Hotel not liable to pay service tax on complementary services of conference hall

CCE-Chandigarh Vs Mashobra Resorts Ltd.  (CESTAT Chandigarh)

CESTAT find that the respondent has not charged separate consideration for providing the conference hall which was provided to the respondent as complementary service. Further, the analysis of the break-up of the corporate billing as provided by the respondent it is clear that no separate consideration was received for provision of conference facilities.

Further, through Circular No. 332/82/97-TRU dated 24 September 1997 it was clarified that in case of no charges/ rental is being paid i.e., the premises are given out free of cost to hold such function, there would be no service tax liability as the premises are given free of cost. This issue has been considered by various benches of the Tribunal as relied upon by the appellant cited (supra). In the case of Dukes Retreat Ltd. (supra), the division bench of this Tribunal in identical facts held that the assessee is not liable to pay service tax on complementary services of conference hall.

In the second case of Dukes Retreat Ltd. vs. Commissioner of Central Excise, Pune-I 2018 (8) GSTL 85 (Tri.-Mumbai) again the Tribunal held that the complementary services provided free of cost will not be taxable under “Mandap Keeper Service”. This decision was challenged by the Revenue before the Hon‟ble Apex Court and the Hon‟ble Apex Court dismissed the appeal on merits as reported in 2018 (18) G.S.T.L. J32 (S.C.) .

Further, the Bangalore bench of this Tribunal relied upon the decision in the case of Duke Retreat Ltd. cited (supra) and held that the assessee is not liable to pay service tax on ^„Mandap Keeper Service‟ in respect of corporate booking of rooms where conference hall is provided as a complementary service.

Therefore, by following the ratio of the said decisions cited (supra), we are of the considered opinion that there is no infirmity in the impugned order which we uphold by dismissing the appeal of the department.

FULL TEXT OF THE CESTAT DELHI ORDER

The department has filed this appeal to assail the Order-in-original No. 113/STC/CHD-I/2010 dated 04.11.2010 passed by the Commissioner of Central Excise, Chandigarh whereby the Commissioner has dropped the demand of service tax for the period October 2004 to 2008-2009 on ‘Mandap Keeper Service‟.

2. Briefly stated the facts of the present case are that the Respondent are engaged in the business of running and operating luxury hotel and was duly registered with jurisdictional service tax authorities under various categories inter alia ‘Mandap Keeper Service‟ specified under Section 65 of the Finance Act, 1994.

• During the course of Audit of the Respondent by the Headquarter Audit, Central Excise, Chandigarh and scrutiny of their records, it was observed that they are engaged in providing the taxable service of ‘Mandap keeper Service‟ to various concerns like Lupin Laboratories, ABN Amro Bank, NFL, SBI etc. who stayed in the hotel for holding business conferences. The services provided to the clients included the provision of LCD Projector, Mike, organisation of Dance/gazels in the rooms/halls let out for the purpose. Further, the Respondent appeared to have provided the catering service i.e. supply of food, in addition to letting out of the Mandap. Further, it was observed that the respondent had paid the service tax only on the amount charged towards LCD Projector, Mike, organization of Dance/gazels whereas the bills were charged for a consolidated amount of room+breakfast+group activities to the company.
• The Respondent filed reply to the show cause notice and after considering the submission of the respondent, the adjudicating authority passed the OIO dated 04.11.2010 and dropped the proceedings initiated against the Respondent observing inter alia that use of conference hall was merely a complimentary service offered by the Respondent against which no consideration was charged, and the consideration was charged for the room booking basis per room/ per night and hence, the Respondent is not providing ‘Mandap Keeper Service‟.

2. Heard both the parties and perused the material of records.

3. Ld. DR submitted that the impugned order, dropping the demand on ‘Mandap Keeper Service‟ is not sustainable in law as the Ld. Commissioner has ignored the material facts and the Circular No. 96/7/2007 dated 23.08.2007. He further submitted that the Commissioner has wrongly dropped the demand on the ground that the primary business of the hotel is to provide accommodation to their clients through room renting alongwith the providing of food facility through restaurants or through room service and such activities of hotels and restaurants do not fall with the ambit of “Mandap” falling under Section 65(105)(m).

• The Ld. DR took us through the definition of taxable service on ‘Mandap Keeper Service‟ prior to 16.05.2008. He also referred to the communication between the respondent and their corporate client, namely, Allahabad Bank to show that in the confirmation letter issued by the respondent, it is evident that the organising of conferences/meetings by the clients were pre planned and the rooms were booked only to hold the official functions in the form of conferences/meetings. The officials have gathered in the hotel for a specific purpose.
• He further submitted that it is not the case that the officials have gone for some personal purpose and suddenly they decided to organize a conference or meeting as they were being provided conference hall without any charges and official conferences are held with prior agenda, discussion, presentations in hard as well as soft copies etc.
• He further submitted that it is clear from the facts that the rooms were booked with the sole purpose of holding official functions.
• Ld. DR also justified the invoking the extended period of limitation on the allegation that though payment of service tax was detected during the audit and the respondent have also suppressed the material facts with intend to evade payment of service tax.

4. On the other hand, the Ld. Counsel for the Respondent supported the impugned order and submitted that the Respondent was offering certain complimentary services like the provision of conference halls, breakfast etc. against the consolidate amount charged for the rooms provided for accommodation in the hotels. She further submitted that no separate consideration was received towards such complimentary services and the same was provided free of cost and this fact is evident from offer details provided by the Respondent which has been produced on record by the respondent wherein it was clearly mentioned that the use of conference hall was a complimentary service. She further stated that the breakup of the corporate billing as provided by the Respondent on record clearly proves that no separate consideration was charged for provision of conference facilities.

