Whether train charges, entry fees, ticket charges for darshan etc. collected by the assessee are to be included in the taxable value of tour operator service?

Case: ANDHRA PRADESH TOURISM DEVL. CORPN. LTD. V/S C.C.E., HYDERABAD

Citation: 2012 (28) S.T.R. 595 (Tri.-Bang.)

Brief Facts: - The appellants, M/s. Andhra Pradesh Tourism Development Corporation Ltd. is a PSU, wholly owned by the Govt. of A.P. In adjudication of a show-cause notice dated 26-9-2003, the jurisdictional Assistant Commissioner had demanded service tax of Rs. 1,33,23,900/- from M/s. APTDCL (assessee) for the period from 1-4-2000 to 31-3-2003 under Section 7 of the Finance Act, 1994 with interest thereon under Section 75 of the Act vide Order-in-Original No. 27/2004, dated 30-9-2004. This demand was set aside by the Commissioner (Appeals) and the case remanded to the adjudicating authority with a direction to give an opportunity to the assessee to produce evidence vide Order-in-Appeal No. 10/2005, dated 29-4-2005.

After examining the definition of 'tour operator' given under Section 65(44) of the Finance Act, 1994, the adjudicating authority allowed the net amount (gross amount collected by the assessee from their customers minus the sum of train/TTD/RFC amounts) and, accordingly, quantified the amount of service tax to be paid by the assessee, which came to be Rs. 48,41,400/-. The adjudicating authority also ordered for appropriation of the said service tax amount with interest thereon from an amount of Rs. 62.7 lakhs paid as service tax by the assessee during the period from 4-3-2004 to 15-3-2005. However, the benefit of Section 80 of the Finance Act, 1994 was given to the assessee and hence no penalty was imposed on them vide Order-in-Original No. 15/2005, dated 5-8-2005. Aggrieved by the demand of interest on tax, the assessee applied for "rectification of mistake" of this order-in-original, which application was rejected by an order dated 13-10-2006 passed by the Assistant Commissioner. In an appeal filed by the assessee, the AC'S order came to be upheld by the Commissioner (Appeals) vide Order-in-Appeal No. 10/2007, dated 29-3-2007, which was subsequently challenged by the assessee in Appeal No. ST/343/2007, which have dismissed as withdrawn vide Final Order No. 560/2011, dated 18-8-2011. The Jurisdictional Commissioner of Service Tax issued show-cause notice dated 12-6-2006 to the assessee to revise Order-in-Original No. 15/2005 ibid proposing to include train fare, TTD darshan fee and RFC entry fee in the taxable value of tour operator's service for the purpose of grant of 60% abatement under Notification No. 39/97-S.T., dated 22-8-1997 in view of Board's Circular No. 43/10/97-TRU dated 22-8:1997. After considering the objections raised by the assessee, the Commissioner as revisionary authority passed Order No. 4/2007, dated 2-7-2007 demanding differential tax of Rs. 4,88,040/- for the period from 1-4-2000 to 31-3-2003 and interest thereon. Thus, the appellant filed the present appeals against Commissioner’s order.

