Whether letting out the rooms by the guests along with garden area for marriage be taxed under “Mandap Keeper services”?

CASE STUDY

Prepared By: Praniti Lalwani & Prayushi Jain

M/S THE INDIAN HOTEL [FINAL ORDER NO. ST/A/52293-52295/2017-CU[DB] dated 10/03/2017

Introduction: The assessee, M/s The Indian Hotel (hereinafter referred as appellant) is leading hoteliers engaged in providing various taxable services, one of them being Mandap Keeper service. They were issued a show cause notice wherein it was alleged that they had shortly paid the service tax on the consideration received by the assessee for the hotel rooms hired by the person at the time of hiring the Mandap/garden area to conduct marriage etc. The revenue authorities were of the view that room rent received was also to be considered as amount received in connection with providing Mandap keeper service. The present case study revolves around the final outcome of this Show Cause Notice.

Relevant Legal Provisions:- the case study primarily revolves around the definition of Mandap keep and Mandap keeper service which RE:-
(i)          (66) "Mandap" means any immovable property as defined in section 3 of the Transfer of Property Act, 1882 (4 of 1882) and includes any furniture, fixtures, light fittings and floor coverings therein let outfor consideration for organizing any official, social or business function;
[Explanation.—For the purposes of this clause, social function includes marriage;]

(ii)“Mandap keeper” means a person who allows temporary occupation of a Mandap for a consideration for organizing any social, official or business function.

Issue Involved:-Whether letting out the rooms by the guests along with garden area for marriage be taxed under “Mandap Keeper services”?

Brief Facts:-The brief facts of the case were that the appellant were engaged in providing taxable service under the category “Mandap keeper services”. The dispute in the present case was related to the nonpayment of service tax on the consideration received by the assessee for the hotel rooms hired by the persons at the time of hiring the mandap/ garden area to conduct marriage etc. The lower authorities held that the room rent received is also to be considered as an amount received in connection with providing “Mandap Keeper services”.
The Ld. Consultant for the appellant had submitted that the letting out the rooms for temporary occupation by the guest cannot be taxed under “Mandap Keeper services”. The assessee was discharging service tax on the consideration received for letting out the garden area/ mandap to conduct marriage and other ceremonies. The fact that the rooms were booked or were occupied by the guests of the person who hired the mandap, by itself cannot make the rooms as part of mandap for service tax purposes. The rooms were provided as part of their regular hotel business. But the revenue authorities were of the view that that if there was no marriage function, then the so called guests would have never visited, resided and rested in the hotel. They concluded that the whole compound was to be treated as a unit and the service tax was to be levied accordingly. The contentions of appellant were not adhered by adjudicating authority and commissioner appeals and order against them were passed. Hence, the appellant preferred appeal at CESTAT.

