CESTAT Allows 100% Cenvat Credit on Management Consultancy Services Availed by Rambagh Palace Hotel from IHCL
Pranav B Prem
In a significant ruling, the Delhi Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has held that M/s Rambagh Palace Hotel Pvt. Ltd. is entitled to avail 100% Cenvat credit on management consultancy services under Rule 6(5) of the Cenvat Credit Rules, 2004. The bench comprising Dr. Rachna Gupta (Judicial Member) and Mrs. Hemambika R. Priya (Technical Member) allowed the appeal by setting aside the demand raised by the Revenue on the classification and utilisation of input services.
The appellant, engaged in providing a range of taxable services such as Mandap Keeper, Internet Café, Outdoor Catering, Health Club & Fitness Service, Dry Cleaning, Banking & Financial Services, Renting of Immovable Property, Business Auxiliary Services, Transport of Goods by Road, and Tour Operator Services, had availed Cenvat credit on various input services used in providing these outputs. A major portion of this credit pertained to operation and management services provided by Indian Hotels Company Limited (IHCL), Taj Mahal Hotel, Mumbai.
The Revenue contended that the services provided by IHCL, being comprehensive in nature and covering running, maintenance, and promotion of the hotel, could not be categorized as “Management or Business Consultancy” services. Instead, it was argued that they should be treated as “Business Auxiliary Services” or “Business Support Services,” which do not fall under the exempted categories eligible for 100% Cenvat credit under Rule 6(5). Accordingly, the Department claimed that the appellant was not entitled to 100% credit and should have complied with the reversal requirements under Rule 6(3)(ii), given that the services were used for both taxable and exempted outputs.
Two Show Cause Notices were issued to the appellant covering different periods, alleging wrongful availing of Cenvat credit amounting to ₹1,50,46,840/- and ₹39,19,748/- respectively, along with interest and penalties. These demands were initially confirmed in the Order-in-Original dated 04.02.2022, and the appeals thereagainst were dismissed by the Commissioner (Appeals), vide a common order dated 13.06.2023.
Before the Tribunal, the appellant argued that the services rendered by IHCL were in the nature of management consultancy, clearly falling within the scope of Rule 6(5) of the Cenvat Credit Rules, 2004, which permits 100% credit on specified services irrespective of their use in taxable or exempted output services. It was pointed out that the relevant period for the dispute was prior to the omission of sub-rule (5) of Rule 6 by Notification No. 3/2011 dated 01.03.2011, which came into effect only from 01.04.2011. Thus, for the period under dispute (October 2006 to March 2011), the benefit under Rule 6(5) remained available.
The Tribunal accepted the appellant’s contentions, noting that the classification of services had not been disputed earlier and was consistently accepted as “Management Consultancy Services.” The Tribunal further observed that the provisions of Rule 6(5) were clear in allowing 100% credit for such services even when partly used in exempted services. It held that the authorities had erred in denying credit by applying the amended provisions retroactively and by misclassifying the nature of services.
The Tribunal emphasized that the issue stood settled by earlier CESTAT rulings and decisions of the Supreme Court in cases involving other Taj Group hotels, including Commissioner v. Piem Hotels Ltd [2019 (29) GSTL J 78 (S.C.)], Indian Hotels Co. Ltd [2018 (17) G.STL J111 (SC)], Taj GVK Hotels & Resorts [2018 (18) GSTL J124 (SC)], and Newlight Hotels & Resorts Ltd [2016 (44) STR J142 (SC)], all of which upheld the eligibility of 100% Cenvat credit on management consultancy services under Rule 6(5).
In light of these precedents and the fact that the disputed period fell entirely within the time when Rule 6(5) was operative, the Tribunal concluded that the confirmation of demand by the lower authorities was legally unsustainable. It therefore allowed the appeal and set aside the impugned order.
The CESTAT allowed the appeal filed by M/s Rambagh Palace Hotel Pvt. Ltd., setting aside the demand for reversal of Cenvat credit. It held that the appellant was entitled to 100% Cenvat credit on management consultancy services availed from IHCL, as covered under Rule 6(5) of the Cenvat Credit Rules, 2004, for the relevant period prior to 01.04.2011.
Appearance
Mr. Sanjiv Agarwal, Chartered Accountant for the appellant
Mr. Aejaz Ahmad, Authorized Representative for the Respondent
Cause Title: M/s. Rambagh Palace Hotel Pvt. Ltd. V. Principal Commissioner of CGST & Central Excise – Jaipur
Case No: Service Tax Appeal No. 55455 OF 2023
Coram: Dr. Rachna Gupta [Judicial Member], Hemambika R. Priya [Technical Member]
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