F.No.V/DGST/30-MISC-45/2009/756 Dated:- 8-2-2011 Circular – Circulars – Service Tax – F.No.V/DGST/30-MISC-45/2009/756 DIRECTORATE GENERAL OF SERVICE TAX 9 th Floor, Piramal Chambers, Jijibhoy Lane, Parel, Lalbaug, Mumbai 400 012 Ph. No.24178515, 24102587 Dated: February 8, 2011 Sub: Practice being adopted by leading Hotel Chains to utilize Cenvat Credit beyond permissible limits reg. Please refer to this office letter of even number dated 27.04.09 whereunder copy of letter Dy. No.62/Comm. (ST)/2009 dated 27.03.2009 from the Commissioner (Service Tax), CBEC, New Delhi along with its enclosures, was forwarded to you for taking appropriate action and calling for the action taken report. In the said letter dated 27.03.2009, the Commissioner Service Tax, had informed this office about irregular availment of Cenvat Credit by leading hotel chains, as reported to him by the Chief Commissioner, Customs Central Excise, Chandigarh vide letter C.No. 06-Zone 14
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ave found similar issue prevailing in their jurisdiction and that they are taking the necessary action to protect the revenue. On perusal of these reports, it has been observed that the service provider, in most of the cases, is M/s Indian Hotel Corporation Ltd. (M/s IHCL), an assessee registered with Service Tax-I Commissionerate, Mumbai. However, there are others as well viz. M/s Apeejay Sunder Corp. Services, Kolkata, M/s Sarovar Hotels Pvt. Ltd., Mumbai, M/s Nirulas Comer House P. Ltd. etc. who also provide similar services to hotel chains and enable the service recipient to take full Cenvat credit by treating the services as 'Business Consultancy Services'. The field formations are of a uniform view that the services provided by M/s IHCL and other such service providers to the owners of hotels can not be considered to be 'Management Consultant Services' but such services are actually in the nature of Business Support Service or Business Auxiliary Service or Franchise Service, as t
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milar service providers would follow suit. Till then, action is required to be taken by the field formations to prevent / recover the inadmissible excess Cenvat Credit availed by the recipient of such services. It may not be out of place to mention here that the Commissioner, Chandigarh-I, who had originally taken up the issue, had, in the meantime, dropped the demand notice issued in this respect to M/s Taj GVK Hotels and Resorts (service recipient) by passing an Order-in-Original dt.20.09.2010 by holding, inter-alia, that 'the cause which has initiated the present proceedings was beyond the control of the noticee; the noticee can not be held responsible for the misclassification of taxable service at the bands of provider of such service; so the demand is not sustainable and it is even hit by time bar also apart from being not sustainable on merits' etc. However, it has now been reported by the Chief Commissioner's office, Chandigarh, vide their letter dated 16.12.2010 that the sub
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r of output service taking such credit; thus it was the noticee who was required to ensure the description of service and as to what is the classification of input service to discharge this burden even if there was some misclassification at the service provider's end; the entire onus of correct availment was on the noticee'. Considering the issue in the backdrop of what is stated herein above, all the field formations are hereby requested to take appropriate action in the matter to protect the revenue. Commissioner, Service Tax-I, Mumbai would be expected to complete the ongoing investigation/ verification immediately and communicate the result thereof to this office at the earliest. Reports about the final outcome of the action taken may please be forwarded to this, office by all concerned. Yours faithfully, (Additional Director General) – Circular – Trade Notice – Public Notice – Instructions – Office orders Tax Management India – taxmanagementindia – taxmanagement
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