By TIOL News Service

MUMBAI, MAR 21, 2016: THE appellant during the period 16.10.1998 to 31.03.2001 has rendered services to various persons who sought their expertise in Hospitality Business.

The Revenue view is that the services of advice and consultancy rendered by the appellant to various individuals and independent organizations with regard to the entire operation of the hotel in order to bring those hotels to the level of "Taj" is taxable under the category of "Management Consultancy Services".

The CCE, Thane-I confirmed the Service Tax demand along with imposition of interest and penalties.

The appellant is before the CESTAT.

It is submitted that the appellant is engaged in this kind of services from 1988 onwards and were unclear as to whether the activity is chargeable to Service Tax. And that it was only when the Audit group of the Department audited their records and advised them that tax liability arises did they take registration and discharge their liability.

Inasmuch as they paid the Service Tax liability on 16.10.2001, filed ST-3 returns on 19.10.2001 and paid interest on 28.03.2002 as also further Service Tax along with interest on 23.08.2002.

Furthermore, they were served with a SCN on 09.12.2002 for appropriating the amounts paid and also for imposing penalties. It is, therefore, pleaded that since tax and interest was paid before issuance of SCN, provision of s.80 of FA, 1994 be invoked and penalties be set aside. Reliance is placed on the Allahabad High Court decision in Naresh kumar & Co. Pvt. Ltd. - 2014-TIOL-2564-HC-ALL-CX in support.

The AR justified the action by the original authority.

The Bench noted that the appellant was not seriously contesting the Service Tax liability and the interest thereof.

CESTAT further observed -

"6. … on being pointed out by Audit party the entire Service Tax liability along with interest was paid up before the issuance of show-cause notice. In our considered view, appellant could have entertained bonafide believe that the advice, consultancy as given by them may not be covered under ‘Management Consultancy Services'. They could have also entertained bonafide believe that they are rendering the business of the various hotels in the same manner from 1988, no Service Tax liability arises. We find that the appellant has made out a justifiable case for setting aside the penalties imposed. We also find strong force in the argument made by the learned Counsel that on being pointed out that they discharged Service Tax along with interest before the issuance of show-cause notice. In our view, the Service Tax liability on ‘Management Consultancy Services' was in nascent stage when the Audit Party brought to the knowledge of appellant that Service Tax liability arises, which was discharged immediately. By invoking the provision of Section 80 of Finance Act, 1994, we set aside the penalties imposed by the adjudicating authority under Section 76, 77 and 78 of the Finance Act, 1994."

The appeal was disposed of.

(See 2016-TIOL-671-CESTAT-MUM)