Assessee’s Contention:-.The appellant submitted that the order was passed by simply holding that while charging service tax, motive of the services is to be taken and the assertion of the appellant that the purposes of both i.e. booking of gardens and that of rooms were different was not maintainable. The appellant submitted that consolidating the room charges alongwith the consideration received for Mandap by treating the entire hotel compound as one was not justified as the service tax can be levied on a service only if it falls in the definition of that service. For eg., service tax can be levied under “Mandap Keeper Services” only if the property falls in the definition of Mandap which reads as follows:-
(66) "Mandap" means any immovable property as defined in section 3 of the Transfer of Property Act, 1882 (4 of 1882) and includes any furniture, fixtures, light fittings and floor coverings therein let outfor consideration for organizing any official, social or business function;
[Explanation.—For the purposes of this clause, social function includes marriage;]
The analysis of above definition makes it clear that an immovable property will be termed as “Mandap” if all of the following conditions are satisfied:-
·         The immovable property is of nature as defined in section 3 of Transfer of Property Act, 1882.
·         It will include any furniture, fixtures, light fittings and floor coverings therein.
·         It should be let out for consideration.
·         The purpose for which the property is let out should be organizing of any official, social or business function.
Thus, the definition says that an immovable property will be termed as Mandap if all the above conditions were satisfied. Merely because it was an immovable property and was let out for a consideration, it would not tantamount to “mandap” unless any Official, Social or Business function was performed. The assessee submitted that the entire definition was to be read as a whole. And on reading the definition it became clear that not only the area but the functionality also required to be seen for deciding whether a particular premise was let out for marriage ceremony. It was also submitted that the marriage ceremony and all the related functions were held in the garden area of the appellant. Therefore, only the garden area can be said to be let out for Mandap Keeper Service. However, in the rooms let out to the party was only for resting or refreshing purpose. It cannot by any stretch of imagination be said that the Marriage ceremony or any related function was held in the rooms let out. The assessee further submitted that the use of the Rooms was also required to be seen as to ascertain whether any function was held there. However, it was clear that no marriage ceremony or any related function was held in the rooms let out. Therefore, the letting out of said rooms cannot be held to fall under the category of ‘Mandap Keeper Service’ and no service tax can be demanded from the appellant on letting out of the said rooms. Thus, the very basic aspect of levying the service tax was not satisfied and since the rooms in this case did not fall in the definition of “Mandap”, no service tax can be levied on the same. This definition and discussion thereof was done in the appeal memorandum but it has not been discussed in the impugned order which makes it a non speaking and non-reasoned order which was not sustainable in the light of following decision:-
·         M/s Ashbee Systems Pvt Ltd v/s CCE, Delhi [2011-TIOL-181-HC-DEL-CX]-
Central Excise – procurement, erection and commissioning of pit and pitless type of Electronic Weigh Bridge – whether manufacture – CESTAT has not considered the grounds and case law relied upon by the petitioner – Matter remanded: It is noticed that the impugned order passed by the CESTAT does not notice and take into consideration the contentions raised by the petitioner including case law relied upon by them have not been referred to in the impugned order. Keeping in view the afore-said facts, the impugned order is quashed and CESTAT asked o decide the application for stay afresh. The Tribunal will keep in mind the contentions and reasons including the case law relied upon by the petitioner. It is clarified that this Court has not expressed any opinion on merits of the controversy and issue. CESTAT will independently apply its mind.: DELHI HIGH COURT;
Thus in light of above the appellant contented that the order was not tenable.

