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2014 (12) TMI 1235 - AT - Service TaxLiability of Service tax - Management Consultancy Service - Whether the running, operating and managing the entire hotel business of M/s. Taj Lands End Ltd., Bandra under a ‘License Agreement’, from the date of agreements up to completion of final purchase of the hotel, would be covered under ‘Management Consultancy Service’ and service tax would be payable on the quantum of Gross Operation Profits earned/retained by the appellants or not. Held that:- the contention of the appellant is convincing that IHCL had entered into a License Agreement with LHPL (later the name of LHPL was changed to Taj Lands End Ltd.) to the effect that the hotel which stood in the name of LHPL was given to IHCL on a license basis to enable the latter to run the hotel on its own. So, although the owner of asset is LHPL, whereas the owner of business of running the hotel is IHCL. Service can be said to be provided by one entity to another only when the first entity undertakes an activity or performs a service for another for a consideration. From the Agreements, it does not appear that IHCL was running the hotel as a service to LHPL. In fact IHCL was part owner of the asset, i.e., LHPL, the remaining part owner being ICICI I-Venture who had parted with a huge loan of ₹ 330 crores which was primarily utilized to repay the existing debt of LHPL. If IHCL was part owner of LHPL, it can hardly be said that IHCL was providing service to itself to the extent of its ownership of LHPL. The other owner, i.e., I-Venture was essentially a lender who was eased out of the ownership in 2006. Thus there is sufficient evidence to show that IHCL was running the hotel on its own and was not doing any service for another entity. Therefore, it is clear that the IHCL are running the hotel and are not providing consultancy as mere holding of joint discussions between two entities does not mean that one entity is providing service to the other. Also the agreement states unambiguously that, for mutual benefit, IHCL shall run, develop, conduct, operate manage …. carry out all activities of running the hotel. The activities of IHCL in operating the hotel cannot be called as a service rendered under the category of Management Consultancy service results in no service tax payable. Invokation of extended period of limitation - Held that:- by relying on the decision of Tribunal in the case of I2IT Pvt. Ltd. v. Commissioner of Central Excise, Mumbai [2014 (9) TMI 345 - CESTAT MUMBAI], the extended time period is not invokable once mens rea is not established. Imposition of penalties - Section 76 & 77 of the Finance Act, 1994 - Held that:- Penalty is not imposable as there is no mens rea on the part of IHCL. - Matter remanded back
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