Appellant’s Contention: - The appellant by referring the definition of 'tour' given under Section 65 of the Finance Act, 1994 and to the meaning of 'journey given in P. Ramanatha Aiyar's "Advanced Law Lexicon" and argued that no tour was involved in TTD darshan at Tirupathi, sight-seeing in RFC or visit to hill or cruises in lakes/ponds. Once the destination was reached, the journey terminated at that place and the local events like darshan of the deity in a temple situated in that place, boat cruises in a lake in or around that place, sightseeing in or around that place or a visit to a nearby hill station could not be considered to involve any "journey from one place to another" and therefore, the charges collected from the customers for incurring expenses of such events would not form part of the taxable value of Tour Operator's Service. Thus, he contended that the TTD darshan ticket charges, RFC entry fees, hill transportation charges and water fleet charges were not to be included in the taxable value of tour operator's service. Further, relying on the Tribunal's decision in the cases of Scott Wilson Kirkpatrick (I) Pvt. Ltd. v. CST [2007 (5) S.T.R. 118 (Tri.-Bang.)] and Rolex Logistics Pvt. Ltd. v. CST [2009 (13) S.T.R. 147 (Tri.-Bang.)], he submitted that the TTD darshan charges, RFC entry fees, train fare etc., having been paid by them and reimbursed by their customers, were to be regarded as expenditure incurred on behalf of clients by the service-provider and not as expenditure for the tour operator's service provided by them. It was also pointed out that the Revenue's appeal against the Tribunal's decision in the case of Scott Wilson Kirkpatrick (I) Pvt. Ltd. was dismissed by the appellate Court. Further, he contended that, as the above charges/fees were not includible in the value of taxable service, they were entitled to claim abatement under the relevant Notifications viz. No. 39 /97-S.T., dated 22-8-1997, No. 2/2004-S.T., dated 5-2-2004 and No. 1/2006-S.T., dated 1-3-2006 without including such charges/fees in the taxable value. He also relied on Notification No. 15/2007-ST., dated 4-4-2007 issued under Section 11C of the Central Excise Act read with Section 83 of the Finance Act, 1994, as per which any amount of service tax in excess of the service tax calculated on 40% of the gross amount charged by a tour operator for providing the taxable service during the period from 1-4-2000 to 4-2-2004 was not required to be paid by the service provider. He submit that they were entitled to abatement to the extent of 90% under Notification No. 2/2004-S.T. for the period from 5-2-2004 to 9-7-2004 even after including TTD darshan ticket charges, RFC entry fee etc. in the value of the taxable service. He submitted that this claim was not appreciated in the impugned order. It was also contended that the chartering of boats for cruising in lakes and getting reimbursement of the chartering charges from the customers could not be subjected to levy of service tax under the category of "tour operator's service". In any case, the taxable value determined by the department for the demand was liable to be treated as cum-tax value.

He also contended that the extended period of limitation under the proviso to Section 73(1) of the Finance Act, 1994 was not attracted in this case. It was claimed that all the relevant facts were within the knowledge of the department and therefore the allegation of suppression of facts was not sustainable. Such facts were gathered by the department through their auditors and officers who frequently/periodically visited their premises. In the circumstances, the allegation of suppression of facts was not tenable. In this context, they relied on following decisions:

-       Ugam Chaild Bhandari v. CCE [2004 (164) E.L.T. 236 (S.C.)]
-       Anand Nishikawa Co. Ltd. v. CCE [2005 (188) E.L.T. 149 (S.C.)]

Further the first show-cause notice itself had been issued alleging the relevant facts. There was no change of facts for the subsequent period and, therefore, the allegation of suppression of facts raised in the subsequent periodical notices was untenable. In this connection, reliance was placed on the following decisions of the Supreme Court:

(a) Nizam Sugar Factory v. CCE [2006 (197) E.L.T. 465 (S.C.) = 2008 (9) S.T.R. 314 (S.C.)]
(b) Hyderabad Polymers (P) Ltd. v. CCE [2004 (166) E.L.T. 151 (S.C.)]
(c) P & B Pharmaceuticals (P) Ltd. v. CCE [2003 (153) E.L.T. 14 (S.C.)]
(d) Geo Tech Foundation & Construction v. CCE [2008 (224) E.L.T. 177 (S.C.)]
(e) ECE Industries Ltd v. CCE (2004 (164) E.L.T. 236 (S.C.)]

They further pointed out that they were Government Undertaking and held the bona fide belief that they paid the tax due and did not have any intent to evade payment of service tax. The dispute between them and the department was in relation to interpretation of statutory provisions. There were frequent changes in the definition of ‘tour operator' and notifications were issued by the Government from time to time granting abatements and exemptions. In such circumstances, confusion prevailed in the matter of interpreting the provisions related to tour operator's service. For these reasons also, the proviso to Section 73(1) of the Finance Act, 1994 was not invokable against them. In this context, the following decisions were cited:-

(a) Centre for Development in Advanced Computing v. CCE [2002 (141) E.L.T. 6 (S.C.)]
(b) SNS (Minerals) Ltd. v. UOI [2007 (210) E.L.T. 3 (S.C.) = 2007 (6) S.T.R. 161 (S.C.)]
(c) CCE v. Surat Textile Mills Ltd. [2004 (167) E.L.T. 379 (S.C.)]
(d) Padmini Products v. CCE 1989 (43) E.L.T. 195 (S.C.)]

Thus, they contended that, as they have genuine reason for not paying service tax in excess of what they estimated as the correct amount of service tax payable for the period of dispute, they were entitled to the benefit of Section 80 of the Finance Act, 1994 and therefore no penalty could have been imposed on them under the said Act.