In continuation to above, the appellant further submitted that the learned Commissioner (Appeals) had contended that the ‘purpose’ of booking the rooms was to be seen and there would have been no visit of said customer if no Mandap was booked. As such, it was alleged that the room charges will also be treated as consideration received for Mandap Keeper Services only as the purpose for booking of both Mandap and rooms was marriage only. While alleging this, the learned Commissioner (Appeals) upheld the contention of the adjudicating authority while passing the order in original that entire hotel was to be treated as one unit and accordingly rooms were also be considered as an extension of Mandap. This contention was contented to be baseless as the hotel is divided into various parts and services levied at each part was to be checked by comparing the legal definition of that service to that of the nature of services provided there. It was only when the criteria laid down for a particular service was satisfied, then only, the service tax can be levied under that head. As such, though the hotel was one building, yet it was being divided into various parts – for eg. gardens/ auditoriums which were taxed under the category of Mandap Keeper services, the gym facilities which were taxed under the “Health Club and fitness centre”, beauty parlour services, restaurants, etc. If the entire hotel was treated as one, it will mean that regardless of nature of service availed by that particular customer, the service tax will be levied under the category of Mandap Keeper services as per allegations of impugned order. Even if this allegation of the impugned order was accepted for the sake of argument also and entire hotel is treated as one, will the learned Commissioner (Appeals) allow the abatement of 60% (as applicable on Mandap Keeper services) on the services namely health and fitness centre, beauty parlour, wifi, etc. as availed by that customer who has come to attend the marriage? Yes, if the entire hotel was to be treated as one as these were availed by the person who had come to hotel to attend the marriage ceremony. Since the purpose of coming to hotel was marriage only and thereafter the said services were availed and as per allegation of impugned order, entire hotel was to be seen as one unit, all the consideration received from those customers (on account of health and fitness, wifi, dry cleaning, beauty parlour, etc.) should be treated as receipts against Mandap Keeper services only and consequently abatement should be allowed. However, the ‘purpose for availing the service’ had been checked only for the ‘room booking’ only as this was the only service that was not taxable during the relevant period. This aspect was not checked for the remaining services like health and fitness, beauty parlour, dry cleaning, wifi, etc. as availed by the same person. This was so because these services were already taxable and that too at full rates. Since the revenue was gaining at this end, the interpretation of treating the entire hotel compound as one had not been followed here. However, since the rooms were not levied to service tax, the mis-interpretations of legal provisions had been done by one or other baseless grounds. Such an approach was not justified as it was ultra vires the provisions of Finance Act.
The appellant further submitted that when the mandap area was booked, then the room occupancy increases. Obviously, when the rooms were booked, many of the other services were availed by these guests; which were separately charged at the respective areas. When these services were availed at the taxable areas – like health and fitness centre, beauty parlour, etc. the appellant duly pays the service tax under the respective head. However, that was not challenged to fall under the mandap keeper services. It was accepted that these services were health and fitness services or beauty parlour services even if these were availed by the guests attending the specified functions in mandap. But when it comes to room charges, the learned Commissioner alleges that these were not room services, these were mandap keeper services. Thus, it is proved that the learned Commissioner has accepted somewhere that hotel was bifurcated into various areas – like health club, beauty parlour, etc. and at some places like rooms, it was alleged that entire hotel compound is one and the same. This was merely because, room charges were not taxable and services availed at other places were taxable. Thus, for taxing even the non-taxable services, such allegation had been raised, which was not at all tenable.

The appellant further submitted that the impugned order was placing reliance on the clarification issued by the CBEC vide its Circular No. 96/7/2007-ST dated 23.08.2007 that hall rooms etc. let out by hotels/restaurant for a consideration for organizing social, official or business functions were covered within the scope of ‘mandap’ and service tax was payable on them. The appellant submit that the said circular had been relied from the issue of show cause notice stage and the appellant had replied since then that this circular was not applicable in their case as the rooms on which service tax was being demanded under ‘mandap keeper services’ were not used for organizing any social or marriage function but the said submission had not been accepted while passing the order. The appellant reiterate that it was clarified that the rooms, halls, etc. let out FOR ORGANISING THE SOCIAL, OFFICIAL OR BUSINESS FUNCTION will be taxable under mandap keeper services. In this regard, the appellant reiterate that no such function was organized in rooms and they were simply used for resting purpose. Therefore, the said circular was not applicable on them. It was further alleged that there was no evidence that the said rooms were not used for any marriage function. In this regard, it was submitted that the learned Commissioner had not proved his allegation that the rooms were used for marriage purpose. It was simply said that no evidence was given to prove that the said rooms were not used for any marriage function. In this respect, the appellant submitted that the assessee cannot be asked to prove the negative. If the department raised any allegation it should be proved by it rather than putting this burden on the assessee. It has been decided in the following case:-
·               M/s Aviat Health Care Pvt Ltd Vs CC & CE, Belapur [2008-TIOL-1924-CESTAT-MUM.]
Allegations are purely conjectural and ipse dixit in nature - It is trite law that it is for the Revenue to substantiate its allegations and not for the assessee to prove the contrary- Revenue loses Rs.5.62 Crores Central Excise undervaluation case at the hands of the Tribunal. :MUMBAI CESTAT;

