Whether bus reservation charges taxable under tour operator services?

PJ/Case Law/2014-15/2157

Case:-CHOUDHARY YATRA CO PVT LTD Vs COMMISSIONER OF CENTRAL EXCISE & CUSTOMS

Citation:-2014-TIOL-401-CESTAT-MUM

Brief facts:- Thematerial facts of this case are thatthis appeal is directed against Order-in-Appeal No: IPL/252/NSK/2008 dated 31/12/2008 passedby the Commissioner of Central Excise & Customs (Appeals), Nasik. Vide the impugned order the learned appellate authority has upheld the order dated 27/05/2008passed by the Joint Commissioner of Central Excise, Nasik wherein the activity undertaken by theappellant has been classified under ‘tour operator service' and service tax demand ofRs.11,77,681/- has been confirmed against the appellant for the period 01/04/2006 to 31/05/2007along with interest thereon. In addition, penalty has been imposed on the appellant underSections 76 and 78 of the Finance Act, 1994. Aggrieved of the same the appellant is before the bench.

When the case was called, an application for adjournment was filed on behalf of theappellant on the ground that the Director of the company is on urgent business tour. It was noticed that the said case has come up on earlier occasions, i.e. on 16/07/2009, 02/09/2009, and 25/11/2013and on all these occasions the appellant sought adjournment. This is the fourth occasion theappeal is coming up for hearing and therefore, not inclined to consider the adjournmentrequest. Therefore, with the assistance of the Departmental Representative, theappeal was taken up for consideration and disposal.The appellant undertakes tours to various places and they entered into agreements withvarious parties and for the services rendered they are collecting amounts under the heads ‘BusReservation Agreement', ‘Seat Reservation Agreement', Nasik Darshan', and ‘Tour Extension'. Theyare discharging service on the charges received for seat reservation, Nasik Darshan and TourExtension. However, no service tax liability is discharged on the consideration received for ‘BusReservation'. Accordingly, a show cause notice dated 11/10/2007 was issued to the appellantdemanding service tax on the charges received towards bus reservation for the period 01/04/2006to 31/05/2007 and the same was adjudicated vide order dated 30/04/2008 by classifying theservices rendered by the appellant as ‘Tour Operator Service'.

Appellant’s contention:-The appellant's contention is thatthe services rendered by them would come under the category of Rent-a-Cab Operator and theyare discharging service tax on the said activity w.e.f. 01/06/2007 onwards and, therefore, for theperiod prior to 01/06/2007, the said services cannot be classified as tour operator services andthey have placed reliance on the decision of the Tribunal in the case of Gujarat Chemical PortTerminal Co. Ltd. vs. Commissioner of Central Excise & Customs 2008 (9) STR 386 (2007-TIOL-1898-CESTAT-AHM) and Diebold Systems (P) Ltd. vs. Commissioner of Service Tax, Chennai 2008 (9)STR 546 (2008-TIOL-489-CESTAT-MAD). Therefore, it is the appellant's contention that the activityundertaken falls under ‘Rent-a-Cab Services' and not under ‘Tour Operator Service'.

Respondent’s contention:-The learned Additional Commissioner (AR) appearing for the Revenue, on the other hand,submits that the appellant is discharging service under ‘tour operator services' in respect of seatreservation and tour extension services undertaken by them but only on the component of busreservation charges collected by the appellant, they are not discharging service tax liability. Theentire activity is a single activity and, therefore, the said activity cannot be divided andsegregated and service tax liability discharged only on the part of service rendered of seatreservation and tour extension by contending that bus reservation falls under a different categoryaltogether. Therefore, he justifies the impugned order and prays that the appeal be dismissed.

Reasoning of judgment:-The bench carefully considered the submissions made in the appeal memorandum and also thecontentions raised by the Revenue. They also perused the bus reservation agreement dated17/10/2007 available on record entered into by the appellant with the Principal, Rangubai JunnarePrimary School. The said agreement is for booking of the buses for the tours undertaken to Nasik,Ellora, Ghrisneshwar, Siddharth Garden, etc. and the tour starts at 5.00 a.m. on 22/11/2007 andconcludes at 7.00 p.m. on 23/22/2007. Thus, the bus reservation is for conduct of the tours andtherefore, it forms rightly part of the tour operator services as defined in law.
They found that in appellant's own case, for the previous period, this Tribunal had examined thisissue and held that the appellant would be liable to discharge service tax liability on the busreservation agreement under the category of tour operator services w.e.f. 10/09/2004.(2012-TIOL-1207-CESTAT-MUM).

In view of the above no merit was found in the appeal filed by the appellant andtherefore, they upheld the confirmation of service tax demand on the ‘bus reservation charges'collected by the appellant under the category of tour operator service. Consequently, the liabilityto pay interest on the confirmed service tax demand is also sustained.

As regards the penalties imposed, two penalties had been imposed, one underSection 76 and another under Section 78. Section 76 penalty is imposable if there is a delay ordefault in payment of service tax and no mens rea is required to be proved. However, impositionof penalty under Section 78 is for suppression of facts, collusion, fraud etc. In this particularcase, since the activity has been in dispute since 2004, the department cannot allege suppressionor willful mis-statement of facts. Therefore, the penalty under Section 78 is neither justified norwarranted in the circumstances of the case. Accordingly, we set aside the penalty imposed underSection 78 of the Finance Act, 1994.

But for the above modification, the order of the lower appellate authority is upheld and theAppeal dismissed.

Decision:-Appeal dismissed.

Comment:-The essence of this case is that the bus reservation charges collected in view of the tour conducted are incidental to the main service provided of the tour operator and shall be taxable under tour operator service only. The incidental services cannot be separately classified under “Rent-a-cab Service” because it is essential part of the tour operator services.

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PJ/Case Law/2014-15/2157

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