By TIOL News Service

MUMBAI, MARCH 14, 2014, THE appellant undertakes tours to various places and they entered into agreements with various parties and for the services rendered they are collecting amounts under the heads ‘Bus Reservation Agreement', ‘Seat Reservation Agreement', Nasik Darshan', and 'Tour Extension'. They are discharging service on the charges received for seat reservation, Nasik Darshan and Tour Extension. However, no service tax liability is discharged on the consideration received for ‘Bus Reservation'.

A SCN came to be issued demanding service tax of Rs.11,77,681/- on the charges received towards bus reservation for the period 01/04/2006 to 31/05/2007 and the same was adjudicated vide order dated 30/04/2008 by classifying the services rendered by the appellant as ‘Tour Operator Service'. Since the order was upheld by the lower appellate authority, the appellant is before the CESTAT.

It was submitted that the services rendered by them would come under the category of Rent-a-Cab Operator and they are discharging service tax on the said activity w.e.f. 01/06/2007 onwards and, therefore, for the period prior to 01/06/2007, the said services cannot be classified as tour operator services and in this regard they placed reliance on the decisions in Gujarat Chemical Port Terminal Co. Ltd. (2007-TIOL-1898-CESTAT-AHM) Diebold Systems (P) Ltd. 2008-TIOL-489-CESTAT-MAD.

While disposing the Stay application, the Bench had found prima facie case for the appellant against the impugned demand and after noting that the appellant had deposited an amount of Rs.1 lakh, the CESTAT waived the pre-deposit and stayed the recovery. We reported this order as (2009-TIOL-1726-CESTAT-MUM).

The appeal was heard recently.

The Bench noted that the case had come up on three earlier occasions but the appellant had sought adjournments and even on the present occasion they had sought adjournment on the ground that the Director of the company is on urgent business tour. Taking a view that it was the fourth occasion the appeal is coming up for hearing,the Bench opined that it was not inclined to consider the adjournment request and, therefore, proceeded to dispose the appeal.

The Revenue representative submitted that the appellant is discharging service tax under ‘tour operator services' in respect of seat reservation and tour extension services undertaken by them but on the component of bus reservation charges collected, they are not discharging service tax liability. Inasmuch as since the entire activity is a single activity, the same cannot be divided and segregated and service tax liability discharged only on the part of service rendered of seat reservation and tour extension by contending that bus reservation falls under a different category altogether.

The Bench observed –

"6. …We have also perused the bus reservation agreement dated 17/10/2007 available on record entered into by the appellant with the Principal, RangubaiJunnare Primary 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 and concludes at 7.00 p.m. on 23/22/2007. Thus, the bus reservation is for conduct of the tours and therefore, it forms rightly part of the tour operator services as defined in law."

The Bench further observed that in the appellant's own case, for the previous period, it had examined this issue and held that the appellant would be liable to discharge service tax liability on the bus reservation agreement under the category of tour operator services w.e.f. 10/09/2004. [We had reported this order as (2012-TIOL-1207-CESTAT-MUM).

Holding that there is no merit in the appeal, the service tax demand on the ‘bus reservation charges' collected by the appellant under the category of tour operator service was upheld and the liability to pay interest was also sustained.

In the matter of penalty imposed under sections 76 & 78, the Bench observed –

"…Section 76 penalty is imposable if there is a delay or default in payment of service tax and no mensrea is required to be proved. However, imposition of penalty under Section 78 is for suppression of facts, collusion, fraud etc. In this particular case, since the activity has been in dispute since 2004, the department cannot allege suppression or willful mis-statement of facts. Therefore, the penalty under Section 78 is neither justified nor warranted in the circumstances of the case. Accordingly, we set aside the penalty imposed under Section 78 of the Finance Act, 1994."

Except for the above modification, the order of the Commissioner(A) was upheld and the appeal dismissed.

(See 2014-TIOL-401-CESTAT-MUM)