Respondent’s Contention: - The respondent reiterated the findings recorded in the impugned orders and also relied on Section 67 of the Finance Act, 1994 and the Board's Circular No. B-43/10/97-TRU, dated 22-8-1997 to contend that, in the case of package tour, the gross amount including all elements of cost was to be taken into account for service tax payment. He also referred to Trade Notice No. 110/97, dated 28-8-1997 of Madurai Commissionerate and Board's Circular No. B-11/1/2001-TRU, dated 9-7-2001. Reliance was also placed on the Tribunal's decision in the case of Touraid (I) Travel Services v. Commissioner [2008 (12) S.T.R. 452 (Tri.-Del.)] wherein it was held, for the period from 1-4-2002 to 31-3-2007, that the supplementary services of arranging guide, monument visits, food, general assistance etc. were also covered by the definition of 'tour operator's service.' On this basis, they submitted that all amounts collected by the assessee as train fare, TTD darshan fee, RFC entry fee, water fleet charges, etc. were liable to be included in the taxable value of 'tour operator's service.' Only on the gross taxable value could the assessee claim the benefit of abatement of 60% under Notification No. 39/97-S.T. It was also pointed out that the assessee had availed and utilized inadmissible credit of Rs. 8,11,058/- being the amount of service tax paid on architectural and technical services used for construction of hotels, which were not input services with nexus to tour operator's service. In this connection, they referred Order-in-Original No. 26/08-S.T. With regard to the demand of service tax of Rs. 4,82,768/- challenged in Appeal No. ST/954/2011, they agreed with the appellant that this appeal could be disposed of only on the basis of the outcome of Appeal No. ST/138/2009. On the point of limitation, he reiterated the findings recorded in the relevant impugned orders.

Reasoning of Judgment: - The Hon’ble Tribunal held that the fact that A.P. Tourism Development Corporation was providing tour operator's service during the material period is not in dispute. The demand of tax on this service for the period from 4/2000 to 3/2003 as confirmed in order-in-original No. 15/05, dated 5-8-2005 in adjudication of show-cause notice dated 26-9-2003 was not challenged by the appellant on the ground that they did not provide the said service. The order-in-original was challenged only in respect of the demand of interest on service tax. Therefore, any challenge will not be sustainable against the revisionary authority's order dated 1-8-2007 or other impugned orders. Further, it cannot be denied that the appellant was operating package tours. They have consistently claimed the benefit of Notification No. 39/97-S.T. which was applicable to package tour only. Their claim under the successor-Notification was also in respect of package tour only. The main dispute is with regard to the taxable value of the package tours operated by the corporation. It is the case of the appellant that, as tour means a journey from one place to another, only the amount charged for such journey can be taken as the taxable value of tour operator's service. Any amount collected for local events such as sightseeing, boat cruising, visit to temple, visit to film city etc. in a particular place cannot be part of the taxable value of tour operator's service. In this connection, the appellant has relied on lexicon meaning of 'journey'. ADVANCED LAW LEXICON referred to by the appellant says that the term 'journey', as used in a statute forbidding the carrying of weapons except on a journey, should be construed in its popular sense, and includes a going from home by a highway to a definite point far enough distant to carry a person beyond the circle of his neighbors. The lexicon further says that it is impossible to lay down any determinate distance which will characterize the act as a journey or the actor as a traveller. Much must depend on the circumstances of each particular case. In another context, the lexicon says that journey in its original signification meant a day's travel, but in use it has attained a broader though less definite meaning, and it is now applied to a travel by land from place to place without restriction of time. The appellant has also adverted to the meaning of the word 'travel' given in WORDS AND PHRASES (Permanent Edition), Volume 42A. This book says thus: "travel means to go from one place to another at a distance; to journey" Relying on these books, the appellant has argued that going round for sight-seeing, cruising in boat in a body of water, visiting a temple for darshan of the deity or visiting a hill station in or around the same place cannot be considered to be journey or travel from one place to another and hence such events are not part of a 'tour' defined under Section 65 of the Finance Act, 1994. Therefore, according to the appellant, the moneys collected by them from tourists in relation to local events like temple darshan, visit to film city, boat cruising, etc. cannot be part of the taxable value of tour operator's service. Per contra, it has been argued by the respondent that, as the distance between the starting point and the destination of the traveller is immaterial to 'tour' as defined under Section 65 ibid, the local small trips undertaken by a tourist in a particular place are also covered by the definition of 'tour'. The sight-seeing trips undertaken in a particular place, boat cruising in a lake or pond in a particular place, darshan of the deity in a temple situated in a particular place are all to be considered as part of the package tour and therefore the moneys collected by the appellant from tourists for such purposes would be includable in the taxable value of tour operator's service under Section 67 of the Act. In this connection, they heavily relied on the Tribunal's decision in Touraids (I) Travel Services (supra). He has also relied on the Board's Circular dated 22-8-1997.