Thus, the liability was rested upon the department to prove its allegation. In the case of appellant, the department had alleged that the rooms were used for marriage function. But it had failed to prove how these were used. The marriage was a life-size function being witnessed by a large no. of people running from few hundred to thousands of people. How this function was organized in these rooms which have capacity to hold only few people at a time. Thus, the allegation of department neither seem logical nor it was otherwise proved anywhere in the entire order.
In continuation, the appellant submitted that though the above circular was not applicable in the instant case, yet even if it was accepted for the sake of argument also that the circular was applicable then too, we can disagree and opt not to follow the same. This has been held in the case of CCE, Bolpur v/s rattan Melting & Wire Industries [2008-TIOL-194-SC-CX-CB] and BIRLA JUTE AND INDUSTRIES LTD. versus ASSISTANT COLLECTOR OF C. EX. [1992 (57) E.L.T. 674 (Cal.)]. Thus, the impugned order was not viable in placing the reliance on this circular and is liable to be set aside.

The impugned order had further alleged that the extended period was rightfully invoked in the instant case as the appellant had deliberately suppressed the material facts from the department. It was contended by the appellant in their appeal memorandum submitted to Commissioner Appeals that there was no suppression as the value of exempted income was shown in the ST-3 return and while calculating the proportionate reversal under rule 6(3) of the Cenvat Credit Rules, 2004. In this context, it was alleged by learned Commissioner (Appeals) that the fact of showing the room charges in ST-3 and considering them in proportionate reversal were not relevant because the fact of double invoicing was never disclosed to the department. In this regard, it was submitted that the appellant had practice of raising the separate invoices pertaining to different areas of the hotel compound where different types of services were provided. For eg.: separate bills are raised at restaurant for food. For health services and spa, separate bills are generated. This is the common practice adopted in the most of the leading hotels. However, there was no legal requirement of informing the department about the manner of invoicing done by the assessee. Neither any rule nor any section of the Finance Act, 1994; prescribed that the manner of invoicing done by the appellant was to be specifically informed to the department. Also, this information was also not specifically asked by the departmental authorities. Had it been the case that there was any provision stating that the manner of invoicing should be informed to the department, or where the department had specifically asked for providing the same and the appellant had not obeyed the demand, it would have tantamount to suppression. This was not the case here. Since there was no legal requirement of disclosing the manner of invoicing to the department, nor it was specifically asked by the department; the non-disclosure of invoicing manner suo motu will not amount to suppression. This has been decided in the following cases:-
Ø APEX ELECTRICALS PVT. LTD. VS UNION OF INDIA [1992 (61) E.L.T. 413 (GUJ.)]:-
“Demand - Limitation - Suppression - Information not required to be supplied under law if not supplied does not amount to suppression - Proviso to Section 11A(1) of Central Excises and Salt Act, 1944.”
Ø PROLITE ENGINEERING CO. VS UNION OF INDIA [1995 (75) ELT 257 (GUJ.)]:-
“Demand - Limitation - Non-disclosure of information which is not required to be disclosed or recorded by statutory provision or prescribed proforma does not amount to suppression or concealment - Extended period of limitation not invokable - Proviso to Section 11A(1) of Central Excises & Salt Act, 1944 - Rules 9(2) and 57-I of Central Excise Rules, 1944.”
An analysis of both of these decisions given by hon’ble High Courts made it clear that the information not required to be submitted under law did not amount to suppression. In the case of appellant also, they were not required to submit the manner of invoicing to the department, therefore, for non supply of this information, charge of suppression cannot be confirmed against them in the light of above decisions. Thus, the impugned order had wrongly confirmed a time barred demand and was liable to be quashed.

