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M/s. Sarovar Hotels Pvt. Ltd. Versus Commissioner of Service Tax, Mumbai

2017 (9) TMI 893 - CESTAT MUMBAI

Management Consultancy Services - It was alleged that the appellants have received Franchisee Service from PG and service tax on the same was payable under reverse charge as import of services in terms of Section 66A of the Finance Act, 1994 - Held that: - the so called service of Franchise was provided by PG, USA to the appellant for which the appellant has paid the fees in convertible foreign exchange, this amount was paid out of the total receipt by the appellant from the ultimate service rec .....

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ice tax payable in respect of Franchise service, therefore the entire issue is revenue neutral - this is a clear case of revenue neutrality. - The demand of service tax in the present case amounts to double taxation on the part of the same service charges - appeal allowed - decided in favor of appellant. - ST/701/12 - A/89361/17/STB - Dated:- 31-8-2017 - Shri Ramesh Nair, Member (Judicial) And Shri Raju, Member (Technical) Shri Vinod Awtani, C.A. for the appellant Shri M.K. Sarangi, Add, Com .....

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za International'. The said agreement grants exclusive rights to the appellants to develop hotels in India which includes the rights to use the names 'Park Inn', 'Park Inn International', 'Park Plaza', and 'Park Plaza' International as well as to use the system of hotel management. As per the agreement, the appellants are required to pay the amount of Commitment Fees, Monthly Royalty Fees, Reservation Fees and Advertising Fees. In view of the territorial licen .....

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brand names. During the course of the audit of the service tax it was observed that the appellant had made payments in foreign currency to PG under the said agreement which was indicated in the audited balance sheet and service tax was not paid on the same. It was alleged that the appellants have received Franchisee Service from PG and service tax on the same was payable under reverse charge as import of services in terms of Section 66A of the Finance Act, 1994. Accordingly show cause notice dt. .....

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ered Accountant appearing on behalf of the appellant at the outset, submits that the demand is not sustainable on the ground of revenue neutrality, as the service tax paid/to be paid on the service of so called franchisee service is admissible as cenvat credit to the appellant. He submits that the service of PG, USA is clearly subsumed in the overall output service provided by the appellant to their clients i.e. various hotels in India, therefore Cenvat Credit is clearly admissible. The learned .....

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vice tax liability which is much higher than this amount would have stood reduced to this extent, accordingly the entire case is revenue neutral. In support he placed reliance on the following judgments: (i) Jet Airways (I) Ltd. Vs. Commissioner of Service Tax, Mumbai - 2016 (44) STR 465 (Tri.-Mumbai) (ii) United Phosphorous Ltd. Vs. Commissioner of Service Tax, Mumbai - 2016-TIOL-1572-CESTAT-MUM (iii) Rochem Separation Systems (India) P. Ltd. Vs. Commr. of S.T., Mumbai-I - 2015 (39) STR 112 (Tr .....

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he total amount was received from the Indian Hotels to whom service was provided by the appellant. Therefore the part amount of which remitted to the foreign hotel brand owner will amount to double taxation. For this reason also demand is not sustainable as held in the case of Dinesh M. Kotian Vs. Commissioner of Central Excise & S.T.-I, Mumbai - 2016 (42) STR 772 (Tri.-Mumbai). He further submits that demand on the amount of advertisement fees is not an amount under the contract with PG and .....

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e which is incurred by the appellant there cannot be any service tax as this amount was not recovered from the hotels on which service tax have been discharged therefore this demand is patently incorrect. Without prejudice, he further submits that as regards this advertisement expenses the service tax cannot be demanded for one more reason that the said amount was not received separately by the appellant and the service tax at the relevant time was chargeable only on the actual receipt of the se .....

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time barred being for the extended period. He submits that the appellant had received letter dt. 15.12.2005 from the Preventive Section of the Commissioner of Central Excise, Mumbai-I enquiring about the agreement entered into with M/s. Park Global Holdings Inc. the appellant had replied to the said letter vide letter dt.29.12.2005. Thus, the department was totally aware about the transactions and the payment made by the appellants to PG under the said agreement therefore there is no suppression .....

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ed period is not sustainable. In this regard, he placed reliance on the following judgments. (i) Reliance Industries Ltd. Vs. Commr. of C. Ex., & S.T., LTU, Mumbai - 2016 (44) STR 82 (Tri.-Mumbai) (ii) Nirlon Ltd. Vs. Commissioner of Central Excise, Mumbai - 2015 (320) E.L.T. 22 (S.C.) (iii) Jay Yuhshin Ltd. Vs. Commissioner of Central Excise, New Delhi - 2000 (119) E.L.T. 718 (Tribunal-LB) As regard penalty he submits that since there is no malafide intention on the part of the appellant as .....

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artment under the Franchise service, he submits that the service received by the appellant M/s. Park Global Holdings Inc,. PG does not fall under the definition of Franchise services in terms of Section 65(47). He submits that the Foreign Service provider has not given the representational right to the appellant. Nothing in the agreement suggest that the appellants can represent M/s. Park Global Holdings Inc. The PG have only permitted the appellant to use their brand name along with system, thi .....

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the brand name of PG and allowing the various Indian Hotels to use the same, the appellant has been granted representational right by the PG for providing services to Indian Hotels. Therefore the services clearly falls under franchise service, hence it is taxable. 4. We have carefully considered the submissions made by both the sides. On hearing both sides we find that the appeal can be disposed of on the point of revenue neutrality. In this regard, we observed that the so called service of Fra .....

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