Further they held that it is not deniable that a 'journey' means travel from one place to another. It is not a word defined in the Finance Act, 1994 or the Service Tax Rules, 1994. It has to be understood in keeping with common parlance. Even the law lexicon referred to by the appellant says so. It also says that it is impossible to lay down any determinate distance which will characterize the act as a journey. According to the lexicon, much depends on the circumstances of each particular case. In the present case, 'tour' means a journey from one place to another irrespective of the distance between such places. From 10-9-2004, the business of a tour operator includes arrangements for accommodation, sight-seeing or other similar services vide definition of 'tour operator'. In a tour as understood in common parlance, tourists, usually in groups, are taken by the tour operator by any mode of transport from one place to another and, en route or at the terminal place, local sight-seeing trips (including visits to zoo, museum, monuments and other historic spots etc.), visits to temples or other places of worship, boat cruising in lakes, trips to hill resorts, etc. are organized or facilitated for the tourists by the tour operator. In their view, such local events or trips organized or facilitated by the tour operator in any place covered by the tour are also to be considered as part of the tour as these were not casual occurrences but pre-planned and organized events which can reasonably be brought within the ambit of the expression "other similar services" by applying ejusdem generis principle. These supplementary services provided by the tour operator are also encompassed by the definition of the taxable service under Section 65(105)(n) of the Finance Act, 1994, which reads: "taxable service means any service provided or to be provided to any person by a tour operator in relation to a tour". Therefore the pedantic arguments based solely on the meaning of 'journey' cannot be countenanced.
Further in the case of Touraids (I) Travel Services (supra), this Tribunal considered supplementary services like arranging guide service, porter service, food service, monument visit, etc. and held that these were covered by the expression 'any service provided by tour operators in relation to a tour'. The Tribunal observed that the phrase 'in relation to a tour' was wide enough to cover such supplementary services also. The Tribunal also noted that supplementary services like arrangement of accommodation, sight-seeing and similar services were covered by the definition of 'tour operator' from 10-9-2004. CBEC's Circulars dated 22-8-1997 and 9-7-2001 were accepted as contemporanea expositio of tour operator's service and accordingly it was held that the supplementary services of arranging guide services, monument visit services, porter services, food services, general assistance services, etc. were covered by the definition of "tour operator's service" and hence attracted Service Tax for pre-10-9-2004 period also. They agree with the coordinate Bench.

The appellant’s claim for 60% abatement in terms of the Notification no. 39/97-ST, dated 22.8.1997 was granted but on the gross amount including the cost of supplementary services. Their limited plea is to exclude the cost of supplementary services from the gross amount and allow abatement on the remainder. The benefit, in any case, is available only to a "package tour". The appellant was, indisputably, operating such package tours and hence could claim under the above Notification 60% abatement on the gross amount charged from the tourists for the services provided in relation to the tour. This gross amount is the taxable value in terms of Section 67 of the Finance Act also and the same must, perforce, include the amounts collected from the tourists towards costs of supplementary services viz. TTD darshan fee, RFC entry fee, cruise/water fleet charges and hill transportation charges. It must, of course, include also train fare being the cost of the railway segment of the tour. The appellant has relied on the Tribunal's decision in the cases of Scott Wilson Kirkpatric and Rolex Logistics to argue that the amounts collected from the tourists towards TTD darshan tickets, RFC entry fee, water fleet charges etc. after defraying these expenses are in the nature of reimbursable expenses and hence liable to be excluded from the taxable value. The ratio of the cited decisions is of no aid to the appellant as it is based on what 'reimbursement' means in the context of determination of taxable value of a given taxable service. In view of our finding that TTD darshan, sight-seeing In RFC etc. are supplementary services rendered by the appellant in relation to package tour, the collections for the same from the tourists cannot be typified as 'reimbursements'. Such collections do not answer the test laid down in the order of the Tribunal and are necessarily to be part of the taxable value. The decision in Scott Wilson Kirkpatrick's case was based on a circular of Director-General of Service Tax. Nobody has relied on any DGST circular before them.