It was further submitted that the impugned order had confirmed the penalty under section 78 by holding that the Hon’ble Supreme Court of India in the case of UOI vs. Dhamendra Textiles Processors had ruled that if a statue prescribes a penalty for breach of civil obligations, penalty was imposable irrespective of mens-rea and so penalty imposed on the appellant under section 78 of the Act needs no intervention.In this respect, the appellant submit that, as per language of the section, penalty can be imposed only if the short-payment was due to any of the ingredients referred in the section like fraud, collusion, willful misstatement or suppression of facts. However, in the instant case, none of these ingredients were present. As such, the judgment of the hon’ble Supreme Court had been delivered by ignoring the provisions of the section mentioned in the law. It had been held in the case of A-One Granites v State of U.P. (2001)3SCC537; AIR2001 SC 1203; Salmond on Jurisprudence, 12th Edn. Pg 167 that the decision given by the hon’ble Apex Court which had been rendered per incuriam, i.e. by ignoring the provisions of the Act, was not binding under article 141 of the Constitution. The doctrine of per incuriam was an exception of the rule of precedents and it says that any expression resulting from ignorance was not a binding authority and it may be ignored. In the instant case, the mens rea/willful suppression had been mentioned as essential ingredients for the purpose of imposing the penalty as contemplated by the provisions of the Finance Act, 1994. But the hon’ble Supreme Court had rendered decision of Dharmendra Textiles by ignoring this vital fact. As such, it was not binding precedent as per doctrine of per incuriam. In the instant case, there was no willful suppression by the appellant but this was a simple case wherein the appellant had not paid service tax on the receipts collected on account of rooms let out by them during the course of providing mandap keeper services as no function was organised in such rooms. Further all the facts of the case were well within the knowledge of the department as its audit have been conducted from time to time. Further, the fact of collecting the room charges was disclosed in the ST-3 return and these charges were also considered while calculating the proportionate. When everything was known to department, there cannot be any suppression of facts. Thus, allegation of suppression was not leveled. As such, the penalty under section 78 that was leviable for the charge of suppression cannot be imposed upon them by relying on the case of Dharmendra Textiles. As such, the impugned order was not tenable and it should be set aside.

In continuation to above, it was submitted that the decision of hon’ble Supreme Court in the case of M/s Dharmendra Textiles had been referred by hon’ble Punjab and Haryana High Court in the following case:-

·         CCE, Chandigarh-II Vs M/s Sarvpriya Industries Ltd [2010-TIOL-523-HC-P&H-CX.]-
Central Excise - Supreme Court decisions in Dharmendra Textile as well as in RajasthanSpinning& Weaving Mills do not lay down that for every short payment of duty, penalty is automatic: Dharmendra Textile as well as in RajasthanSpinning& Weaving Mills is that mandatory penalty under Section 11AC of the Act was not applicable to every case of non-payment or short-payment of duty. Thus, even though the authorities may have no discretion once conditions stipulated under Section 11AC of the Act exist, in absence of fulfilment of such conditions, penalty could not be levied. In this view of the matter and the finding of the Tribunal that there was no allegation of suppression of facts with intent to evade the payment of duty, the penalty under Section 11AC of the Act was not warranted. No substantial question of law arises: PUNJAB AND HARYANA HIGH COURT
Thus, hon’ble High Court has ruled that penalty was not warranted in each and every case of non-payment of duty or short payment of duty. This should happen only due to suppression of facts with intent to evade the payment of duty. In the light of this decision, since the impugned order had not been able to prove the ulterior motive, the penalty was not sustainable.

