employees was different from the restaurant in which it serves the guests - there was no service whatsoever in the respondent supplying food at subsidized rate to its own employees as part of its legal obligations. No service tax can therefore be charged.
Conclusion - The demand of service tax on the retention charges and also amounts collected from its own employees cannot be sustained. Consequently, the demand of interest and penalties also cannot be sustained.
The appeal filed by the Revenue is dismissed. X X X X Extracts X X X X X X X X Extracts X X X X ..... earned Authorized Representative for the Revenue submitted as follows on the question of cancellation charges :- (a) The activity of cancellation of room bookings and the consideration collected by the party for the same in the form of 'Room Retention Charges' cannot be covered under the category of 'Short Accommodation Services'. Once the guests/clients have cancelled their bookings and do not turn up to occupy the rooms, and then there is no question of accommodation services being rendered to the guests /clients. Since, no accommodation services are being rendered by the party so it is clear that they cannot get the benefit of the abatement which is available only for the short term accommodation service. Thus, any room retention charged collected by the party are liable to Service Tax at the normal rate i.e. without abatement. (b) Once the room bookings are cancelled by the clients, then the nature of service automatically changes. Since, the clients are no longer coming to the hotel and occupying the rooms so it is self evident that no "Accommodation Services" are being provided by the Party. The service of room booking and cancellation is like any other service for which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6). (ii) In some cases where the guests who had paid advances for staying in the rooms do not turn up or cancel the bookings or occupy the room for stay for a shorter period. Respondents retained some portion of the advances towards administrative expenses and other expenses, such as, keeping the room in ready notes etc. (iii) The act of retention of certain amount is inextricably linked to short term accommodation service as the retention charge was part and parcel of the charges received for booking accommodation. Service Tax on the amount had already been paid on the amount. (iv) The department had incorrectly considered the retention of part of the advances as "declared services" under section 66E (e) of the Finance Act, i.e. as an "act of agreeing to the obligation to refrain from an act or to tolerate an act or a situation" which is erroneous. (v) Section 66E (e) covers only such cases where the agreement is to refrain from an act or to tolerate an act or a situation. It does not cover those cases where any amount is charged for breach of contract as a compensation. Therefore, no service tax can be levied on them. Reliance is placed on the order of this Tribunal in Shiv V ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he room. Thereafter, if the client cancels the room, respondent would suffer a loss because it is difficult to get a new client for the day. In order to discourage cancellations, they deduct an amount of advance and only refund the rest. 13. For something to fall within the mischief of Section 66E (e) of the Finance Act, one has to agree to tolerate an act and in lieu of such tolerance, an amount must be paid. 14. However, the agreement here was different. The agreement was for giving the hotel room for accommodation by the client. In such a case, respondent could be the service provider and its client who is the service recipient. The enjoyment of the room/suite for the period would be the consideration which the client would receive and the amount paid as tariff would be consideration received by the respondent. Sometimes, the client, after booking the room, cancels it or stays for a shorter period. Having already reserved and blocked that room for the client, the respondent would lose on account of lack of business. Thus, the agreement was for letting the guest enjoy the room in lieu of the tariff. If the guest reneges from the reservation, the respondent loses some potential ..... X X X X Extracts X X X X X X X X Extracts X X X X
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