Hotel chain evaded service tax by under invoicing

Cambay Hotels and Resorts have not paid service tax.

Assessing the books of accounts of the last five years, the service tax department has found that the group — promoted by former bureaucrat Sanjay Gupta promoted Neesa Leisure Limited (NLL) — had not paid any duty for an income of Rs60 crore which means it is liable to pay Rs3.40 crore as service tax.

Highly placed sources in the service tax department have claimed that the group was found guilty of not paying service tax by under-invoicing stay at its hotels and resorts.
The department had raided the NLL premises this May and seized books of accounts and other records for five years between 2007 and 2012.

“Investigation revealed that taking advantage of one of the rules, the company was raising invoices of Rs999 for visitors instead of the declared tariff of Rs3,500 to Rs16,500 amounting to tax evasion. Also, a batch of 50 people was given same rooms three times in 24 hours,” said a senior official of the department.

Tax is calculated on the difference between invoice amount and declared tariff. “Total difference of under-invoicing is Rs60 crore so far which may go up as assessment is still on,” the official said.

Gupta is currently director and executive chairman of Metro-Link Express for Gandhinagar and Ahmedabad (MEGA) Company to facilitate the Ahmedabad-Gandhingar Metro rail project.

“The group is using its sister concerns to cater to its hospitality business. Service tax charged on the group company is claimed as Cenvat credit (input tax credit) but not deposited with the exchequer,” the official further stated.

“The company has paid Rs1.25 crore in tax liability as well as reduced its claims for Cenvat credit by Rs3.50 crore. However, this is not the final assessment as we are still checking the records,” he added.

New service tax rules
With effect from February 2009, service tax is levied for short-term accommodation in hotels, guesthouses, resorts and other places where the declared tariff is Rs1,000 or more. The declared tariff has been defined within the notification as charges for all amenities provided in the unit of accommodation. Thus, it will include the cost of all electronic gadgets installed in the room and any other facility normally provided by a hotel as part of the stay.