Superstar Rajinikanth Wins Appeal: CESTAT Rules Renting of Raghavendra Mandapam for Hotel Use Not Liable to Service Tax [Read Order]

The Chennai Bench of the Customs, Excise and Service Tax Appellate Tribunal(CESTAT) allowed the appeal filed by Superstar Rajinikanth and held that renting of Raghavendra Mandapam for running a hotel is not liable to service tax under the Finance Act, 1994.

R. Rajinikanth, the appellant owns a multi-storey building called Raghavendra Mandapam in Chennai. The property was leased to Vasantha Bhavan Hotels India Pvt. Ltd. to run a hotel. The department alleged that the appellant had not paid service tax on renting of immovable property used for commercial purposes and issued show cause notices demanding service tax with interest and penalties for the period from June 2007 to June 2012.

The adjudicating authority confirmed the demand and imposed penalties. On appeal, the Commissioner (Appeals) upheld the demand but set aside the penalty under Section 77. Aggrieved by the order, the appellant filed appeal before the CESTAT.

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The appellant’s counsel argued that the building was leased for running a hotel and buildings used for accommodation including hotels are excluded from service tax under Section 65(105)(zzzz) of the Finance Act, 1994. The counsel also argued that the authorities wrongly applied Explanation 2 and pointed out that earlier tribunal decisions had already interpreted the provision in favour of assessees.

The revenue argued that the premises were also used for facilities like restaurant, banquet hall, conference hall, bar and health club. According to the department, this means the property was used for business or commerce and service tax would apply.

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The two-member bench comprising M. Ajit Kumar (Technical Member) and Ajayan T.V. (Judicial Member) examined the issue. The tribunal observed that hotels normally provide facilities like restaurant, banquet hall, conference hall and health club, and these are part of hotel operations. The tribunal explained that these facilities are mainly for hotel guests and do not change the nature of the building.

The tribunal pointed out that the building continued to be used as a hotel and falls within the exclusion provided for buildings used for accommodation including hotels. The tribunal set aside the impugned orders and allowed the appeal with consequential relief.

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