Shiv Vilas Resorts (P) Ltd. Vs Commissioner of Central GST and Central Excise (CESTAT Delhi)
Summary: CESTAT Delhi partly allowed the appeal of Shiv Vilas Resorts (P) Ltd. in a Service Tax dispute concerning restaurant service charges and hotel “no show charges”. On restaurant service charges collected over and above the price of food, the Tribunal held that the amount formed part of the consideration for restaurant service under Section 67 of the Finance Act, 1994. The assessee’s contention that the amount was distributed among hotel staff did not alter its character for Service Tax purposes, and liability on such service charges was therefore upheld. However, the Tribunal reached the opposite conclusion for advances forfeited when customers cancelled bookings or failed to appear.
Applying Section 66E(e), Section 65B(44) and the requirement of consideration, CESTAT held that customers paid advances for hotel accommodation and not as consideration for the hotel agreeing to tolerate cancellation or non-appearance. The forfeiture clause merely safeguarded the hotel’s commercial interest and there was neither an express nor implied contract to provide a separate service of tolerating a no-show. Following Lemon Tree Hotel and South Eastern Coalfields Ltd., the Tribunal consequently set aside Service Tax on no-show charges.