Notification No. 39/97-S.T. was rescinded by Notification No. 2/2006-S.T., dated 1-3-2006. But the abatement on the gross value of package tour continued under Notification No. 1/2006-S.T., dated 1-3-2006, which was also claimed by the appellant for the relevant period. This Notification initially allowed 60% abatement on the gross amount charged for the services provided by a tour operator where he provided a package tour. The Central Government amended the entry by Notification No. 38/2007-S.T., dated 23-8-2007 thereby enhancing the abatement to 75% which was also claimed by the appellant for the period from 23-8-2007. The definition of "package tour" given in Notification No. 1/2006-S.T., dated 1-3-2006 has been heavily relied on by the appellant in support of their contention that, in any case, TTD darshan, RFC visit etc. would not be part of package tour and expenses thereof cannot be included in the taxable value for any period prior to 23-8-2007. "Package tour" was defined identically in the explanations to Notification No. 39/97-S.T. and Notification No. 1/2006-S.T. The basis of the contention of the appellant is the absence of the words "other similar services" in the definition of 'package tour' prior to 23-8-2007. On the one hand, the above argument of the appellant is a tacit acknowledgment of the fact that the supplementary services viz., TTD darshan, RFC visit, boat cruise etc. can appropriately be brought within the scope of "other similar services". On the other hand, it is founded on the unacceptable premise that the provisions of an exemption Notification could be used as a means to construe the provisions of a statute. As it is already indicated, what should be the components of taxable value of package tour operator's service will be governed the definitions of tour, tour operator and tour operator's service under Section 65 coupled with the provisions of Section 67 of the Finance Act, 1994. Apparently, the meaning of 'package tour' as understood in common parlance was recognized in the Board's Circulars noted by the Tribunal in Touraids case, and the same concept came to be incorporated (through the clause in parenthesis, reading: "which may include arrangements for accommodation, sight-seeing or other similar services") in the definition of 'tour operator'. More significantly, the definition of the taxable service under Section 65(105)(n) of the Act has, at all times, had room for including such supplementary services also within the ambit of "any service provided in relation to a tour". In their view, the meaning of package tour' has to be understood in this manner and, accordingly, the elements to be included in the taxable value of package tour operator's service have to be determined. Notifications No. 39 /97-S.T. and No. 1 /2006-S.T. were issued to benefit package tour operators and, therefore, a definition of 'package tour' was also incorporated therein, in the absence of a definition in the Finance Act, 1994. In case of an inconsistency between the scope of this definition and what is contemplated in Section 65 of the Act, the latter must, perforce, prevail. In this view, the contentions raised by the appellant on the basis of Explanation ibid cannot be accepted. However, for reasons already stated by them, the benefit of 60% abatement on the gross collection of the appellant (including amounts collected for supplementary services) will be admissible to them upto 22-8-2007 and 75% abatement on the gross collection will be admissible from 23-8-2007 subject, of course, to the relevant condition attached to Notification No.1/2006-ST.

The benefit of Notification No. 2/2004-S.T., dated 5-2-2004 (90% abatement cannot be claimed in respect of package tour inasmuch as this Notification reads "...... hereby exempts taxable service (other than service in relation to a package tour) provided by a tour operator ....". The appellant is not eligible for exemption under Notification No. 15/07-S.T., dated 4-4-2007 either as this benefit is also not applicable to operators of package tours.

