Accommodation or guest house facility will not form part of infrastructural support services and cannot be treated as provision of BSS and cannot be subjected to service tax under section 65(105) (zzzzw) of the Finance Act
M/s Anand Automotive Ltd. vs Commissioner, Service Tax, Delhi; Service Tax Appeal No. 58840 of 2013; CESTAT; New Delhi; 16.09.2021
- The appellant is engaged in the field of manufacture and sale of automotive parts. The appellant provided consultancy service exclusively to its group companies only and received professional fees, internal audit fees and training fees from its group companies in relation to consultancy services. Appellant had paid service tax on the said amount received under the category of ‘management consultancy service’.
- The appellant also maintains transit house/ guest houses situated at various locations for the purpose of providing accommodation to the employees of its group companies visiting the said places on official visit. The income generated through rent received in relation to the said transit houses was booked by the appellant under the head of ‘transit house income’.
- As part of the Anand Group’s policy decision, the employees of the group companies also got transferred to other group companies. In spite of this inter-company transfer of personnel, they continued to remain on the rolls of the company where they were recruited. However, their salary and all other remuneration were paid by the company they were working for and the same was routed through the appellant.
- A show cause notice dated April 20, 2011 was issued to the appellant for the period from May 01, 2006 to September 30, 2010. The Commissioner confirmed the demand of Rs.3,56,56,891/- towards service tax and Rs.3,53,483/- towards CENVAT credit. Thus, a demand of Rs.3,60,10,374/- was confirmed with penalty under sections 77 and 78 of the Finance Act 1994.
Observations and findings:
I. Service tax under BSS on the transit house income
- The provision of housing facility on short-term basis is specifically covered under “short-term accommodation services”, which has been subjected to service tax w.e.f. May 01, 2011 under section 65(105) (zzzzw) of the Finance Act. As this service is a new entry and has not been carved out from any other existing service, it cannot be included under any other category, including BSS, prior to May 01, 2011.
- This is what was held by Bombay High Court in Indian National Shipowners’ Association. The Bombay High Court observed that introduction of a new entry and inclusion of certain services in that entry would pre-suppose that there was no earlier entry covering the said services. It was also observed that creation of the new entry was not by way of amending the earlier entry and it was not carved out of any earlier entry.
- Even otherwise, accommodation or guest house facility does not form part of infrastructural service and, therefore, cannot be treated as provision of BSS. This follows from the definition of BSS in section 65 (104c) of the Finance Act and the Explanation contained therein. BSS means service provided in relation to business and commerce and includes, amongst others, infrastructural support services.
- Services under the Explanation includes providing office along with office utilities, lounge, reception with competent personnel to handle messages, secretarial services, internet and telecom facilities, pantry and security.
- Thus, infrastructural support services includes only the service specified in the Explanation, which essentially includes setting up office spaces. Thus, accommodation or guest house facility will not form part of infrastructural support services and cannot be treated as provision of BSS.
- Thus, for the reasons stated above, the Commissioner was not justified in confirming the demand on the amount received for transit house under the category of BSS.
II. Manpower supply services
- The impugned order has confirmed the demand of service tax against the appellant under the category of ‘manpower recruitment and supply agency service’ on the ground that the appellant was supplying manpower to its group companies.
- The appellant only deputes its employees to the group companies. In such cases, the group companies reimburse the salary of the employees to the appellant during the tenure of the deployment and so it cannot be said that the appellant is supplying any manpower as the appellant is not ‘engaged’ in rendering services of supply of manpower.
- In Lowe’s Services India, the Tribunal observed that in order to classify any service under the manpower recruitment or supply agency service the following conditions need to be satisfied:
i. The agency must be any person
ii. It must be engaged in providing a specified service
iii. The specified service is recruitment or supply of manpower
iv. The service can be provided “temporarily or otherwise”
v. The service may be provided directly or indirectly
vi. The service may be provided in any manner
vii. The service must be provided to any other person
After relying upon the earlier decisions of the Tribunal and the High Court, the Tribunal in Lowe’s Services India set aside the demand raised by the Department under the category of manpower recruitment.
- In view of the factual position stated above and the decisions referred to above, it has to be held that the appellant is not engaged in rendering supply of manpower service
The impugned order dated April 18, 2013 passed by the Commissioner, except to the extent it has confirmed the demand of CENVAT credit for the months of April 2006 to April 2008, cannot be sustained and was set aside.
So far as the confirmation of demand of CENVAT credit for the months April 2006 to April 2008 was concerned, the Commissioner was directed to reexamine the matter in the light of the observations made above.