TMI Blog2024 (1) TMI 681X X X X Extracts X X X X X X X X Extracts X X X X ..... a booking agent and not an agent of the hotel, as is evident from Privilege Partnership Agreement and the User Agreement entered into between the appellant and the customers. It is the hotel that has provided the service of short-term accommodation to the customers, and the appellant has merely acted as a facilitator between the hotel and the customer for the provision of short-term accommodation service by the hotels to the customers. The appellant is thus not a hotel. The appellant cannot, therefore, be said to be the provider of short-term accommodation service to the customers. Whether the appellant is entitled to, as a tour operator, ninety percent abatement under the Abatement Notifications? - HELD THAT:- A tour operator can provide for a host of services, including booking of accommodation, transportation and food facility. However, when a person, otherwise is qualified as a tour operator but provides only booking of accommodation service, then such a tour operator would be entitled to ninety percent abatement. What is required is the qualification of a tour operator itself (qua the person), and not as the services rendered (qua transaction). It is, therefore, not possi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... demand. Penalties - HELD THAT:- The penalties imposed upon the Vice President and the Director of the appellant that have been assailed in Service Tax Appeal No. 51845 of 2021 and Service Tax Appeal No. 51846 of 2021, therefore, cannot also be sustained. Appeal allowed. - HON BLE SHRI JUSTICE DILIP GUPTA, PRESIDENT AND HON BLE HEMAMBIKA R. PRIYA, MEMBER (TECHNICAL) Appearance For the Appellants : Shri V. Lakshmikumaran, Ms. Poorvi Asati and Shri Manish Gaur, Advocates. For the Department : Shri Mihir Ranjan, Special Counsel. JUSTICE DILIP GUPTA: Service Tax Appeal No. 51844 of 2021 has been filed by M/s Make My Trip (India) Private Limited [the appellant] to assail the order dated 29.07.2021 passed by the Additional Director General [the Adjudicating Authority] confirming a portion of the demand proposed in the show cause notice dated 17.10.2016 and the two Statement of Demands dated 22.10.2018 and 12.04.2019 issued under sections 73 and 73A of the Finance Act 1994 [the Finance Act] with interest and penalty. 2. Service Tax Appeal No. 51845 of 2021 and Service Tax Appeal No. 51846 of 2021 have been filed by the Vice President (Fina ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of check-in on booking of hotel rooms done by the customer. The appellant discharges its service tax liability on the basis of this invoice; (ii) Hotel Confirmation Voucher is issued to the customer when the booking is confirmed by the hotel. The voucher contains details like check-in and check-out dates, room type, number of guests, base amount, discount, hotel taxes, amount paid, other packages and cancellation policy; and (iii) Hotelier s Voucher is issued to the hotel. The voucher contains details of the customer, check-in and check-out dates, room type, number of guests, base amount, discount, hotel taxes and other packages. 6. The appellant has also stated that it entered into three types of agreements with hotels: (i) The appellant provides an interest-free deposit to the hotel, which is used by the appellant against each room booking made in the said hotel; (ii) A specific number of hotel rooms are allocated to appellant for booking through website; and (iii) Booking of hotel rooms on commission basis. 7. During the relevant period, the appellant discharged the service tax liability on the entire amount received from the customers ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fications. The tour operator is qua the person and not qua the transaction; (iii) Section 73A of the Finance Act was incorrectly invoked by the department as the ingredients of section 73A of the Finance Act are not fulfilled; and (iv) The demand, both under sections 73 and 73A of the Finance Act, was not sustainable. 11. The Adjudicating Authority did not accept the contentions of the appellant and recorded the following findings in the impugned order: (i) Services provided by the appellant to the customers are in the nature of short-term accommodation service as the appellant has booked the entire amount received from the customers as 'sales and the amount paid to the hotel as purchases in its books of account; (ii) The appellant is not an intermediary since the hotels are not aware of the exact value of services. The appellant is not acting as an agent of the hotel and is not facilitating the provision of any service. The appellant has absolute control over charging of gross amount from the customers for hotel accommodation. Thus, the price at which the hotel room is sold to the customer by the appellant is fixed and decided by appellant on it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Tax assessed and paid by them, though the hotels in which the customers were lodged were having declared tariff below Rs. 1,000/- per day per unit and the amount so collected by MMT has not been paid to the credit of the Central Government; (v) MMT have collected an amount of Rs. 1,55,89,142/- representing as Service Tax from the customers for providing taxable services in the State of Jammu Kashmir (J K) even though the same was not required to be collected in as much as the Finance Act, 1994 [Section 64(1)] is not applicable to the State of J K, and the amount so collected has not been paid to the credit of the Central Government; (vi) MMT's claim that they are in an agency relationship with the hotels does not appear to be acceptable in view of discussions made in para 8 to 13 above. 