Against the demand of service tax allegedly short-paid on mandap keeper's service, the learned Commissioner did not accept the assessee's plea for adjustment of the excess tax paid under tour operator's service towards the demand on mandap keeper's service. The reason stated by the Commissioner is that the assessee did not satisfy the conditions laid down under sub-rule (4B) of Rule 6 of the Service Tax Rules for effecting such adjustment under sub-rule (4A) vide Commissioner’s order. The appellant has submitted that this finding of the Commissioner is beyond the scope of the show-cause notice. In this connection, the appellant has also relied on a few decisions of the Supreme            Court viz. Gujarat State Fertilizer Co. v. CCE [1997 (91) E.L.T. 3 (S.C.)]; SACI Allied Products Ltd v. CCE [2005 (183) E.L.T. 225 (S.C.)] etc. The appellant, however, has not set up any challenge against the Commissioner's finding that they did not satisfy the conditions for adjustment of tax under sub-rules (4A) and (4B) of Rule 6. Para 14 of the show-cause notice indicates that, against the relevant audit objection, the assessee's contention was that there was no short-payment of tax on Mandap keeper's service as excess payment of tax made on tour operator's service during the same period had been adjusted. The show-cause notice alleged that such adjustment was not permissible as the assessee had not correctly arrived at the taxable value for the purpose of payment of tax in respect of tour operator's service. The show-cause notice did not allege that the adjustment was not acceptable for want of compliance with the conditions laid down under Rule 6(4B). Thus, it appears that the reason stated by the adjudicating authority for not allowing adjustment is beyond the scope of the show-cause notice. In terms of the show-cause notice, the Commissioner ought to have determined whether there was any excess payment of service tax by the assessee in respect of tour operator's service for the relevant period so that the excess amount could be allowed to be adjusted towards demand of service tax on Mandap keeper's service. This, apparently, was not done. It is a foregone conclusion that abatement can be claimed only on the gross taxable value which includes the amounts collected by the appellant for the supplementary services provided to the tourists. 60% of this gross value can be allowed as abatement under the relevant Notifications for the purpose of payment of service tax upto 22-8-2007. The demands of service tax quantified on this basis are sustainable. Consequently, the demand of service tax of Rs. 4,88,040/- raised by the Commissioner as revisionary authority is liable to be upheld. The appellant is liable to pay this amount with interest thereon as they have not pleaded limitation.

The challenge in the second appeal is for the period 2003-04 to 2006- 07. A total amount of over Rs. 1.1 crores was demanded as service tax for the said period on a taxable value which included TTD darshan ticket charges, RFC entry fee, hill transportation charges and water fleet charges. For reasons already recorded by them, these charges are liable to be included in the gross taxable value before any abatement can be allowed under the relevant Notifications.

The adjudicating authority has ordered for recovery of an amount of Rs. 8,11,058/- from the assessee on the ground that Cenvat credit to this extent was irregularly availed by them on architect services and technical services used for construction of hotels and utilized the credit during the period from October 2004 to February 2006. The Commissioner held that the said services were not used for providing the output service (tourist operator's service) and hence not input services for the purpose of Cenvat credit. The Commissioner also invoked Rule 9(1) and Rule 9(2) to deny the credit to the assessee on the ground that the relevant invoice/bill did not indicate that the input service provider had paid tax on the service. The appellant has submitted that the reason stated by the Commissioner with reference to Rule 9 for denial of Cenvat credit on the aforesaid services is also beyond the scope of the show-cause notice. It is claimed that the denial of the benefit is contrary to the provisions of the Cenvat Credit Rules, 2004. They have considered these submissions also. As rightly submitted by the appellant, the Cenvat credit in question was proposed, in the show-cause notice, to be denied to the assessee on the ground that there was no nexus between the input services and the output service and not on the ground that the invoices/bills issued by the input service providers did not contain the necessary particulars required under Rule 9 of the Central Excise Rules. They find that the learned Commissioner denied the credit mainly for want of nexus with output service. Though it can be said that he travelled beyond the scope of the show cause notice by citing the defects of invoices/bills as a reason for disallowing Cenvat credit, nevertheless, for this reason alone, the credit in question cannot be allowed to the appellant inasmuch as, in this appeal, they have not brought out any nexus between the so-called input services (architect services and technical services) and the tour operator's service. Their claim that they are eligible for the credit under the Cenvat Credit Rules, 2004 remains ipse dixit as they have not shown that the said services fell within the ambit of the definition of 'input service' under Rule 2(1) of the Cenvat Credit Rules, 2004. Therefore, the Commissioner's decision to deny Cenvat credit of Rs. 8,11,058/- to the assessee cannot be disturbed.

