Tourists vehicle having tourist permit are leviable to service tax under Tour Operator Service.

Case:-CHOUDHARY YATRA CO. PVT. LTD. VERSUS COMMISSIONER OF C. EX., NASHIK

Citation:-2013(29) S.T.R. 240(Tri.-Mumbai)

Brief Facts:-The appellants are in appeal against the impugned order confirming the service tax demand of Rs. 1,03,65,342/- along with interest and equivalent amount of penalty imposed under Section 78 of the Finance Act, 1994 and Rs. 1,000/- under Section 77 of the Finance Act, under the category of “tour operators service”.
The facts of the case are that the appellants are providing following services against the remuneration received by them:
(a)    Bus Reservation Agreement (BRA). Under this category they supply ordinary buses (not tourist vehicles) to other tour operators as well as commercial or non-commercial concerns on rent basis.
(b)    Seat Reservation Agreement (SRA)
(c)    Nashik Darshan (ND)
(d)    Tour Extension (TE)

The department is of the view that the activity undertaken by the appellant is covered under the category of tour operators service, which is liable to service tax with effect from 1-9-1997 and the appellant has not paid the service tax under the category on their activity. Therefore, a show-cause notice was issued on 16-10-2006 demanding service tax for the period 1-4-2001 to 31-3-2006 under the category of BRA and from 1-4-2001 to 9-9-2004 under SRA, ND &TE. The said show-cause notice was adjudicated and the impugned demands by way of adjudication have been confirmed against the appellants. Aggrieved by the said order, the appellant is before the Tribunal.

Appellant Contentions:-The appellant submits that as the appellants are having their offices in all over Maharashtra, therefore, they were issued show-cause notice from the various divisions to tax the above activity under the category of tour operators. Initially, the appellant took registration and paid the service tax also, but in some of the cases either the show-cause notices were dropped or it was held by the Commissioner (Appeals) that the activity undertaken by the appellant does not fall under the category of tour operators service and the amount of service tax paid by the appellant was refunded. The definition of tour operators was amended with effect from 10-9-2004 thereafter the appellants are paying service tax on the activity of Seat Reservation Agreement (SRA), Nashik Darshan (ND) and Tour Extension (TE), which is not in dispute. He further submits that the activity of Bus Reservation Agreement does not fall under the category of tour operators as the same does not qualify the definition of tour operators because the appellants are not providing tours to their customers/clients in tourist buses. As per the definition of tour operator, the tour is to be provided in a tourist buses covered by a permit. He further submits that it is not disputed that buses played by them are not tourist buses as the same has been admitted by the adjudicating authority in the impugned order. He further submits that moreover this bus reservation agreement, the buses were provided on rent to the tour operators mainly to ITDC. The ITDC being a “tour operators” have discharged the service tax liability in the same activity. A small remuneration has been received from other customers viz., commercial concerned/schools, where they have not paid the service tax as they are not providing any tour to their clients. Moreover, their activity is more specifically covered under the category of “rent-a-cab scheme operator” and that they are also paying service tax under rent-a-cab scheme operator service with effect from 1-6-2007.Therefore, the impugned order is liable to be set aside. In support of his contention he relied on the decision of Secretary Federation of Bus-Operators Association of Tamil-Nadu v. UOI, reported in 2006 (2)S.T.R. 411 (Mad.) = 2001 (134)E.L.T. 618 (Mad.), Indian National Shipowners Association v. UOI, reported in 2009 (14)S.T.R. 289 (Bom.), Creative Marine Services v. CCE, Mumbai, reported in 2011 (24)S.T.R. 557 (Tri.-Mumbai) and Sri Pandyan Travels v. CCE, reported in 2006 (3)S.T.R. 151 (Mad.) = 2004 (163)E.L.T. 409 (Mad.). It is further argued that the show-cause notice has been issued by invoking extended period of limitation, as the issue of liability of service tax under the category of tour operator is doubtful, therefore, the demands for extended period is not sustainable. Consequently, the penalties are also not sustainable.

