Hotel President Planet Vs Principal Commissioner of CGST & Central Excise (CESTAT Delhi)
The appeal concerns the confirmation of service tax, interest, and penalty on a hotel property leased by the appellant, Hotel President Planet, to Hotel Lemon Tree under a lease agreement dated 25 March 2008. The appellant was registered for service tax under the category of Renting of Immovable Property and had leased out its New Delhi hotel to the lessee. During an audit covering October 2016 to June 2017, authorities examined the lease agreement and observed that, apart from the contracted rent, the appellant received additional considerations. These included 75 complimentary room nights per year for family and friends of the appellant’s promoters and directors, free of charge, and a 50% discount on food, beverages, laundry, and other services regardless of whether those persons were hotel guests. The audit also noted that the insurance costs for the leased property were borne by the lessee.
Authorities concluded that the value of the complimentary room nights, discounted services, and insurance expenses ought to have been included in the gross value for payment of service tax. A show cause notice dated 2 March 2022 alleged short-payment of service tax amounting to ₹1,00,486 along with interest and penalties. The adjudicating authority, through an order dated 29 March 2023, confirmed service tax of ₹66,362 relating to complimentary room nights and food discounts, while dropping the proposed tax demand on insurance expenses. The appellate authority upheld this order, leading the appellant to approach the Tribunal.
