The Delhi Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) upheld the Rs. 3.44 crore service tax demand related to the hotel’s marketing and promotional activities.
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M/s VCI Hospitality Ltd., the appellant/assessee, was registered with the Service Tax Department. The company signed a contract with World Resort Ltd. (WRL), Bangalore, to conduct promotional activities for the marketing and sales of Golden Palm Hotel & Spa. These activities include placing ads in magazines, television channels, and daily newspapers, putting up hoardings, hiring a telephone company, and educating the public about the hotel’s facilities and amenities, among other things.
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The Department sent the appellant a show-cause notice because it was claimed that the appellant was rendering taxable services. The appellant did not show up for the Commissioner’s in-person hearing or submit a response to the notice. As a result, the order that is the subject of this appeal was issued. Despite the subject being listed ten times, no one showed up for the Tribunal’s hearing. As a result, we base our decision on the arguments presented in support of the appeal.
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The appellant argued that the department bears the burden of proof for any service tax demand and confirmation. As a result, the department must determine the type of services rendered by the appellant, the service recipient, and the amount of money received in exchange.
The two-member bench of Hemambika R. Priya (technical member) and Binu Tamta (judicial member) has noted that the promotional activities for the marketing and sales of Golden Palm Hotel & Spa, which included placing hoardings, contracting and reaching people over the phone, informing the public of the hotel’s amenities, and inserting advertisements in daily newspapers, magazines, and television channels, are not covered by Section 66D of the Finance Act or any exemption notification.
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The tribunal ruled that on July 1, 2003, the Finance Act of 2003 made business auxiliary activities pertaining to marketing, advertising, and customer support taxed under “business auxiliary services.” The Finance Acts of 2004 and 2005 expanded the range of activities that fall under the category of business auxiliary services. These activities included nearly all services related to obtaining inputs for the client, producing or processing goods (that do not constitute manufacturing) for and on behalf of the client, and providing a service on behalf of the client. These activities were then subject to taxation under this classification.
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