• She further submitted that vide Circular No. 332/82/97-TRU dated 24 September 1997, it was clarified that in case of no charges/ rental is being paid i.e., the premises are given out free of cost to hold such function, there would be no service tax liability. She also referred to the Circular No. 62/11/2003-ST dated 21 August 2003 vide which it was clarified that as per charging section viz. Section 66 of the Act, service tax was chargeable at the rate of 8% of the value of taxable services and if the value is zero, the tax will be zero even though the service is taxable. Thus, if the services are provided free of charge, then no service tax could be levied on the same.
• She also submitted that this issue is no more res-integra and has been decided by various benches of the Tribunal in favour of the assessee. She cited the following decisions:-

World Resorts Hotels Ltd. v CCE, Bangalore 2019 (24) G.S.T.L. 758 (Tri. – Bang.)

Dukes Retreat Ltd. v CCE, Pune-I, 2017 (3) G.S.T.L. 229 (Tri. – Mumbai)

Dukes Retreat Ltd. v CCE, Pune-I, 2018 (8) G.S.T.L. 85 (Tri. – Mumbai)[maintained in Supreme Court in 2018 (18) G.S.T.L. J32 (S.C.)]

CCE, Jaipur-I v Rambagh Palace Hotels Pvt. Ltd.2018 (14) G.S.T.L. 343 (Raj.)- Rajasthan High Court [affirmed in Supreme Court in 2018 (14) G.S.T.L. J122 (S.C.)]

Aamby Valley City Developer Ltd. v CCE, Pune, 2018 (6) TMI 931 – CESTAT Mumbai

• She also submitted that holding the conference is merely an incidental and ancillary to the main purpose i.e., stay and recreation of employees. She also submits that the consideration received from the Respondent was against the letting out of rooms for stay and not for the purpose of holding business conferences and the conference hall was merely a complimentary service provided by the Respondent. She also submits that during the relevant period letting out of rooms for accommodation does not constitute taxable service under the Act though the short term accommodation in hotel becomes taxable with effect from 01.05.2011.
• She further submits that the findings in the case of Rajmohan hotel vs. CCE 2006 (4) STR 370 (Tri.-Del.) relied upon by the appellant is not applicable in the instant case as the same is based on different facts. In the said case, the appellant was maintaining a separate book for the purpose of booking hall for marriage and other social function and the hall was rented out where marriages were solemnized for consideration whereas in the instant case, there was no separate consideration charged from the corporates for the provision of conference halls and no separate entry was recorded by the Respondent in its books which is evident from the breakup of the corporate billing provided by the Respondent.
• She also submitted that the computation of services tax made in the SCN is incorrect as the same was calculated at a higher tax rate and as per the correct computation, the service tax amount if at all payable would be Rs. 48,02,826 instead of 51,63,974.
• Regarding the interest and penalty, she submitted that the demand is partly time barred as the show cause notice issued by invoking the extended period of limitation in the absence of any wilful suppression on the part of the Respondent.

5. After considering the submissions of both the parties and perusal of material on record, we think before we proceed to decide the appeal, it is pertinent to reproduced the definition of “Mandap Keeper Service” as provided under Section 65 (66) of the Finance Act, 1994 as under:-

“Mandap” means any immovable property as defined in section 3 of the Transfer of Property Act, 1882 (4 of 1882) and includes any furniture, fixtures, light fittings and floor coverings therein let out for consideration for organizing any official, social or business function;

[Explanation.—For the purposes of this clause, social function includes marriage;]*

6. Further, we find that the respondent has not charged separate consideration for providing the conference hall which was provided to the respondent as complementary service. Further, the analysis of the break-up of the corporate billing as provided by the respondent it is clear that no separate consideration was received for provision of conference facilities.

7. Further, through Circular No. 332/82/97-TRU dated 24 September 1997 it was clarified that in case of no charges/ rental is being paid i.e., the premises are given out free of cost to hold such function, there would be no service tax liability as the premises are given free of cost. This issue has been considered by various benches of the Tribunal as relied upon by the appellant cited (supra). In the case of Dukes Retreat Ltd. (supra), the division bench of this Tribunal in identical facts held that the assessee is not liable to pay service tax on complementary services of conference hall. In Para 6, the Tribunal has observed as under:-

“We find that the invoices are specifically in the name of corporate clients and the invoices indicate only the amounts charged by them for the rooms. The details of the rooms and check-in and check-outs done by the officials of their corporate clients are clearly indicating that the appellants are only charging room rent to their corporate clients. There is nothing in the said invoices to indicate that appellant had charged any amount towards utilization of conference halls and gymnasiums, etc. There is no bifurcation indicated in the invoices to come to a conclusion that appellant had in fact charged an amount for the use of the conference halls.”

8. In the second case of Dukes Retreat Ltd. vs. Commissioner of Central Excise, Pune-I 2018 (8) GSTL 85 (Tri.-Mumbai) again the Tribunal held that the complementary services provided free of cost will not be taxable under “Mandap Keeper Service”. This decision was challenged by the Revenue before the Hon‟ble Apex Court and the Hon‟ble Apex Court dismissed the appeal on merits as reported in 2018 (18) G.S.T.L. J32 (S.C.) .

9. Further, the Bangalore bench of this Tribunal relied upon the decision in the case of Duke Retreat Ltd. cited (supra) and held that the assessee is not liable to pay service tax on ^„Mandap Keeper Service‟ in respect of corporate booking of rooms where conference hall is provided as a complementary service.

10. Therefore, by following the ratio of the said decisions cited (supra), we are of the considered opinion that there is no infirmity in the impugned order which we uphold by dismissing the appeal of the department. Accordingly, the appeal is dismissed.

(Pronounced on 03.05.2023)