Yet another grievance raised by the appellant is that the value determined by the department was not treated as cum-tax value. It is submitted that the service tax element ought to have been excluded while computing the value of taxable service. In this connection, the appellant has relied on explanation to Section 67 of the Finance Act, 1994 as it stood during the material period. The appellant has also relied on case law viz. CCE v. Martian Udyog Ltd. [2002 (141) E.L.T. 3 (S.C.)]. It appears, the Commissioner did not consider this plea of the assessee. He should have given effect to the explanation ibid (which was in force till 30-4-2006) and sub-section (2) of Section 67 of the Act as this provision stood from 1-5-2006. The main ground raised in Appeal is limitation. The show-cause notice was issued on 11-1-2008 demanding service tax for the period 2003-04 to 2006-07 by invoking the extended period of limitation under the proviso to Section 73(1) of the Finance Act, 1994 on the ground of suppression of facts. The show-cause notice alleged that the collection of taxable amounts was not disclosed in the ST-3 returns filed for the period of dispute and that this crucial fact was suppressed willfully. In their reply to the show-cause notice, the assessee submitted that the relevant facts were within the knowledge of the department as indicated by allegations raised in the first show-cause notice which was issued for the period from 1-4-2000 to 31-3-2003. Therefore, it was not open to the department to allege in show-cause notice dated 11-1-2008 that the appellant had suppressed the same facts for a later period. In this connection, certain judgments of the Supreme Court were also relied on by the assessee. The adjudicating authority relied on the Apex Court's judgment in Coaltar Chemicals Manufacturing Co. v. L101 [2003 (158) E.L.T. 402 (S.C.)] and the Tribunal's decision in the case of Insurance and Provident Fund Department v. CCE [2006 (2) S.T.R. 369 (Tri.-Del.) = 2001 (132) E.L.T. 726 (Tribunal)] to hold that there was adequate ground for invoking the extended period of limitation. Before this Tribunal, the assessee has supplemented judgments in a bid to establish that the extended period of limitation was not invocable as they being a Government company did not have any intent to evade tax and as any short-payment of service tax was attributable to the confusion which prevailed in the matter of interpretation of the provisions related to tour operator's service. The appellant has also submitted that there was confusion regarding the scope of the definition of 'tour operator' as indicated by the amendments made to this definition from time to time. He has also referred to the Notifications issued by the Government granting abatements and exemptions. He has particularly referred to the Notification issued under Section 11C of the Central Excise Act read with Section 83 of the Finance Act, 1994. In this view, these legislative measures amply reflected the uncertainty or lack of clarity in the stand of the Revenue regarding the taxability of tour operator's service. According to the appellant, in such circumstances, the extended period of limitation should not be invoked in this case. A part of the demand challenged in Appeal is also said to be beyond the normal period. It was urged that the above submissions be considered for this appeal also. They viewed that the plea of limitation is supported by the cited decisions. The earliest show-cause notice issued to the appellant is dated 26-9-2003, but no copy of this notice is available on record. No copy of the second show-cause notice dated 12-6-2006 is available either. From show-cause notices dated 11-1-2008 and 21-10-2008, it appears that it was during the course of audit of the accounts of the appellant by officers of the department for the period from 2003-04 to 2006-07 that it was noticed that the appellant had been estimating the gross taxable value of tour operator's service without including train fare, TTD Darshan ticket charges, RFC entry fee, water fleet charges etc. Subsequent to the audit, the appellant was apparently engaged in frequent correspondence with the department on the issue of includability of the above charges/fees in the gross taxable value of the service. It appears from the records that the appellant paid an amount of Rs. 62.7 lakhs as Service Tax during the period from 4-3-2004 to 15-3-2005. It has also become amply clear that there was a difference of opinion between the appellant and the department during the material period, on interpretation of the statutory provisions relating to tour operator's service. Apparently, the appellant held the belief that they were not liable to include the aforesaid fees/charges in the gross taxable value for the purpose of claiming abatement under the relevant Notifications. In such circumstances, some of the cited decisions are supportive of the plea of limitation. In the case of Nizam Sugar Factory (supra), it was noticed by the Supreme Court that all relevant facts were in the knowledge of the Department when the first of a series of show-cause notices raising the same issue was issued to the assessee, and it was held that the allegation of suppression of facts by the assessee could not be raised in the subsequent show-cause notices. The Apex Court's judgments in the cases of P&B Pharmaceuticals (supra) and ECE Industries Ltd. (supra) are also to the effect that the extended period of limitation is not invocable in a show-cause notice on the ground of willful suppression or misstatement of facts where the Department raised a similar demand of duty in an earlier show-cause notice issued to the assessee on the same grounds. In the cases of Padmini Products (supra), SNS (Minerals) Ltd. (supra), Centre for Development in Advanced Computing (supra) etc., the Apex Court held to the effect that if the assessee bona fide believed in a legal position in which they did not have liability to pay duty, the extended period of limitation was not invocable for recovery of such duty. In the instant case, the appellant, a Government Undertaking, held the bona fide belief that they paid the tax due and did not have any intention to evade payment of service tax. The dispute between the appellant and the Department apparently arose out of conflicting interpretations of the Notifications and statutory provisions relating to tour operator's service. The definition of 'tour operator' came to be amended twice during the material period and Notification No. 39/97-S.T. was superseded by Notification No. 1/2006-S.T. and the latter was amended by Notification No. 38/2007-S.T., all these during the material period. It appears, these changes created confusion in the mind of the appellant on the question whether the charges/fees collected by them from tourists for TTD darshan, RFC visit, boat cruise etc. were to be included in the gross taxable value of tour operator's service for the purpose of claiming abatement. In these circumstances, it was not correct on the part of the Department to allege that the appellant had willfully suppressed facts with intention to evade payment of service tax. In the result, it has to be held that the invocation of extended period of limitation is unsustainable in the facts and circumstances of this case.
The benefit of this view shall be available to the appellant in Appeal.