If the contention of the impugned order that rooms will also fall under the definition of mandap is accepted even for the sake of argument also, then the closing phrase of this definition – “for organizing any official, social or business function” will lose its relevance. If any immovable property let out for consideration is deemed as mandap then what will be use of adding the above phrase. It had been held by hon’ble Supreme Court that legislature never waste its words and where language of any provision is plain and unambiguous, no other meaning was to be taken. Reliance was placed on the decisions of British Airways PLC vs Union of India [2002 (139) ELT 6 (S.C.) and CCE, Mumbai -V Vs M/s GTC Industries Ltd [2008-TIOL-1634-CESTAT-MUM-LB.]. Therefore, it was clear that any interpretation which led to redundancy was to be avoided. In the light of above decisions, the contention of the impugned order that rooms will also be termed as mandap (inspite of the fact that no social, official or business function was organized there) will lead to redundancy of use of phrase “for performing the social, official or business function”. Therefore, such an interpretation was not sustainable and was liable to be set aside.
Many of the judicial pronouncements were cited in the written submissions in favour of their contention that the service tax cannot be levied on room charges under the head of Mandap Keeper services. Reliance was placed on the following decisions:-
·         Merwara Estates v/s CCE {[2007] 6 STT 310/ 21 STT 327 (New Delhi – CESTAT)}
·         M/s Merwara Estates v/s CCE, Jaipur [2009-TIOL-871-CESTAT-DEL]
·         M/s Rambagh Palace Hotel v/s CCE, Jaipur [2012-TIOL-673-CESTAT-DEL]
Out of the above three decisions, the decision of M/s Rambagh Palace was squarely applicable in their case and was the latest decision on the even issue. It was supposed to be discussed while passing the impugned order but it had not been done.
It was submitted in the written submissions that demand pertains to the period from 01.04.2006 to 31.03.2009 during which there was no service tax on the room charges. The service tax had been imposed on these receipts w.e.f. 1.5.2011. The appellant is duly registered as from this date and paying the service tax thereupon. Since service tax has been imposed on these services w.e.f. 01.05.2011, it cannot be said that these receipts were taxable under some other head prior to this date. In this regard, they had relied upon the ratio of judgments given in M/s Kaveri Coal Suppliers & Another v/s CCE, Kanpur [2011-TIOL-1593-CESTAT-DEL]; Sap India Private Limited v/s CCE, Bangalore [2010-TIOL-1569-CESTAT-BANG] and inM/s Prince Foundations (P) Ltd v/s CST, Chennai [2009-TIOL-1103-CESTAT-MAD]. In these services it was held that when service tax is specifically imposed on any service as from a particular date, it cannot be alleged that the same service was taxable under some other head prior to this date. Going by the same analogy, since the room rent is made taxable as from 1.5.2011; demand cannot be raised for the prior period under some other head.
In their appeal memorandum and written submissions, they had rebutted the allegations raised by Additional Commissioner while passing the impugned order in original. They had refuted the reliance placed by Adjudicating authority on the decisions of Tamil Nadu Kalyana Mandapam Association v/s Union of India [2006 (3) STR 260 (SC)], Contnental Foundation JT Venture v/s CCE, Chandigarh-I [2007 (216) ELT 177 SC] and M/s Chemfab Alkalis Ltd v/s CCE Pondichery [2010 (251) ELT 264 Tri-Chennai]. However, this portion of their appeal memorandum which justified that the impugned order in original was incorrect has not even been touched.
The appellant had cited a no. of decisions to support their claim that the extended period of limitation was not invokable in the instant case. None of these decisions have formed the part of the impugned order. These decisions are reproduced as follows:-
·         Chemphar Drug & Limits reported in (2002-TIOL-266-SC- CX)
·         Pushpam Pharmaceuticals Company Vs. CCE, Mumbai reported in (2002-TIOL-235-SC- CX)
·         DEVANS MODERN BREWERIES LTD. Versus COMMISSIONER OF C. EX., CHANDIGARH [2006 (202) ELT 744 (SC)]
·         PADMINI PRODUCTS Versus COLLECTOR OF C. EX. [1989 (43) ELT 195 (SC)]
·         LUBRI-CHEM INDUSTRIES LTD. VersusCOLLECTOR OF CENTRAL EXCISE, BOMBAY [1994 (73) ELT 257 (SC)]
·         CC, Kandla Vs M/s Shah Alloys [2011-TIOL-35-SC-CUS]
·         M/s Idea Cellular Ltd Vs CCE, Rohtak [2009-TIOL-387-CESTAT-DEL]
·         CCE, Cochin v/s M/s Avenue Regent [2010-TIOL-121-CESTAT-BANG]
·         Commissioner of Central Excise Bangalore-I v/s M/s MTR Foods Limited [2011-TIOL-696-HC-KAR-CX]
·         M/s Power Grid Corporation of India Ltd v/s CST, New Delhi [2011-TIOL-1457-CESTAT-DEL]
·         M/s Sujana Metal Products Ltd v/s CCE, Hyderabad [2011-TIOL-1170-CESTAT-BANG]
Regarding their submission of non imposition of penalty, following decisions were cited in appeal memorandum and written submissions which were not discussed and distinguished:-
·         M/s Neptune Equipment Pvt Limited v/s CCE, Ahmedabad [2011-TIOL-1069-CESTAT-AHM]
·         Uniflex cables Ltd v/s CCE, Surat [2011-TIOL-85-SC-CX]
·         Hindustan Steel Ltd v/s. State of Orissa - [1978 (2) ELT (J-159)]
·         2010 (258) ELT 465 (SC) – Sanjiv Fabrics
·         2007 (207) ELT 27 (P &H) – UT Ltd
·         2007 (5) STR 251 (P & H) – Kamal Kapoor
·         COMMISSIONER OF CENTRAL EXCISE, TRICHY Versus GRASIM INDUSTRIES LTD. [2005 (183) E.L.T. 123 (S.C.)]
·         Sri Krishna Alloys vs Commissioner of Central Excise, Salem [2006 (200) ELT 158 (Tri.-Chennai)].
·         Prakash Decorators v/s Commissioner of Central Excise, Jaipur [2008 (088) RLT 0559 (CESTAT-Del.)]
·         M/s ITEL Industries Ltd v/s CCE, Calicut [2010-TIOL-236-CESTAT-BANG].
·         CCE, Lucknow v/s M.s Rosa Sugar Works [2010-TIOL-82-CESTAT-DEL]
·         M/s Hindustan Lever Ltd v/s CCE, Lucknow [2009-TIOL-1795-CESTAT-DEL]
·         M/s GHCL Ltd v/s CCE, Bhavnagar [2009 (16) STR 588(Tri-Ahmd.)
It was further submitted that the issue involved in the current appeal was decided in appellant’s favour by the learned Commissioner of Central Excise, Jaipur-II vide order in original no. 32/2012/S.T./JPR-II-COMMISSIONER dated 17.9.2012 in their own case. In this case also, the demand was raised on the room charges paid by the customers who had taken Mandap on rent. While deciding the case in appellant’s favor, it was held that if a facility is to be compulsorily availed with the ‘Mandap’, then only the charges for that facility were to be added. In the instant case, it was not compulsory for the customers to avail the rooms. As such, the collections from rooms were not to be added while determining the liability under the Mandap Keeper Services. Since the issue was already decided, its benefit was extendable to them.
It was further submitted that it has been held by the hon’ble Supreme Court that where the facts and circumstances are identical, the consistency should be maintained while deciding the case. Reliance was placed on the case of Government of Andhra Pradesh & Othrs v/s A. P. Jaiswal & Ors [2001 AIR SCW 101] and Commissioner of C. Ex., Vadodara v/s Adarsh Re-rolling Mills [2002 (143) ELT 533 (Tri. - LB)].

