Whether transportation of employees of corporates on charter basis/hire basis would be taxable under “tour operator services”?

PJ/Case Law/2013-14/1996

Case:-LAWRENCE TRAVELS VERSUS COMMISSIONER OF C.EX., NASHIK

Citation:-2013(32) S.T.R. 715(Tri.-Mumbai)

Brief Facts:-The appeal and stay application are directed against Order-in-Revision No. 5/ST/2010, dated 23-3- 2010 passed by the Commissioner of Central Excise, Nashik.
The appellant-M/s. Lawrence Travels, Nashik, entered into agreements with various corporates in Nashik such as Glaxo Smithkline Ltd., Siemens Ltd., VIP Industries Ltd., and VTC Ltd. for transport of the company employ from their residences to their offices and back and collected service charges from these corporates for the same during the period 10-9-2004 to 31-3-2007. The department was of the view that the said service is taxable under the category of tour operators' services and accordingly issued a notice dated 5-10-2007 demanding service tax of Rs. 4,50,425/- along with interest thereon and also proposing to impose penalties under the provisions of Finance Act, 1994. The notice was adjudicated by the Asst. Commissioner of Service Tax, Nashik who dropped the proceedings. The said order was taken up in revision by the Commissioner and the Commissioner passed the impugned order setting aside the order passed by the lower adjudicating authority and confirming the Service Tax along interest thereon and also by imposing equivalent amount of penalty. Hence appellant is before Tribunal.

Appellant Contentions:-The ld. Counsel for the appellant submits that they have undertaken the said activity using a stage carriage and prior to 10-9-2004, the said activity was not taxable. The definition of tour operator under Section 65(115) of the Finance Act, 1994 was amended with effect from 10-9-2004 and as per the revised definition, 'tour operator' means any person engaged in the business of planning, scheduling, organizing or arranging tours (which may include arrangements for accommodation, sightseeing, or other similar services) by any mode of transport, and includes any person engaged in the business of operating tours in a tourist vehicle covered by a permit granted under the Motor Vehicles Act, 1988 or the rule made thereunder. The taxable service is defined under Section 65(105)(n) as “any service provided or to be provided to any person, by a tour operator in relation to a tour ". The appellant does not undertake any planning, scheduling, organizing or arranging tours so as to come within the definition of the tour operator. They are merely providing transportation of the company's employees from their resident to their offices and back. Therefore, they are not liable to Service Tax under the category of tour operator during the impugned period. He submits that in a similar case pertaining to M/s. Moharir Travels, the Tribunal vide Order No. S/595/2012/WZB/CSTB, dated 24-4-2012, by a majority decision, had directed the appellant therein to make a pre-deposit of part of the Service Tax. The said order was challenged before the Hon’ble Bombay High Court and the Hon’ble High Court set aside the order and directed the Tribunal to hear the appeal on merits without insisting on any pre-deposit. He further submits that the Government vide Notification No. 20/2009-S.T. had exempted tour operator's services having a contract carriage permit for interstate or intrastate transportation of passengers, excluding tourism, conducted tours, charter or hire service, from the whole of Service Tax leviable thereon and the said exemption was given retrospective effect from 1-4-2000 vide Section 75 of the Finance Act, 2011. He relies on the decision of this Tribunal in the case of Ideal Travels [2012 (28) S.T.R. 257] in support of his contention. In view of the above, he prays that stay be granted.

Respondent Contentions:-The ld. Additional Commissioner (AR) appearing for the Revenue on other hand contends that this Tribunal in the case of Valsala Travels Pvt. Ltd. v. CST, Bangalore [2010 (20) S.T.R. 89]had held in identical case of transportation service to companies for pick up and drop of employees merits classification under “tour operators service" and accordingly ordered for pre-deposit of part of the dues. Further in the case of Himachal Road Transport Corporation v. CCE, Chandigarh [2008 (11) S.T.R. 389], this Tribunal in the case of transportation of employee of a company under agreement and collecting charges on basis of rates fixed per kilometer held that the service would be liable to tax under tour operators service and accordingly directed the appellant therein to make pre-deposit of the Service Tax during the normal period of limitation. The Hon'ble High Court of Madras in the case of Sri Pandyan Travels [2006 (3) S.T.R. 151 = 2004 (163) E.L.T. 409 (Mad)] had held that transportation using contract carriages would come within the purview of 'tour operator services' and upheld the levy of Service Tax following the decision of the Division Bench decision in the case of Secy. Federation of Bus Operators Association of Tamil Nadu [2001 (134) E.L.T. 618 (Mad.) = 2006 (2) S.T.R. 411 (Mad.)]. He also submits that in the instant case, the appellant would not be eligible for the benefit of exemption under Notification No.20/2009 as the service is charter hiring of the vehicles which is excluded from the scope of the exemption. Accordingly he pleads for putting the appellant to terms.

Reasoning of Judgment:-We have carefully considered the rival submissions. As per the definition of tour operator under Section 65(115) of the Finance Act, 1994, as amended and operative with effect from 10-9-2004, "tour operator" means any person engaged in the business of planning, scheduling, organizing or arranging tours (……) by any mode of transport and includes any person engaged in the business of operating tours in a tourist vehicle…..". Thus any person who operates the tour in a contract carriage, stage carriage or tourist vehicle, would come under the category of 'tour operator' and the activity undertaken in any form of carriage or mode of transport in relation to a tour would come within the definition of tour operator. In the present case, the appellant has entered into agreements with the various corporates for transportation of their employees on charter/hire basis. The consideration for the same is paid by the corporates and not by the individual employees. Therefore, the ratio of the decisions of this Tribunal in the Valsala Travels caseand Himachal Road Transport Corporation case cited supra which dealt with identical situation would squarely apply. The decision of the Madras High Court in the Sri Pandyan Travels case and Federation of Bus Operators of Tamil Nadu case support the proposition that even if the tour is undertaken in a stage carriage or contract carriage, Service Tax levy would be attracted under tour operators service. The reliance placed by the appellant on the Moharir Travels case does not help because there was a difference of opinion between two members which was referred to a third member and by a majority decision, the appellant was directed to make the pre-deposit at the interim stage. The Hon'ble Bombay High Court, did not consider the case on merits and pass any judgment on merits but directed the Tribunal to decide the case without insisting on any pre-deposit only on the ground that there was a difference of opinion between the members. Therefore, the said decision cannot be made applicable to all cases, even when the facts are different. Regarding the reliance placed on the decision of Ideal Travels case, the service provider was not providing the service on charter/hire basis but was plying the buses on intrastate routes. Hence the ratio of the said decision cannot also be applied to the present case where the facts are different. As regards the exemption under Notification No. 20/2009-S.T., the said notification excludes from its scope such services if they are of the nature of tourism, conducted tours, charter or hire service. In the case before Tribunal, the service is rendered on charter/hire basis and therefore the benefit of the said exemption would not apply. Accordingly we are of the considered view that the appellant has not a case for complete waiver of the dues adjudged against them.
In view of the foregoing, we direct the appellant to make a pre-deposit of Rs. 1,34,253/- which is the demand for the normal period within a period of 6 weeks and report compliance on 20-5-2013. On such compliance, balance of dues adjudged against the appellant shall stand waived and recovery thereof stayed during the pendency of the appeal.

Decision:-Stay partly granted.

Comment:-The essence of this case is that transportation of employees from residence to corporate and back on charter/hire basis is leviable to service tax under the category of “tour operating services” based on the decision of the Tribunal in the case of Valsala Travels.

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PJ/Case Law/2013-14/1996

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