In the order under challenge in Appeal, the Commissioner recorded certain reasons for invoking the proviso to Section 73(1) of the Finance Act, 1994 even though the show-cause notice had not invoked this proviso. The show-cause notice in this case does not indicate as to whether the appellant was filing ST-3 returns quarterly or half-yearly. The Commissioner's order does not clarify this aspect either. In any case, a part of the demand of service tax is found to be beyond the normal period of limitation. In the absence of allegation of suppression or other ingredients of the proviso to Section 73(1) in the show-cause notice and for other reasons recorded hereinabove, the demand beyond the normal period of limitation is liable to be set aside. In the absence of valid grounds for invocation of the proviso to Section 73(1) of the Finance Act, 1994, in this case, there can be no penalty on the appellant under Section 78 of the Act either. Penalties imposed on the appellant under Section 76 of the Act are under challenge in some of these appeals. In one appeal, the penalty imposed under Section 77 of the Act is also under challenge.

The question whether the benefit of Section 80 of the Act should be granted to the assessee was not considered by the lower authorities while imposing these penalties. In their view, the bonafide belief held by the appellant that they could claim abatement under the relevant Notifications on a taxable value without including therein the amounts collected from tourists for the supplementary services can be considered as a "reasonable cause" for their failure to pay the service tax demanded by the lower authorities inasmuch as they have demonstrated the belief to be bonafide. Therefore, the appellant can legitimately claim the benefit of Section 80 of the Act. Both the penalties are liable to be set aside on this ground. As already recorded, in Appeal requantification of the amount of tax is required to be done to ascertain the amount recoverable from the assessee. Only upon such requantification can it be ascertained whether any excess payment of tax over and above what was due to the Revenue was paid by the assessee in 2006-07. According to the appellant, they made excess payment of Rs. 4,82,768/- as service tax on tour operator's service in 2006-07 and this amount can be appropriated towards the demand of service tax for the month of April 2007 challenged in Appeal. The demand of service tax of Rs. 4,82,768/- has been confirmed against the assessee for the month of April 2007 on the ground that there was no excess payment of tax in the previous financial year. Thus, it is clear that the question whether any amount of tax is recoverable from the assessee in respect of tour operator's service for the month of April 2007 can be settled only after determining whether there was excess payment of service tax for the previous financial year (2006-07) covered by Appeal. It would follow that the subject matter of Appeal has to be remanded to the adjudicating authority. Though the order-in-original in this case was passed by the Deputy Commissioner, it would be convenient for the Commissioner to deal with the matter in the circumstances of this case. Accordingly, the Commissioner while dealing with the subject matter of Appeal may also deal with the question of tax liability involved in Appeal.

Decision: - The appeals were disposed of on above terms.

Comment:-The substance of the case revolves around determination of taxable value of the package tours operated by the appellant. It was concluded that amount collected for local events such as sightseeing, boat cruising, visit to temple, visit to film city etc. would be included in the taxable value for the purposes of levy of service tax under tour operator service and then abatement will be allowed to the assessee. However, a substantial portion of the demand was barred by limitation period as there was no suppression and misstatement on part of the assessee.

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PJ/Case Laws/2012-13/1415

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