13. Clauses (i) and (ii) of the aforesaid paragraph 14 relate to the demand proposed under section 73 of the Finance Act and clauses (iii), (iv) and (v) relate to the demand proposed under section 73A of the Finance Act. 14. The following chart would demonstrate the demand confirmed under sections 73 and 73A of the Finance Act, and the demand dropped: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Gaur made the following submissions: (i) The appellant is not providing short term accommodation services. For any service to qualify as short term accommodation, it should be specifically provided by a hotel, inn, or a guest house. Neither the show cause notice nor the impugned order allege or hold that the appellant is in hotel or inn or a guest house business. In any view of the matter, even if what is alleged by the Department is correct, then too the same would not constitute service and no service tax on the same would be payable; (ii) The appellant, being a tour operator, is entitled to 90% abatement under the Abatement Notifications; (iii) Section 73A of the Finance Act could not have been invoked as the appellant collected the amount as taxes and fees on behalf of the hotel, which amount has been remitted to the hotels. The appellant did not collect any amount representing service tax; (iv) The impugned order has confirmed the demand of service tax under section 73 of the Finance Act on the gross amount collected by the appellant from the customers, which includes the amount remitted to the hotels as well. Thus, there is duplication of demand; (v) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... batement under the Abatement Notifications as the appellant did not fulfil any of the three conditions stipulated in the Notifications while providing taxable service regarding standalone hotel bookings; (v) The department was justified in invoking the provisions of section 73A of the Finance Act and requiring the appellant to pay the taxes collected from the customer and passed on to the hotel as the appellant collected the amount from the customers as representing service tax on hotel accommodation service but discharged service tax liability as a tour operator; (vi) The provisions of sections 73 and 73A of the Finance Act can be simultaneously invoked. Section 73 has been invoked to recover the service tax short levied as the appellant was discharging the service tax liability under tour operator service, while it was providing short-terms accommodation service. The differential service tax under hotel accommodation service was sought to be recovered under section 73 of the Finance Act. The demand under section 73A relates to service tax collected by the appellant on hotel accommodation services from the customers and not deposited with the government. There is no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he business of providing hotel accommodation and Hotel has represented to MMT that it is capable of providing hotel accommodation to MMT s customers as and when requested. 1. Scope of Services: 1.1 Hotel acknowledges and agrees that bookings of the Hotel rooms will be purely at the choice of the customers. 1.2 The bookings of MMT will be as per the user agreement at http://www.makemytrip.com/legal/user_agreement.ht ml and the parties agree to deliver their obligations accordingly. xxxxxxxxxxx 1.5 The list of properties of the Hotel are more specifically set out in Annexure-A. 2. Deposit: MMT agrees to pay an interest free deposit of Rs. 50,00,000/- (Fifty Lac Rupees) ( Deposit ) to the Hotel as agreed upon. Hotel agrees and acknowledges that such Deposit shall be exploited by MMT against each booking made by MMT with the Hotel from time to time. MMT in its sole discretion will replenish the Deposit if it is exhausted during the term unless otherwise agreed by the parties. The Deposit will be of open-ended validity and MMT may utilize it as and when necessary. 4. Hotels Representation and Warranty 4.1 Hot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s to be made to the hotels by MMT i.e. hotel shall not be allowed to deduct any amount from the deposit for such booking. 8.3 Even in case of confirmed bookings for overbooked dates, the hotel will still honor MMT s bookings by accommodating in its own facilities . In case accommodating in the same hotel can t be provided even on best effort basis, then the Hotel will provide the customer within an alternate hotel in same category or higher category hotel in the same or nearest locality at no extra cost, including transfers. 8.4 In case of failure by the Hotel to honor the commitment either partially or fully, the Hotel shall indemnify MMT against all claims, losses or damages incurred by MMT due to such failures. 8.5 Hotel shall provide services to the MMT customers as per best industry practice. 8.6 Hotel agrees to indemnify and hold MMT, its officers, directors, employees, successors and assigns harmless against all losses, damages, liabilities, costs or expenses of whatever form or nature, including, without limitation, attorney s fees and expenses and other costs of legal defense, whether direct or indirect, that they, or nay of them, may ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... yees of the hotel; breach of any applicable laws pertaining to the subject of this Agreement; and breach of any of representations, warranties and obligations under this Agreement. 24. It is, therefore, evident from the aforesaid that by providing booking of hotel rooms service to the hotel/customers through the online portal, the appellant merely acted as a facilitator between the hotel and the customers, for which the appellant received commission and it cannot be urged that the appellant had rendered hotel accommodation service to the customers. In fact the appellant only provided access to an online platform to the customer for ease of booking hotel and charges commission on the hotel for the same and pays service tax on such commission. A customer accesses the appellant online portal and books the hotel room as per his preference and makes payment for the same along with a nominal convenience fee. Out of the total amount received by the appellant from the customer, the appellant retains only its commission and service fee (if any) and the balance amount is forwarded to the hotel. Thus, the amount charged by the appellant from the customer for providing access ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... expressly made herein or in the terms and conditions of the services. If the User does not agree with any of the terms above, they are advised not to read the material on any of the MMT pages or otherwise use any of the contents, pages, information or any other material provided by MMT. The sole and exclusive remedy of the User in case of disagreement, in whole or in part, of the user agreement, is to discontinue using the services after notifying MMT in writing. (emphasis supplied) 26. Service tax on providing hotel accommodation is leviable under section 65(105)(zzzzw) of the Finance Act and it is reproduced: Section 65(105)(zzzzw): taxable service means any service provided or to be provided to any person by a