TMI Blog2024 (1) TMI 84X X X X Extracts X X X X X X X X Extracts X X X X ..... nd consultancy services with respect to the management of the hotel. The appellant had agreed to pay a fixed monthly amount to HLL as a consideration for management services - The appellant, which was the service recipient under the Agreement, paid the expenses for the employees of HLL and HLL, as a service provider, reimbursed such expenses. There is no payment of any consideration, which is an essential requirement for a service to attract the levy of service tax under the Finance Act. The Supreme Court in COMMISSIONER OF SERVICE TAX ETC. VERSUS M/S. BHAYANA BUILDERS (P) LTD. ETC. [ 2018 (2) TMI 1325 - SUPREME COURT] clearly held that consideration should be for taxable services provided or to be provided and there should be a nexus between the consideration and the services provider. The Supreme Court in UNION OF INDIA AND ANR. VERSUS M/S. INTERCONTINENTAL CONSULTANTS AND TECHNOCRATS PVT. LTD. [ 2018 (3) TMI 357 - SUPREME COURT] also held that the value of taxable services should be the gross amount charged by the service provider for such service and the valuation cannot be anything more or less than the consideration to be paid for quid pro quo for running such servi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndia. In terms of the PI Agreement, PI was obliged to allow the appellant to operate and maintain the hotel, while the actual possession of the hotel was always to remain with PI. The revenue earned from the hotel was to be deposited in a separate bank account of PI, which was to be operated under joint signatories of appellant and PI. The amount in the bank account was to be utilized firstly towards running the hotel; secondly towards the fixed monthly share of PI; and the balance amount (inclusive of service tax) was to be the revenue share of the appellant. The appellant claims to have discharged service tax liability in respect of its revenue share and the same is not in dispute in the present appeal. 3. The appellant entered into another agreement dated 01.02.2015 with HLL wherein the appellant engaged HLL to provide managerial and consultancy services with respect to the management of the hotel. In terms of the HLL Agreement, the appellant agreed to pay a fixed monthly amount to HLL as consideration for management services. The appellant claims to have discharged its service tax liability in respect of such fee under reverse charge mechanism and the same is also not in dis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inding recorded in the impugned order that the appellant was required to pay service tax is perverse, as it is contrary to the terms of the Agreement which clearly requires all the taxes to be paid from the account of PI; (iii) The revenue generated from the hotel was deposited by PI in the designated bank account and after deducting the statutory liabilities and expenses of the hotel, a fixed amount of such revenue was transferred to another account of PI. The appellant received the balance amount towards consideration for providing the business support services to PI; (iv) Merely because the tariff was decided by the appellant would not mean that the appellant is the owner of the hotel; (v) Pursuant to the audit conducted of the accounts of the appellant, a show cause notice dated 28.09.2020 was issued to PI proposing demand of service tax by alleging that PI provided the services of right to use its property and trade-mark to the appellant against a fixed consideration (i.e. PI s share from the hotel revenue deposited in the bank account) and that PI provided manpower service to the appellant against the employee cost received from the appellant. The said demand was dro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ant that it was providing business support services to PI. On the other hand, they do support the contention of the department that the appellant was providing hotel accommodation services; (ii) The Commissioner has correctly confirmed the demand of service tax on the reimbursement received by the appellant from HLL; and (iii) The contention of the appellant that the extended period of limitation could not have been invoked is incorrect and the Commissioner was justified in invoking the extended period of limitation. 12. The submissions advanced by the learned counsel for the appellant and the learned authorized representative appearing for the department have been considered. 13. In order to appreciate the contentions and also for the reason that the learned counsel for the appellant and the learned authorized representative appearing for the department relied upon the Agreement dated 06.08.2012 entered into between the appellant and PI, it would be appropriate to reproduce the relevant clauses of Agreement and they are as follow; WHEREAS : A. PI is the sole and absolute owner of and is running and maintaining a hotel in the name and style of Park Premi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e marketing material in which registered proprietary logo/trademarks of PI may be used provided that such marketing material should comply with and should not violate the applicable laws, by laws, rules, regulations enunciated by the Government of India/ state government/local governmental bodies. (h) It is clearly agreed between the parties that except for the property tax which shall be borne by PI and unless otherwise provided in this Agreement, all the statutory taxes and other expenses of whatsoever nature with respect to the operations of the Hotel from the date hereof other than respective income tax of PI and QLEIPL shall be borne out of the Bank Account. PI and QLEIPL shall pay their respective income taxes separately as per the income earned by them from the venture herein described. 2.2. Obligations of PI (b) The payment to the employees of PI and the cost for day to day operations and maintenance shall be borne from the Bank Account. (h) It clarified that all the staff and employees working in the Hotel shall remain the employees of PI and their emoluments shall be paid from the Bank Account in accordance with Clause 3 (c)(i). (j) PI shal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... maintaining it in the name and style of Park Premier . The parties had agreed between themselves that PI shall allow the appellant to operate and maintain the hotel and that they shall use their respective resources and expertise to tap the potential hospitality market requirements for the guests. Under clause 3 of the Agreement, the entire revenue of the business of the Hotel including the revenue from the guests shall be received and deposited in a separate new account of PI to be referred to as the Bank Account and PI shall ensure that it is operated under joint signatures of PI and the appellant. Sub-clause (b) of clause 3 of the Agreement further makes it clear that the payment from the guests for the Hotel rooms and for use of the facilities and restaurant operated and managed by the appellant shall be deposited in the Bank Account. The obligations of both the appellant and PI have also been enumerated in clause 2 of the Agreement. The obligations of the appellant are that it shall have the right to market the entire accommodation available in the hotel and it will independently determine the tariff to be charged. Under clause 2.1 (h), the parties have also agreed between t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ideration. Paragraph 3 of the said show cause notice dated 28.09.2020 specifically mentions that from the ST-3 returns filed by PI it was clear that it had deposited service tax on accommodation and other services and, in fact, a year wise summary of the returns for the period from 2014-15 to June, 2017 was also provided. 19. Despite this fact having been pointed out, a finding has been recorded by the Commissioner in paragraph 18 of the order that ; 18. The notice further contended that PI has already discharged service tax in respect of accommodation service provided by it to the guest of the hotel, I find that M/s PI was registered with service tax Department and filed ST-3 returns for several services which includes Mandap Keeper Service, Restaurant services, Internet Telecommunication service, Health Club and Fitness Service, Banking and financial service, accommodation in Hotels, inn, guest house, club or camp site service, dry cleaning service. However, with the documents (ST-3) it cannot be corroborated that the PI has paid service tax on the revenue induced by the notice on account of the hotel service and same could not be verified. The noticee has not submitted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ces. These expenses were reimbursed by HLL to the appellant on actual basis in foreign currency. It is, therefore, clear that the reimbursements were not towards any consideration for any service provided by the appellant. The appellant, which was the service recipient under the Agreement, paid the expenses for the employees of HLL and HLL, as a service provider, reimbursed such expenses. There is no payment of any consideration, which is an essential requirement for a service to attract the levy of service tax under the Finance Act. 23. The Supreme Court in Bhayana Builders clearly held that consideration should be for taxable services provided or to be provided and there should be a nexus between the consideration and the services provider. The Supreme Court in Intercontinental also held that the value of taxable services should be the gross amount charged by the service provider for such service and the valuation cannot be anything more or less than the consideration to be paid for quid pro quo for running such service. The reimbursable expenses have not been incurred by the appellant in exchange of the taxable service provided by it. The same cannot, therefore, be treated ..... X X X X Extracts X X X X X X X X Extracts X X X X
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