Pranav B Prem

The Delhi Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT), comprising Judicial Member Binu Tamta and Technical Member Hemambika R. Priya, has upheld a service tax demand of ₹3.44 crore against M/s VCI Hospitality Limited in connection with promotional and marketing activities carried out for Golden Palm Hotel & Spa. The Tribunal held that the services rendered by the appellant fell squarely under the taxable category of “Business Auxiliary Services,” making them liable for service tax under Section 66B of the Finance Act, 1994.

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M/s VCI Hospitality Limited had entered into an agreement with M/s World Resort Ltd. (WRL), Bangalore, to undertake promotional activities including advertisements in print and television media, hoardings, and telephonic outreach to market the facilities and amenities of the hotel. These activities, as per the Tribunal, clearly involved promotion and customer outreach functions directly related to the hotel’s commercial interests.

The appellant was registered with the Service Tax Department and was issued a show cause notice dated 27.12.2016 by the Department, demanding service tax of ₹3,44,30,427 for the period 2011–12 to 2014–15. The notice also proposed interest and penalties under various provisions of the Finance Act. However, the appellant neither filed a reply to the show cause notice nor appeared for a personal hearing before the adjudicating authority. The Commissioner, Central Tax, Delhi West Commissionerate, proceeded ex parte and confirmed the demand, interest, and penalties. The appellant later challenged this decision before the Tribunal.

Despite the matter being listed multiple times, no one appeared on behalf of the appellant during the proceedings before the Tribunal. The Tribunal therefore proceeded to decide the appeal based on the written submissions in the appeal memo.

The appellant contended that they were not liable for service tax as they were not engaged in procuring goods or services on behalf of the client, nor did they act as agents. It was further argued that promotional services offered to the hotel were not taxable under the Finance Act and that the burden to prove taxability rested with the Department. They also challenged the estimation for the financial year 2014–15, stating there was no rational basis for increasing turnover by 25% compared to the previous year. Additionally, they asserted that since no suppression or misdeclaration had occurred, no penalties or interest should have been imposed.

Rejecting these arguments, the Tribunal examined the nature of services provided and held that promotional and marketing services were squarely covered under the scope of “Business Auxiliary Services,” as clarified through successive amendments to the Finance Act from 2003 onward. These services, being neither exempted nor covered under the negative list in Section 66D, were found to be taxable under Section 66B of the Finance Act, 1994.

Regarding the use of the Best Judgment Assessment method by the Department for the financial year 2014–15, the Tribunal noted that the appellant had failed to submit its balance sheet for the relevant year. The Department, therefore, had no option but to invoke Section 72 of the Finance Act. Citing the Delhi High Court’s decision in National Building Construction Company Ltd. v. Union of India [2019(20) G.S.T.L. 515(Del.)], the Tribunal emphasized that best judgment assessments are permissible when records are unavailable, provided they are based on fair estimation.

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Similarly, the Tribunal referred to its own ruling in Fort Health Club v. Commissioner of Central Excise, Cochin [2010 (17) S.T.R. 154 (Tri. - Bang.)], reiterating that the onus lay on the appellant to furnish accurate records, which they failed to do. Finding no merit in the grounds raised by the appellant and no procedural lapses in the Department’s assessment or adjudication process, the Tribunal dismissed the appeal and upheld the demand of ₹3.44 crore along with applicable interest and penalties.

Appearance

Present for the Appellant: None

Present for the Respondent: Shri Anand Narayan, Authorised Representative

Cause Title: M/s. VCI Hospitality Limited V. Commissioner of Central Tax

Case No: Service Tax Appeal No.51850 Of 2018

Coram: Hon'ble Ms. Binu Tamta [Member (Judicial)], Hon'ble Ms. Hemambika R. Priya [Member (Technical)]

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