JUSTICE (R) ABDUL MAJID TIWANA, CHAIRMAN.--(1). This appeal arises out of the Order-in- Original, dated 04.09.2000, by which the Collector, Faisalabad camp at Multan, directed M/s. Holiday Inn, Multan, the appellant herein, to pay central excise duty for the period from July, 1996 to July, 1997 on the rooms of the hotel in self-use of its General Manager and instructed his department to recalculate the demand and effect recovery keeping in view tariff rate applicable at the relevant time. He further observed that if during the relevant period those rooms were rented out and central excise duty had been paid by the appellant, the amount should be deducted from the liability so worked out.
2. Regarding the liability for the period from March, 1995 to June, 1996, be held that the demand fell under rule 10(1) of the 1944 Rules, and was time-barred on account of inadvertence or misconstruction. He did not impose any liability of additional duty under section 3-B of the Act as he did not find any deliberate attempt of evasion of duty on the part of assessee.
3. On 18.06.1997 the Staff of Central Excise inspected the record of the appellant and found 3 rooms of the hotel (121, 123 & 125) in the self-use of its Management since the very beginning. In the contravention report drawn up by them, they assessed the demand of Rs. 11,08,170/- and in the show cause notice, dated 28.06.1997, this amount was demanded as arrears of central excise duty.
4. The appellant contested the show cause notice inter alia on the ground that:-
(a) till March, 1995, there was no General Manager of the hotel and the question of his self-use of the three rooms since Sept. 1994 did not arise;
(b) the hotel was under construction and to look after construction work and other business the General Manager was stationed therein in 1995 and during initial period 50% of the rooms were lying vacant;
(c) two rooms, which were allegedly in the self-use of the General Manager, were in fact being used as office as then the Admn. Block was under construction;
(d) at the time of surprise visit of Central Excise Staff headed by their Deputy Superintendent, three rooms in question were actually lying vacant;
(e) the rooms used for the official purpose by the hotel Management are not liable to the c.e.d. As lettable or for sale;
(f) the appellant had, vide letter, dated 10.5.1995, duly informed the Department that room No. 121, 123 and 125 had permanently been converted into an apartment for the General Manager and his family and a change of status was requested which the Department impliedly accepted, as they did not raise any objection; and
(g) the show cause notice was time-barred under rule 10(1) of the Central Excise Rules, 1944 and no amount .Of duty can be recovered after the limitation has intervened.
5. During the course of hearing before the adjudicating officer, the learned counsel for the Hotel seems to have reiterated the above points.
6. The prosecution represented by the Deputy Superintendent, who had drawn up the contravention report, supported the charges and in support of the contention that the hotel room in self-use or occupation of the Management are liable to central excise duty, he quoted PTCL 1989 CL. 322.
7. The learned Collector, relying on the above decision, held that even the hotel rooms in the self- use of its Management are excisable services and subject to c.e.d. He, however, appreciated the stance of the appellant that rate of room rent goes on fluctuating and the prosecution should not have applied the rate of rent of July 1997 w.e.f. 1995. Ultimately, he passed the impugned order and his findings have already been mentioned in the opening paragraphs of this judgment. Aggrieved by it, the appellant came up in appeal to this Tribunal.
8. The learned counsel for the appellant, during the course of argument, has almost reiterated the contentions raised in paragraph 4 and has also placed on the record a writing apparently written and signed by the Controller Finance, Pearl Continental Hotel, Peshawar, in support of his contention that a few rooms in the hotel are reserved for its General Manager's residence termed as 'G.M's apartment' and the same are not included in count of rooms available for rent or sale and all calculations of taxes are made accordingly. He submits that this is general practice prevalent in all big hotels like the appellant that those rooms, which constitute part of its Administration Block are never included for the levy of central excise duty. With reference to Rule 96-W(l) of the 1944 Rules, he argues that under this rule the Hotel Management has to submit to the proper officer of the Central Excise Department a plan of the premises and fittings intended to be used for providing or rendering excisable services along with the list of rate of services. This plan, according to the learned counsel, can be modified, altered or added to after giving to the proper officer of the Central Excise Department seven days notice, specifying the manner in which the plan is intended to be modified, altered or added. He contends that though it has not been specifically spelled out in this sub-rule the purpose of submitting plan to the Central Excise Authorities but it obviously aims at supplying the details of different parts of the hotel, including the administration block, kitchen, laundry etc. Besides the lettable rooms and his client had done so initially when the hotel had been completed about 4/5 years ago, clearly indicating therein the administration block, kitchen and laundry etc. Part from the lettable rooms and since three rooms in question at that time were provisionally being used by the General Manager, they constituted his apartment in the hotel and those were not lettable or saleable to the customers and no excise duty was chargeable thereon.
9. On the other hand, it has been argued on behalf of the respondent with reference to section 4(3) of the Central Excise Act, 1944 read with rule 96-W(l) coupled with the aforesaid ruling of the Judicial Member of Board of Revenue that the law on the subject did not make any distinction between the rooms of the hotel reserved for the self-use of the General Manager and the rooms meant for rent or sale to the customers and the impugned order was unexceptionable.
10. No doubt, that section 4(3) of the Central Excise Act, 1944, makes no distinction between the rooms in a hotel meant for self-use of the General Manager or any other person of the Management and the rooms used by the customers and even if the General Manager is occupying certain rooms without payment of rent thereof, the Department is entitled to charge central excise duty thereon as the same are also excisable like other rooms. But rule 96-W(l) enjoins the Management to submit a plan of the hotel to the Central Excise Department and keep them informed in tum whenever any change or alternation is made therein. While so doing, the Management obviously must be indicating in the plan, the location of administration block, reception, kitchens, laundry etc. Beside the saleable or lettable rooms thereof. In this situation, the portion of the hotel building used as administration block, kitchen, laundry etc. Must not have been chargeable to central excise duty and only the saleable or lettable rooms must be chargeable to the duty. If in a hotel, there is no separate apartment provided for the self-use of the General Manager, then he must be using a few saleable or lettable rooms for this purpose and a certificate issued by the Pearl-Continental Hotel, Peshawar, indicates the practice.
11. In the case in hand, it seems that during the relevant period when the hotel was under construction and by that time a separate apartment for its General Manager had not been constructed, he was occupying two or three rooms from the lettable or saleable rooms for self-use and if these rooms had been so indicated in the plan or declared by the Management to the Central Excise Department, which they assert they had, then those three rooms were not subject to the payment of duty. This is what we have gathered from the tenor of rule 96-W(l) though it is not so clearly provided therein.
12. The view that we have taken above, finds support from the decision of Writ Petition No. 5463 of 1988 (Avari Hotel, Lahore Vs. Government of Pakistan) which in tum was based on the dictum of Writ Petition No. 1021 of 1978. In these authorities it was held that no excise duty was payable for the accommodation which was occupied by the Management itself because no services were being provided by the hotel to its own employees who were pan of the Management itself.
13. In view of the above, the appeal is accepted and the impugned order is set aside.