By TIOL News Service

MUMBAI, NOV 28, 2013: BRIEF facts of the case are that the assessee is a Corporation owned by the Government of Maharashtra. It was alleged that they were providing the tour services to the customers under contract-carriage basis and stage-carriage basis which fall under the category of ‘Tour Operators' service as defined under Section 65 (105)(n) of the Finance Act, 1994. SCNs were issued against the assessee covering the period from 1.4.2001 to 31.3.2008. The lower adjudicating authority confirmed the demand in all the cases and also imposed penalties under the various provisions of the Finance Act, 1994.

The assessee challenged these appeals before the Commissioner (Appeals). In some appeals the orders were upheld but the penalties were set aside and in the rest the appeals were decided in favour of the assessee.

So, both the assessee and the Department are in appeal before the CESTAT.

Submissions made by the appellant inter alia are as under -

+ they are not tour operators but a nationalized undertaking constituted under the Road Transport Corporation Act, 1950 and hence not liable to pay Service Tax;

+ ‘Tourist Vehicle' has been defined under Section 2 (43) of the Motor Vehicles Act and it means a contract carriage constructed or adopted and equipped and maintained in accordance with such specifications as may be prescribed in this behalf.

+ the vehicles which they are operating are ordinary contract carriage and stage-carriage and they do not conform with the specifications provided under Rule 128 of the Central Motor Vehicles Rules.

+ contract carriage and stage carriage vehicles are covered under permits granted under Section 72 and 74 respectively of the Motor Vehicles Act, whereas the tourist vehicles are covered under the permits granted under Section 89 of the Motor Vehicles Act.

+ all tourist vehicles are contract-carriages however all contract carriages are not tourist vehicles unless the contract carriages are made as per the specifications provided under the said Rule 128.

+ They are not arranging any tour and, therefore, they cannot be termed as tour operators and hence cannot be subjected to pay service tax.

The Revenue representative submitted that the assessee is providing buses for tours like excursions, site seeing, marriages, election duty etc. which is falling under the definition of ‘tour operators' which was in vogue from 1.9.1997 and 10.9.2004 onwards; that as per the definition u/s 65(113) of the Finance Act, 1994 "tour"means ‘a journey from one place to another irrespective of the distances between such places.'

The Bench observed -

"6.1 …Undisputedly the period involved in this case is from 1.4.2001 to 31.3.2008. The definitions of Tour Operators at the relevant period are reproduced hereunder for convenience of reference.

(i) the position from 1.4.2000 to 9.9.2004- ‘any person engaged in the business of operating tour in a tourist vehicle covered by a permit granted under the Motor Vehicles Act, 1988.

(ii) the position from 10.9.2004 onwards: persons who are engaged in the business of planning, scheduling, organising or arranging tours by any mode of transport, and includes any person engaged in the business of operating tours in a tourist vehicle.'

6.2 From the records we find that the assessees are only renting their vehicles. We also find that the department could not bring out on record that the assessees are engaged in the business of planning, scheduling, organizing or arranging tours. In these circumstances, the assessees cannot be termed as tour operators. Therefore, the demands of Service Tax against them are not sustainable in law. As the demands are not sustainable, the penalties also do not survive. In these circumstances, the assessees appeals are allowed and the Revenue's appeals are dismissed."

In passing: Also see 2010-TIOL-1308-CESTAT-MUM.

(See 2013-TIOL-1769-CESTAT-MUM)