2026-VIL-1713-CESTAT-DEL-ST
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SERVICE TAX CESTAT Cases

Service Tax – Taxability of food and beverages served in hotel rooms – Period 01.07.2012 to 31.03.2013 – Audit alleged that the Appellant, a hotel, did not pay Service Tax on income from room service and grand room service, being serving of food and beverages in hotel rooms. The Respondent relied on a Board Circular and contended that it is an indivisible service. The Appellant contended that a hotel room cannot be equated with a restaurant and that food was separately charged and served from a separate service area – Whether serving of food and beverages in hotel rooms is a taxable service – HELD – Restaurant service under Section 65(105)(zzzzv) is taxable only when food and beverages are served in the premises of an air-conditioned restaurant having a licence to serve alcoholic beverages. A hotel room cannot be called a restaurant, and the Respondent produced no evidence that the food was served from the restaurant. The Circular clarifies that service tax cannot be charged on food served in the room, even under short term accommodation, if the bill is raised separately. There is no evidence that the value of food was included in the value of room service, and the invoices show that food was charged separately. Sale of goods is excluded from the definition of service under Section 65B(44) – Demand not sustainable - Service Tax – Amounts received from liquor manufacturers under branding and promotion contracts – Business auxiliary service and sponsorship service – Period 2010-11 to 2014-15 – Appellant received fixed amounts from liquor companies for displaying branded table accessories and giving exclusivity to their brands. The Appellant contended that the amounts were trade incentives in lieu of purchase discounts – Whether the amounts received are consideration for a taxable service – HELD – The contracts, by their terms, are for branding, promotion and listing exclusively of the brands of the companies, and the Appellant is restrained from tie-ups with other companies. The Appellant is bound to display the branded accessories at all venues. The contracts are therefore not for purchase of liquor but for promotion and branding. For the pre negative list period, the activity is covered by the meaning of sponsorship, which includes displaying the sponsor's logo or trade name and giving exclusive rights. For the post negative list period, the activity is a service under Section 65B(44) and is not in the negative list under Section 66D. The amounts received are consideration for a promotional activity – Demand confirmed for the normal period - Service Tax – Electricity charges recovered from tenants on actual consumption – Renting of immovable property – Appellant let out office spaces and shops after installing a sub-meter in each premises. Electricity charges were collected as per the sub-meter reading and deposited with the electricity supply agencies – Whether electricity charges recovered from tenants form part of the taxable value – HELD – The Appellant merely collected the charges on actual consumption as landlord and paid the same to the electricity supply agencies. The amount cannot be called consideration for a taxable service. Such amounts could be included in the taxable value only under Rule 5(1) of the Service Tax (Determination of Value) Rules, which has been held ultra vires by the Supreme Court in Intercontinental Consultants and Technocrats – Demand not sustainable - Service Tax – Extended period of limitation – Suppression – Show Cause Notice proposed a demand for the period 2010-11 to 2014-15, most of which was beyond the normal period. The Appellant contended that no suppression was alleged – Whether the extended period was rightly invoked – HELD – There is nothing on record to prove any intentional act of suppression of facts by the Appellant, and the Show Cause Notice did not invoke the proviso to Section 73(1). Mere failure to declare does not amount to wilful suppression, as there must be some positive act on the part of the assessee. The demand for the extended period is set aside. The order is set aside except for the demand on sponsorship services for the normal period, and the appeal is partly allowed.
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