Services To Marriott Hotel In Hong Kong Are 'Export Of Services': CESTAT Mumbai Sets Aside Service Tax Demand

The Customs, Excise & Service Tax Appellate Tribunal (CESTAT), Mumbai has held that services rendered by Marriott Hotels India Pvt. Ltd. to its overseas group entity Marriott Hong Kong qualify as export of services, and therefore cannot be subjected to service tax under the Finance Act, 1994. A Division Bench of Member (Judicial) S.K. Mohanty and Member (Technical) M.M. Parthiban allowed three connected appeals filed by Marriott India, and set aside the entire service tax demand, penalties, and interest confirmed by the Commissioner through Order-in-Original. The case in hand relates to the issue whether the services provided by Marriott Hotels India Pvt. Ltd. to its overseas group entity, Marriott Hong Kong, could be taxed in India or were liable to be treated as export of services under the Export of Services Rules, 2005. Rule 3 of the Export of Services Rules, 2005 relates to conditions for a service to qualify as “export of service.” The assessee argued that the contractual recipient was Marriott Hong Kong, all payments were received in foreign exchange, and the service business development, marketing and regional support were rendered solely for the foreign entity. Employee remuneration could not be added to taxable value, and reimbursements were mere cost allocations. The Revenue maintained that the services were effectively used by Marriott-branded hotels in India, the agreements were structured to avoid tax, and the value should include salaries and reimbursements. The CESTAT rejected the Revenue's stand holding that the export status depends on the location of the service recipient, not where the benefit arises. In view of the above, Tribunal allowed all the appeals setting aside the entire service tax demand, interest and penalties, holding that the Commissioner's reasoning “does not withstand legal scrutiny.” Case Title: Paul Foskey Vs. Commissioner of Service Tax-V Case No: Service Tax Appeal No. 85569 of 2016 Appearance for Appellant: Shri V. Sridharan along with S/Shri Vinay Jain, Shyam Mangokia Appearance for Respondent: Shri Shashank Kumar Yadav Click Here To Read/Download Order

Services To Marriott Hotel In Hong Kong Are 'Export Of Services': CESTAT Mumbai Sets Aside Service Tax Demand

Rajnandini Dutta

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