Respondent Contentions:-On the other hand, the ld. AR for the revenue opposed the contentions raised by the ld. Advocate and submits that in this case the appellants are operating tour into a contract carriage bus and they are liable to pay service tax as held by the adjudicating authority. Moreover, in the case of Pandyan Travels (supra) the Hon’ble High Court of Madras has held that if the tour is operated under the contract carriage bus is also covered under tour operator services. Therefore, they are liable to pay service tax. He further argued that the ld. Counsel has contended that 10-9-2004 onwards on the activity of BRA, ITDC is discharging service tax liability under the category of tour operators but for other clients, namely, commercial organization/schools who are not the tour operators, no service tax is being paid. Therefore, the appellants are liable to pay service tax for their activity of BRA post 10-9-2004 for services provided to their clients other than ITDC.

Reasoning of Judgment:-On careful consideration of submissions made by both sides, we find that there are some admitted facts that the appellants are discharging service tax liability except the activity of BRA (post 10-9-2004) and from 1-6-2007 the appellants are discharging their service tax liability either under the category of “tour operators” or “rent-a-cab scheme operators service”. Therefore, the dispute before us is for the period 1-4-2001 to 9-9-2004 for all the activities undertaken by the appellants and for 10-9-2004 to 31-1-2006 for the service provided under BRA.
To decide the issue we have to go to the various provisions of the Finance Act. The term tour has been defined under Section 65(50) as under :

(50) “tour” means a journey from one place to another irrespective of the distance between such places.

Section 65(51) defines the term “tourist vehicle”, which reads as under:

“tourist vehicle” has the meaning assigned to it in clause (43) of section 2 of the Motor Vehicles Act, 1988.

Section 65 defines the term “tour operator” as under:

“tour operator” means any person engaged in the business of operating tours in a tourist vehicle covered by a permit granted under the Central Motor Vehicles Act, 1988 or the rules made thereunder.

Initially, the “tour operator” means any person who holds a tourist permit granted under the rules made under the Motor Vehicles Act, 1988 and operating tours in a tourist vehicle. This levy came on 1-9-1997. On 18-7-1998 there was a certain amendment took place wherein “tour operator” means any person engaged in the business of operating tour in a tourist vehicle covered by a permit granted under the Motor Vehicles Act, 1988 or Rules thereunder.

From the above definition, tour is to be operated in a tourist vehicle and that is to be covered under a permit issued under the Motor Vehicle Act or Rules thereunder.

Now the question arises “What is Tourist Vehicle?” The said tourist vehicle has been defined in clause (43) of Section 2 of the Motor Vehicles Act, 1988.

As per the said provisions “tourist vehicles” means a contract carriage constructed or adapted and equipped or maintained in accordance with such specifications as may be prescribed in this behalf. The specifications are “tourist vehicle” has to confirm, which is given under Rule 128 of the Central Motor Vehicles Rules, 1988. Therefore, “tourist vehicles” means a contract carriage which confirms the specifications given under Rule 128 of the Central Motor Vehicle Rules, 1988. It is further defined that this tourist vehicle shall be covered by a permit that may be a contract carriage permit/tourist permit or any other permit permissible under the Motor Vehicles Act/Rules.

Therefore, from the plain reading, it is clear that for levy of service tax, the tour is to be operated in a tourist vehicle having any permit permissible under the Motor Vehicles Act/Rules.

The issue came up before the Hon’ble Madras High Court in the case of “Secretary Federation of Bus-Operators Association of Tamil Nadu (supra)” wherein the Hon’ble High Court of Madras has made certain observations which clarified that the only condition is that vehicles should be a tourist vehicle under Section 2(43) of the Motor Vehicles Act/Rules framed there.

