Customs, Excise & Service Tax Appellate Tribunal, Delhi: In an appeal filed against the order of confirmation of the demand of service tax with interest and penalty against the appellant (lessor), a Single Judge Bench of Rachna Gupta (Judicial Member) held that the adjudicating authorities had rightly held that the value of free nights and the discount on food and beverages availed by the lessor were liable to be included in the taxable gross value. It further held that the complimentary room nights and discounts enjoyed by the lessor’s promoters, directors, and their families were additional consideration over and above lease rent, thus, was liable for Service Tax.
Background:
The appellant-Hotel President Planet was registered with the Service tax department for rendering services of renting of immovable property. The appellant had leased out a property to Hotel Lemon Tree vide lease agreement. During the audit of records of the appellant from October 2016 to June 2017, it was observed that in addition to agreed contracted lease rent, the appellant had received various additional considerations. The appellant was entitled to use 75 room nights per annum for family and friends of the promoters and directors of the lessor for free and a 50% discount on food, liquor and beverages, laundry, and other consumables whether such person/s were staying in the hotel or not.
The respondent observed that the expenses of insurance for protection of leased property of the appellant were also borne by Hotel Lemon Tree, who was the recipient of the services. The department stated that the cost of free room charges and discounts, and the insurance expenses should have been included in the gross value calculated for discharging the tax liability.
A show cause notice was issued upon the appellant proposing the recovery of Service Tax of Rs. 1,00,486 along with proportionate interest and appropriate penalties. The demand of Service tax of Rs. 66,362 was confirmed and the demand of service tax amounting Rs. 41,302 was dropped. The said order was confirmed and was further challenged before this Tribunal.
Analysis, Law and Decision:
The issue for consideration was “Whether the complementary nights extended by the lessee to the lessor along with the respective food discount was to be considered as the part of gross value/taxable value as had been held by the adjudicating authority below?”.
The Tribunal observed that Section 67 of the Finance Act, 1994 (‘the Act’) caters to the situation where any part of consideration or the full consideration of the service provided/to be provided was not received in money. Section 67 can be said to be applicable to the cases where the service provider receives any part of a consideration in non-monetary form or by way of reimbursement and that such item does not figure in the invoices raised, thereby resulting in the real value of taxable service.
The Tribunal stated that as per Section 67(1)(ii) of the Act, the value shall be such an amount in money as charged either wholly in money or partly consisting of money or for something for which the amount is not ascertainable. But it should be received for providing ‘such service’ as is either agreed to be provided or is provided. The Tribunal opined that if any other amount in money or otherwise, is charged which is not paid in relation to taxable service provided or to be provided, the service tax will not be payable on such charge.
The Tribunal on perusal of conditions of agreement vide which the appellant had leased out their property, observed that vide single agreement of leasing of immovable property, the appellant in addition to receiving the rent based on monthly turnover, i.e., the amount in money, has simultaneously agreed for getting certain room nights free of cost and discount on food and beverage services i.e., in kind. Thus, the consideration received by the appellant was not wholly in money but was also in kind, i.e., the value of free nights and discount on food and beverages.
The Tribunal held that the adjudicating authorities had rightly held that the value of free nights for the period in dispute and that discount on food and beverages availed by the appellant were liable to be included in the taxable gross value. The Tribunal further held that the privileges availed by the appellant’s directors, promoters and their family and friends were clearly an additional consideration, over and above the amount of lease rent received time to time from the recipient of service.
The Tribunal further observed that no evidence had been placed on record by the appellant for the claim that a higher value of extra nights and extra discount had been added to the taxable value. The order confirming the demand of service tax was upheld and thus, the appeal was dismissed.
[Hotel President Planet v. CCE (GST), Service Tax Appeal No. 50157 of 2025, decided on 06-11-2025]
Advocates who appeared in this case:
For Appellant (s): Krishna Garg, Advocate
For Respondent(s): Rohit Issar, Authorised Representative