By TIOL News Service

ALLAHABAD, JULY 5, 2014: THE appellant, a registered Tour Operatorentered into a contract with various Principal Tour Operators (PTOs) based in Delhi and Mumbai.

The period involved in the proceedings covered under the SCN dated 19.10.2007 issued by CCE, Kanpur is 01.04.2002 to 31.3.2007.

The appellant has filed the returns in ST-3 for the relevant period in dispute disclosing the amount received for the tours and transportation services and also paid tax thereon. They have claimed the exemption to the extent of 60% under the Notification No. 39/97-ST, which was available to the tour operator on a package tour.

The definition of "tour operator" during the impugned period was -

Year 2002 (w.e.f11.05.2002)

(96) "tour operator" means any person engaged in the business of operating tours in a tourist vehicle covered by a permit granted under the Motor Vehicles Act, 1988 (59 of 1988) or the rules made thereunder;

Year 2004 (w.e.f 10.09.2004)

(115) "tour operator" means any person engaged in the business of planning, scheduling, organising 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 (59 of 1988) or the rules made thereunder;

The PTOs provide services of package tours to the foreign tourists and other tourists, who visit various cities and various tourist places in India. It is alleged that the package tour provided by the PTOs includes transport services, alongwith supplementary services, like, Air and Railway Tickets, food and lodging, porter-age services, monuments visit services, guide services, food services and general assistance services etc. It is the contention of the appellant that the PTOs are under the obligation to pay the service tax for rendering such services and the service tax has been paid on such services.

However, no evidence has been adduced by the appellant at any stage that on which turnover and how much services tax has been paid by the PTOs.

It is the case of the appellant that it was only engaged in the business of providing Transport services to be provided by the tourist vehicle, without any supplementary services, like, Air and Railway Tickets, food and lodging, monuments visit services, guide services, porter's services, food services and general assistance service etc. and raised bills from the PTOs only for transport services.

The claim of the appellant is that in respect of certain amount incurred on behalf of the PTOs for engaging the guides, porters or supplying the food, reimbursement is made on actual basis by the PTOs against the debit note being raised by the appellant.

It is the contention of the appellant that there was a relationship between the PTOs and the appellant as a Principal and an agent.

On the basis of investigations conducted and various documents seized, an opinion has been formed by the department that the appellant was not paying the service tax on the gross amount charged from the customers in lieu of the services rendered by tour operator.

As mentioned, a SCN came to be issued by CCE, Kanpur demanding ST of Rs.1,15,70,655/- on a gross amount of Rs.24,85,36,696/-charged and received from their customers.

The demand was confirmed on 13.03.2008 along with penalties etc. and an amount of Rs.15 lakhs paid was appropriated.The CESTAT allowed the appeal in part vide its order dated 25.08.2008. Inasmuch as the Tribunal held that the appellant is liable for the service tax on the entire gross amount of Rs.24,85,36,696/-, excluding the amount of Rs.60,26,174/- received towards temporary advance to tour escorts and the amount of Rs.42,24,160/- on account of inter branch billings income.

Imposition of penalties was also upheld but the matter was remanded for re-calculation of tax and penalty.

Subsequently, an application was filed before the Tribunal on the ground that some of the pleas, which have been taken in the appeal and the arguments raised in respect thereof during the course of the hearing have not been adjudicated but this application was rejected.

Against the Tribunal order dated 25.08.2008, the appellant has filed an appeal before the Allahabad High Court.

On the various questions of law raised by the appellant, after hearing the lengthy submissions by both sides, the High Court observed -

Double Taxation:

++ So far as the submission of learned counsel for the appellant that since service tax has been paid by the Principal Tour Operator on the entire amount received from the customers, which includes amount paid to the appellant, therefore, there should not be a double levy of service tax on the same amount inasmuch as this aspect of the matter has not been considered by the Tribunal, though raised, is concerned, we do not find any substance and the same cannot be accepted for the reasons:

(a) the appellant has filed a miscellaneous application on the ground that the issue has not been considered by the Tribunal, the same has been rejected by the Tribunal against which no appeal has been filed; and

(2) the appellant is not able to adduce any evidence in the form of assessment order of the Principal Tour Operator or any other documents issued by the service tax authorities to substantiate the claim that service tax has been paid on the entire amount by the Principal Tour Operator, which includes the amount paid to the appellant. Merely on the basis of the certificates issued by the Principal Tour Operator enclosed with the memorandum of appeal, the claim of the appellant cannot be accepted inasmuch as it is doubtful whether these certificates have been filed before the authorities below.