We do not agree with the contentions of the ld. AR that in the case of “Pandyan Travels (supra)” the Hon’ble High Court has held that contract carriage is also covered under tour operator. In fact in the case of Pandyan Travels, the Hon’ble High Court of Madras has given the following observations :

“Inasmuch as the petitioner is a contract carriage operator and not a stage carriage operator, the observation of the Division Bench in respect of “spare buses of stage carriages” is not applicable. It is also relevant to refer once again the observation in Para 41 “.... In fact, the most of the petitioners, who are having the contract carriage, are having the permits, under Section 88(9) of the Motor Vehicles Act read with Section 82, which are nothing but tourist “tourist permits” issued for the purpose of promoting the tourism and obviously issued to the tourist. Whereas contemplated under that section. Therefore, there will be no question of entertaining their objections and they will straightaway be covered under Section 65(52) of the Finance Act...”

On the reading of the above reproduced portion of the judgment of the Hon’ble High Court it can be seen that the Hon’ble High Court came to the conclusion based on the fact that the petitioner therein were holding permits under Section 88(9) of the Motor Vehicles Act, read with Section 82. The provisions of Section 88(9) of the Motor Vehicles Act reads as under :-
“(9) Notwithstanding anything contained in sub-section (1) but subject to any rules that may be made by the Central Government under sub-section (14), any State Transport Authority may, for the purpose of promoting tourism, grant permits in respect of tourist vehicles valid for the whole of India, or in such contiguous States not being less than three in number including the State in which the permit is issued as may be specified in such permit in accordance with the choice indicated in the application and the provisions of Sections 73, 74, 80, 81, 82, 83, 84, 85, 86 of sub-section (1) of Section 87 and Section 891 (sic) (89) shall, as far as may be, apply in relation to such permits.”

A plain reading of the above sub-section would indicate that tourist permit is granted to an operator if he has tourist vehicles. Hence the tourist vehicle has to be read in line with the Section 2(43) of Motor Vehicles Act and Rule 128 of Central Motor Vehicles Rules. We have already held that the respondent’s four vehicles did not answer to the description of ‘tourist vehicles’.
From the above observations, it is clear that in the case of Pandyan Travels(supra) it is observed by the Hon’ble High Court that if the operator is having tourist permit under Section 88(9) of the Motor Vehicles Act read with Section 82, then the vehicle is a tourist vehicle.
We have examined the facts of this case, wherein it is admitted position that the appellant are neither holding tourist permit nor having tourist vehicles. Therefore, from the above observations, the appellants are not liable to pay service on their activities for the period prior to 10-9-2004. Therefore, the demands confirmed against the appellant for the period prior to 10-9-2004 are set aside.
The next issue before us is that whether the appellants are liable to pay service tax for their activity of BRA post 10-9-2004 or not.
It is contended by the ld. Counsel that they are providing their buses on rent to ITDC who is a tour operator and discharging service tax liability under the category of tour operator. In view of these observations, we are of the view that the service tax cannot be demanded twice on the same activity as the ITDC has discharged service tax liability on this activity. Therefore, the appellants are not liable to pay service tax. But for the activity under BRA wherein the vehicle have been provided to other commercial concern/schools, etc. as consented by the appellants, we hold that the appellants are liable to pay service tax on that activity for the normal period of limitation as the issue involves interpretation. Therefore, the appellants are directed to pay service tax for their activity of BRA other than ITDC on their own computation for the normal period of limitation with a detailed chart within 30 days of the communication of this order and the same be submitted before the adjudicating authority for verification. As the issue involved is of the interpretive in nature, no penalty is warranted in this case. Accordingly, penalty imposed on the appellants are waived.

Decision:-Appeal allowed on terms.

Comment:- The substance of this case is that service tax is leviable under Tour Operator Service only if the assessee has tourist vehicles holding tourist permit but in the present case it is admitted position that the appellants were neither holding tourist permit nor having tourist vehicles. Therefore, they were not liable to pay service tax under Tour Operator Service. Moreover, as the issue under consideration involved interpretation of law, no penalty was imposed on the appellants.

Comments

PJ/Case law/2013-14/1931

Post a Comment

Query