The appellant also submitted that the issue stood settled in favour of the appellant as all the proceedings were dropped for the demand raised for similar reasons of nonpayment of service tax on room charges on the rooms let out during wedding ceremonies vide order in original no. 32/2012/ST/JPR-II-Commissioner dated 17.09.2012 but still the submissions of the appellant were not considered. Furthermore, the appellant had cited the latest decisions of Tribunal on the same facts and circumstances but the same were not considered while passing the impugned order. As such, the learned Commissioner ought to follow the judicial discipline and should neither take a stand contrary to that already taken and nor pass order without following the decision laid down by its superior authorities which are binding on them. This view is supported by the decision given in the following cases:
Ø Biocon Ltd. Versus Commissioner of Service Tax, Bangalore [2007 (7) STR 214 (Tri.-Bang)]:
“Judicial discipline - Commissioner cannot take a different view than one already expressed by Tribunal in an identical situation. [para 2]”
Ø Advance Lamp Components (P) Ltd. vs Commissioner of C.Ex., Allahabad [2001 (129) ELT 78 (Tri.-Del)]:
“Precedent - Principles of Judicial Discipline - Order passed by Commissioner (Appeals) contrary to principles laid down by Tribunal in another case - Commissioner (Appeals) not competent to ‘disagree’ with Tribunal and pass a contrary order. - A perusal of the impugned order makes it clear that the order passed by the Commissioner is contrary to the principles laid down in the Tribunal’s decision in Bengal Safety Industries case. An order of the Tribunal is binding on all authorities subordinate to its appellate jurisdiction. It was not open to the Commissioner to ‘disagree’ with the Tribunal and pass an order contrary to a binding order of the Tribunal.[1997 (92)E.L.T. 8 (Tribunal) relied on]. [paras 5, 6]”
In light of the aforesaid decisions, the assessee contended an order ought to be passed keeping in mind the judicial discipline and so the impugned order not conforming to the same is liable to be quashed and appeal should be allowed.

