Lalit Mumbai Vs Commissioner of CGST & Central Excise-Delhi East (CESTAT Delhi)
Summary: CESTAT Delhi allowed three appeals of Lalit Mumbai and set aside Service Tax demands concerning two distinct categories of receipts—notice pay recovered from outgoing employees for failure to serve the agreed notice period and amounts retained by the hotel when customers cancelled room bookings or failed to show up. In Appeal No. ST/51668/2019, the Department treated notice-period recovery as consideration for tolerating premature exit of employees and proposed Service Tax of Rs. 2,95,465/- under Section 66E(e) of the Finance Act, 1994.
In Appeals Nos. ST/52265/2019 and ST/52266/2019, the dispute concerned advance amounts retained as cancellation/no-show or room-retention charges, which the Department similarly treated as consideration for a declared service. On notice pay, the Tribunal followed the principle that employment contracts are entered into for employment and performance of duties, not for premature resignation, and compensation recovered when an employee leaves without serving the stipulated notice period is not consideration for any service. It relied particularly on Balaji Medical & Diagnostic Research Centre, Rajasthan Rajya Vidhyut Prasaran Nigam Ltd. and GE T&D India Ltd. On cancellation/no-show charges, the Tribunal followed Shiv Vilas Resort and Lemon Tree Hotel, holding that customers pay for hotel accommodation and not for an agreement to tolerate cancellation or non-appearance.
