By TIOL News Service

NEW DELHI, MAR 08, 2013: THE Appellants have leased a ropeway installed by Municipal Board, Mussoorie at Mall Road, Mussoorie and are engaged in operating it to entertain tourists by carrying tourists from Mall Road to Gun Hill and back to Mall Road.

After amendment of section 65 (115) of Finance Act, 1994 to include any means of transport in the definition of tour operator, the Superintendent of Central Excise, Dehradun asked the appellant to deposit service tax on the charges collected by them from the tourists and they paid such tax under protest for the period Oct 2004 to September 2005.

Later they claimed refund of the said tax paid because they were of the view that they will not be covered by the definition of tour. The Assistant Commissioner rejected the refund and their appeal too was rejected by the Commissioner (Appeal).

So, the operator is before the CESTAT.

The argument on behalf of the Appellants is that they are not planning, scheduling, organizing or arranging tours. They are only operating a ropeway taken on lease by them from the Municipality. They contest that such operators will not be covered by definition given at 65 (115) of the FA, 1994. They also rely on the decision of the Tribunal in Usha Breco Ltd. Vs. CCE - (2006-TIOL-1274-CESTAT-DEL).

They also submit that “ropeways” is an item covered by entry 13 of List-II of Seventh Schedule of the Constitution of India and only the States can pass any law dealing with the subject. They submit that the State is already charging entertainment tax on this activity. Further, they pointed out that no Show Cause Notice has been issued for appropriating the tax paid by them under protest. So they should be granted the refund claimed by them. It is also submitted that they have stopped paying service tax from September, 2005 and no demands have been issued for the subsequent period. So also service tax is not being collected from other operators of ropeways at Haridwar in the State of UP.

The Revenue representative submitted that the decision cited in the case of Usha Breco Ltd was with reference to the definition prevailing prior to 10-09-2004 and the facts are different. It is also submitted that the fact that the State Government is levying entertainment tax for the services provided cannot be reason to hold that service tax is not leviable on the service provided to the tourists. However, as to why there is no demand for the period from September, 2005, the Revenue representative did not have any explanation.

While Technical Member was of the opinion that ropeway belonging to Municipality taken on lease by the appellant to operate the same was a ‘tour operator' and liable to service tax, reverse was the view of Judicial Member holding that running of ropeway between two fixed points by the appellant does not amount to "tour operator service”.

So, the matter came to be referred to the third Member.

The Third Member on reference observed -

"28. The essential fact of the case is that the appellant was a licensee of Nagar Palika Parisad, Masoori to operate ropeway for a period of 5 years from 1.4.2002 to 31.3.2005 against public tender issued and licence deed executed on 27.4.2000. Nagar Palika Parisad as licensor and owner of ropeway had allowed the appellant as a licencee to run the same under certain restrictive covenants in terms of clause 7, 8, 9, 10 and 11 of the licence deed. In terms of clause 7 there was restriction of number of passengers to be allowed to travel in each cabin while clause 8 restricted the fees chargeable from each passenger. Clause 9 obliged the licencee to insure the ropeway and clause 10 required passengers to be insured by the appellant licensee. Clause 11 required meeting the claim of injury of passenger by the licensee.

29. With the aforesaid modality of licence deed, the appellant was allowed to operate the ropeway of Nagar Palika and such factual aspect called for testing by the Revenue Authorities with the provision of law under which the appellant was brought to tax. Section 65 (105) (n) of the Act has taxing entry and meaning of the term "Tour Operator" is given by section 65 (115) of the Act. Definition of Tour Operator" under section 65 (115) states that any person engaged in the business, planning, scheduling, organizing or arranging tours by any mode of transport shall be "Tour Operator". In terms of such definition to call a person as "Tour Operator" he should be either planner of tour or organizer or arranger thereof. So also, scheduling tour brings the service provider to the category of tour operator. Meaning of the term "tour" is given by section 65 (113) of the Act. "Tour" means journey from one place to another irrespective of distance from such place. According to the deed of licence the appellant was to transport the tourists who choose to use the ropeway for their journey and come on their own volition without any planning, scheduling, organizing or arranging tour by the appellant licensee. Once tourists are not governed by any planning, scheduling, organising or arranging for their journey and not dependent on the licensee appellant for such planning, scheduling, organizing or arranging for their tours but only avails the facility of ropeway provided by appellant licensee during working hours from 6 A.M. to 11 P.M. on payment of fees prescribed by clause 8 of licence deed, they were not beneficiary of any planning, scheduling or arranging of tours since tour to be taxable has to follow its preceding activities enumerated by section 65(115) of the Act. Accordingly, the appellant had not acted as "tour operator" within the meaning of Section 65(115) of the Act for which the taxing entry 65(105)(n) thereof is not attracted. Consequently, there shall not be liability to tax following the ratio laid down by Hon'ble High Court of Uttarakhand in the case of CCE, Meerut-I vs. M/s. Usha Breco Ltd. - 2013-TIOL-20-HC-UKHAND-ST."

In fine, the third Member on reference held that the appellant was not a "tour operator" within the meaning of section 65(115) of the Finance Act, 1994 and hence the appeal is to be allowed.

So, by a Majority order, the order of the CCE, Meerut-I was set aside and the appeal was allowed with consequential relief.