Case Details: Commissioner of Service Tax, Delhi Versus ITC Ltd. (2025) 30 Centax 333 (Tri.-Del)
Judiciary and Counsel Details
- Justice Dilip Gupta, President & Shri P.V. Subba Rao, Member (T)
- Shri Tarun Gulati, Senior Adv. & Ms Mallika Joshi, Adv., for the Appellant.
- Ms Jaya Kumari, Authorised Representative, for the Respondent.
Facts of the Case
The appellant, ITC Limited, contested a demand of service tax under the category of Business Auxiliary Services (BAS) concerning payments made under the Starwood Preferred Guests Program (SPGP) and Frequent Flyer Program (FFP). The facts reveals that member-guests earn points on specified expenditures during hotel stays at ITC or other member hotels, which can be redeemed for free stays, airline travel, or merchandise. Member hotels remit 5% of the amount spent by guests to ITC for administering the programs, which ITC then compensates to hotels or airlines where the points are redeemed. ITC submitted that such payments are purely compensatory to meet expenditure and do not constitute any service, promotion, or marketing rendered by ITC.
Further, ITC contended that guests independently choose member hotels and ITC does not influence their choice, thereby negating the element of service. The appellant relied upon Sections 65(19) and 73 of the Finance Act, 1994, and emphasised that there is no ‘taxable value’ involved. The matter was adjudicated before the Delhi CESTAT.
CESTAT Held
The Hon’ble Delhi CESTAT held that payments under SPGP and FFP are not taxable as Business Auxiliary Services since ITC does not render any service, promotion, or marketing in the programs. The Tribunal observed that the payments are merely to compensate member hotels and airlines for benefits availed by guests and that no recommendation or inducement by ITC influences the guests’ hotel choice. It further noted the absence of any ‘taxable value’ in these transactions, thus negating the levy of service tax under the provisions of the Finance Act, 1994. The Department of Revenue was accordingly directed to drop the demand.
List of Cases Cited
- Aircell Digilink India Ltd. v. Commissioner — 2006 (3) S.T.R. 386 (Tribunal) — Inapplicable [Paras 43, 70]
- Andhra Pradesh State Electricity Board v. Collector — 1984 (16) E.L.T. 579 (Tribunal) — Inapplicable [Paras 43, 69]
- Balaji Enterprises v. Commissioner — 2020 (33) G.S.T.L. 97 (Tribunal) — Relied [Para 29]
- Bharat Hotels Limited v. Commissioner — 2018 (12) G.S.T.L. 368 (Del.) — Relied [Para 52]
- Bharti Cellular Ltd. v. Commissioner — 2006 (3) S.T.R. 423 (Tribunal) — Relied [Paras 43, 71]
- Commissioner v. ITC Ltd. — Service Tax Appeal No. 51447/2014, dated 14-3-2018 by CESTAT, New Delhi — Relied [Paras 34, 36]
- Commissioner v. Reliance Industries Ltd. — 2023 (385) E.L.T. 481 (S.C.) = (2023) 8 Centax 96 (S.C.) — Relied [Para 57]
- Commissioner v. Sunshine Steel Industries — 2023 (385) E.L.T. 826 (S.C.) = (2023) 8 Centax 210 (S.C.) — Relied [Para 64]
- GD Goenka Pvt. Ltd. v. Commissioner — (2023) 11 Centax 2 (Tri. – Del.) — Relied [Para 61]
- India Glycols Ltd. v. Commissioner — Excise Appeal No. 52129/2019, dated 20-8-2024 by CESTAT, New Delhi — Relied [Para 62]
- Mahanagar Telephone Nigam Ltd. v. Union of India — 2023 (73) G.S.T.L. 310 (Del.) = (2023) 5 Centax 279 (Del.) — Relied [Paras 53, 66, 70]
- Mallur Siddeswara Spinning Mills Pvt. Ltd. v. Commissioner — 2004 (166) E.L.T. 154 (S.C.) — Inapplicable [Paras 43, 68]
- Pushpam Pharmaceuticals Company v. Collector — 1995 (78) E.L.T. 401 (S.C.) — Relied [Paras 50, 51]
- Raydean Industries v. Commissioner — Excise Appeal No. 52480/2019, dated 19-12-2022 by CESTAT, New Delhi — Relied [Para 60]
- Sunshine Steel Industries v. Commissioner — (2023) 8 Centax 209 (Tri. – Del.) — Relied [Para 63]
