The Delhi Bench of Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has held that 100% Cenvat Credit on Management Consultancy Services Under Rule 6(5) of Cenvat Credit Rules, 2004 (CCR) in Rambagh Palace Hotel Case.
The bench of Dr. Rachna Gupta (Judicial Member) and Hemambika R. Priya (Technical Member) has observed that Management consultancy services vis- a -vis business auxiliary services / business support service; 100 percent cenvat credit allowed under Rule 6 (5) of CCR in Management consultancy services.
The appellant/assessee was registered for providing the taxable services under various categories of Mandap Keeper, Internet Café, Outdoor Catering, Health Club & Fitness Service, Dry Cleaning, Banking & Other Financial Services, Renting of Immovable Property,Business Auxiliary Services, Transport of Goods by road and Tour Operator Services and was taking Cenvat credit in respect of service tax paid on the various input services used for providing the output services.
One of the major input services the appellant is taking service tax credit relates to operation and management services provided by IHCL, Taj Mahal Hotel, Mumbai. Department observed that the appellant, M/s. Rambagh Palace Hotels Pvt. Ltd. were not following the procedure laid down under Rule 6 (3)(ii) of Cenvat Credit Rules, 2004.
The services provided by IHCL are comprehensive and collaborative services for operation, running, maintenance and promotion of the hotel while the owning company only meets the operating expenses. The actual power for running and operating the hotel are being exercised by the operating company, i.e. IHCL. The services being provided by IHCL are therefore appropriately classifiable as “Business Auxiliary services”, or “Business Support Services”.
In other words it appeared to the Department that in any case these services are not classifiable as “Management or Business Consultancy” service.
The services provided by IHCL to M/s. Rambagh Palace Hotel Pvt. Ltd. are not in nature of ‘management or business consultancy’ service and these have been used for providing both taxable and exempted services whereas the services being provided by M/s IHCL are in the nature of “Business auxiliary services” as observed earlier which do not fall in the category of services listed in sub rule (5) of Rule 6 of Cenvat Credit Rules, 2004.
Therefore, M/s Rambagh Palace Hotel Pvt. Ltd. were not entitled to utilize 100% Cenvat Credit of service tax paid on these services. From 01.04.08, as per the provisions of Rule 6(3)(ii) of Cenvat Credit Rules, 2004 they could avail total cenvat credit irrespective of taxable and exempted services but were required to pay an amount equivalent to the Cenvat Credit attributable to input services used for provisions of exempted services and remaining available balance of Cenvat Credit could be utilized for the payment of Service tax in respect of taxable services.
Two Show Cause Notices were served upon the appellants for such period and demanding reversal of such amount of Cenvat credit as is already mentioned in the table above. The proposal of both the Show Cause Notices was initially confirmed, which was the common order with respect to both the Show Cause Notices. The appeal against the said order has been rejected by the impugned common order in appeal.
The tribunal held that the demand has wrongly been confirmed. Resultantly, the order under challenge is hereby set aside. Consequent thereto the appeal is allowed.
Case Details
Case Title: M/s. Rambagh Palace Hotel Pvt. Ltd. v/s Principal Commissioner of CGST & Central Excise – Jaipur
Citation: SERVICE TAX APPEAL No. 55455 OF 2023
Counsel for the Appellant: Sanjiv Agarwal, Chartered Accountant
Counsel for the Respondent: Aejaz Ahmad, Authorized Representative