hotel , inn, guest house, club or campsite, by whatever name called, for providing of accommodation for a continuous period of less than three months. (emphasis supplied) 27. A perusal of the aforesaid section indicates that service has to be provided to any person by a hotel for providing of accommodation for a continuous period for less than three months. It does not state that the service has to be provided to any person by any p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he customers. It is the hotel that has provided the service of short-term accommodation to the customers, and the appellant has merely acted as a facilitator between the hotel and the customer for the provision of short-term accommodation service by the hotels to the customers. The appellant is thus not a hotel. The appellant cannot, therefore, be said to be the provider of short-term accommodation service to the customers. Whether the appellant is entitled to, as a tour operator, ninety percent abatement under the Abatement Notifications 33. It is necessary to examine this issue because even if it is taken that the appellant is providing tour operator service, the contention of the department is that in respect of services relating to booking of accommodation only, the appellant would not be a tour operator. 34. The appellant is operating an online portal through which the services of booking of airline tickets, train tickets, bus tickets, hotel room bookings and tour packages are provided. It is for this reason that the appellant claims that it qualifies as a tour operator. The appellant is also registered with the Service Tax Department under the category of tour ope ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... odation for any person in relation to a tour 10 (b) The invoice, bill or challan issued indicates that it is towards the charges for such accommodation; and (ii) This exemption shall not apply in such cases where the invoice, bill or challan issued by the tour operator, in relation to a tour, only includes the service charges for arranging or booking accommodation for any person and does not include the cost of such accommodation. 40. For the period post 01.07.2012, the Government issued a Notification dated 20.06.2012 and the relevant portion of the Notification is reproduced below: Sl.No. Description of taxable service Percentage Conditions 11. (ii) a tour, if the tour operator is providing service solely of arranging or booking accommodation for any person in relation to a tour 10 (I) CENVAT credit on inputs, capital goods and input services other than the input service of a tour operator, used for providing the taxable service, has not been taken under the provis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ides the services solely of booking or arranging accommodation and the bill issued for this purpose includes cost of such accommodation (Notification No. 40/97-S.T. refers). However, this abatement will not be allowed in case the bill issued does not include the cost of such accommodation. 43. From the aforesaid it is clear that a tour operator can provide for a host of services, including booking of accommodation, transportation and food facility. However, when a person, otherwise is qualified as a tour operator but provides only booking of accommodation service, then such a tour operator would be entitled to ninety percent abatement. What is required is the qualification of a tour operator itself (qua the person), and not as the services rendered (qua transaction). It is, therefore, not possible to accept the contention of the learned special counsel for the department that each transaction relating to the service that is provided has to be examined. Thus, as the appellant is a tour operator it would be entitled to claim abatement under the Abatement Notifications. Whether the demand proposed under section 73 can be confirmed 44. In view of the aforesaid discussion i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stomer has duly been remitted to the hotels and no amount of tax has been retained by the appellant. 48. To substantiate that the appellant collected taxes under the head hotel taxes and fees and paid it to the hotel and no part of it has been retained by the appellant, the appellant has referred to a sample hotel confirmation voucher of Booking ID NH2115510482641 issued by the appellant to Mr. Jatinder Singh (customer). This sample voucher shows that the total amount charged by the appellant from the customer is Rs. 4751/- out of which the room charges/ base amount is Rs. 3821/- and the hotel taxes and fees is Rs. 930/-. The total amount paid by the customer to the appellant is Rs. 4751/-. 49. It also transpires from the Hotelier Voucher issued by the appellant to the hotel in reference to the aforesaid hotel booking, that the amount charged by the hotel for the room is Rs. 2960/- and the tax amount paid is Rs. 485.44/-. Thus, the appellant paid an amount of Rs. 3445.44/-to the hotel. 50. It also transpires from the service tax invoice that the appellant accounted Rs. 4685/- as the sale value and Rs. 66/- as the service tax. According to the appellant the service tax of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the word. The spirit of the provision lends force to the construction that collected means collected and kept as his by the trader. If the dealer merely gathered the sum by way of tax and kept it in suspense account because of dispute about taxability or was ready to return if eventually it was not taxable, it is not collected. Collected , in an Australian Customs Tariff Act, was held by Griffth C.J., not to include money deposited under an agreement that if it was not legally payable it will be returned (Words Phrases p. 274). We therefore, semanticise Collected not to cover amounts gathered tentatively to be given back if found non-exigible from the dealer. (emphasis supplied) In the present case, the DGCEI fails to make out even a prima facie case that some portion of the service tax collected by the Petitioners from the customers 'as representing service tax' or otherwise has been retained by them. Without such prima facie conclusion, it cannot be inferred that the Petitioners have violated Section 73A (1) of the FA. (emphasis supplied) 54. While interpreting a provision using the same words in the U.P. Sales Tax ..... X X X X Extracts X X X X X X X X Extracts X X X X
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