Reasoning of judgment:-:-After hearing both the sides, the CESTAT found that the Department held the view that the charges collected for letting out rooms for accommodating guests has to be added in the gross value for the purpose of service tax liability under “Mandap Keeper services”. The only reason given by the Department was that the person who hired the Mandap/ garden area had also booked some rooms for accommodating the guests. The CESTAT found the reasons adopted by the lower authorities were without legal basis. The Tribunal examined similar set of facts and held that such room charges for letting out the rooms in the hotel cannot be considered in “Mandap keeper service” for service tax liability. The Tribunal made reference to the decision of the Tribunal in case of Rambagh Palace Hotels Pvt ltd v/s Commisioner of central Excise, Jaipur, 2013(31) S.T.R 480 (Tri. – Del).
Further, the Tribunal observed that they, in the case ofMerwara Estates V. C.C.E., Jaipur reported in 2009 (16) S.T.R. 268(Tri.-Del.) had held that renting of hotel rooms cannot be held to be covered by the definition of ‘Mandap Keeper’ in as much as the hotel had an identity, personality and function quite distinguishable from that of a mandap. The Tribunal found that the activity of giving hotel rooms to the customers, who might organize function in the hotel, was an activity entirely different from the mandap keeper activity. The definition of Mandap Keeper nowhere covered the temporary occupation of hotel rooms or the purpose of boarding temporary residence. It was no dispute that no function was held in the hotel room which was used for the purpose of staying in the same. As such, the Tribunal was of the view that the order of the lower authorities holding inclusion of the hotel rooms rent into the value of Mandap keeper service was not sustainable and the same was accordingly set aside and the appeal was allowed with consequential relief to the appellant. The appeal along with cross objections of revenue were dismissed.

Decision: - Appeal allowed

Conclusion:- The gist of the case is that the rooms given on rent to the guests attending wedding in the hotel cannot be bundled with Mandap keeper service. There were several services provided by the hoteliers to the guests and all of them are to be considered separate and have to be taxed accordingly. Therefore the service of giving room on rent and Mandap keeper services are two completely different set of services and have no nexus whatsoever to each other. The tribunal following ratio of cases like Rambagh Palace Hotels Pvt ltd v/s Commisioner of central Excise, Jaipur, 2013(31) S.T.R 480 (Tri. – Del) and Merwara Estates V. C.C.E., Jaipur reported in 2009 (16) S.T.R. 268(Tri.-Del.) concluded that the renting of hotel rooms cannot be bought into the definition of Mandap and hence can never be clubbed with Mandap keeper service.

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PJ/CaseStudy/2016-17/118
03 June 2017

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PJ/CaseStudy/2016-17/118 03 June 2017

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PJ/CaseStudy/2016-17/118
03 June 2017