Limitation:

+ Circular No. F.B.43/10/97- TRU, dated 22-8-1997 clarifies that the value of taxable service in relation to the service provided by a tour operator to a client, shall be the gross amount charged by such operator from the client for services in relation to a tour and includes the charges for any accommodation, food or any other facilities provided in relation to such tour. The aforesaid clarification has been reiterated by the Board in the years 2001 and 2007. Therefore, it is not, that for the first time the circular has been issued in the year 2007 clarifying the position. The position regarding the taxable services provided to any person in relation to a tour has already been explained in the year 1997 and in 2001 itself. Therefore, the appellant ought to have given the information about the supplementary services being provided in ST-3 return or otherwise. In any view of the matter, such information without any doubt ought to have been given after 10.9.2004 when the definition of Tour Operator has been amended, but the appellant willfully failed to disclose such information.

+ Therefore, in view of the above, it cannot be accepted that the appellant under the bonafide belief could not give the information about the supplementary services to the Department.

+ The appellant has availed the benefit of abatement/exemption under the Notification No. 39/97-ST to the extent of 60% of the total amount charged treating the entire services provided as a package tour, including the facilities such as Air and Railway Tickets, porterage, fooding and lodging, monuments visit services, guide services, and general assistance services etc. This clearly shows that the appellant was fully aware that it is a package tour in which supplementary services are also included, but failed to disclose the receipts towards supplementary services.

+ This proves the willful mis-statement and suppression of facts and thus, the proviso to Section 73 (1) of the Act is fully applicable to the extended period of limitation.

Whether prior to 10.09.2004 supplementary services includible:

+ Clause (n) of Sub-section (105) of Section 65 provides that taxable service means any service provided or to be provided to any person by a tour operator in relation to a tour.

+ Sub-section (115) defines 'tour operator' which means any person engaged in the business of operating tours in a tourist vehicle covered by a permit granted under the Motor Vehicles Act or Rules made thereunder.

+ Both clause (n) and sub-section (115) are to be read together. Clause (n) clearly provides service to any person by a tour operator in relation to a tour. The definition is wide and includes all the services rendered by the service provider to any person relating to tour. The charging section is Section 65(105) (n). Sub-section (115) only defines tour operator and cannotnarrow down the scope of services provided in relation to a tour.

+ The phrase 'in relation to' the tour means "in the aid of tour" also. Therefore, if any service is rendered in relation to or in the aid of tour is liable to be taxed. The taxable service, therefore, not only means mere providing of car, taxies, contract carriages on a temporary basis but it would also include other facilities supplied in relation to tour as a whole.

+ Section 65 (105)(n) defines 'taxable service' means any service provided to any person by a tour operator in relation to a tour. Thus, it includes any and all services provided by the Tour Operator in relation to a tour, namely, porterage services, monuments visit services, guide services, food services and general assistance services etc. for which the amount has been paid. The words 'in relation to a tour' is a wide and includes all sort of services, which relate to tour. It may also include supplementary services, apart from the transport services, provided by the Tour Operator. The Tour Operator is defined under Sub-section (115) of Section 65. Sub-section (115) defines 'tour operator' engaged in the business of operating tour in a tourist vehicle, read with "in relation to a tour" means carrying on the business of operating tour which includes transportation services and other allied supplementary services connecting with the tour.

+ There is nothing in the definition which excludes supplementary services which are connected to the tours. Circular dated 22.8.1997 issued by the Board also made the clarification in a similar manner. The amendment in the definition of the Tour Operator with effect from 10.9.2004 by the Finance (No. 2) Act, 2004 enlarging the definition is only clarificatory and does not mean that such services were not included in the business of operating tour prior to 10.9.2004.

+ Therefore, we are of the view that supplementary services or allied services in relation to tour were included in the taxable services provided by the Tour Operator prior to 10.9.2004 and subsequent to 10.9.2004.

Reimbursed expenses, on actual basis, whether liable to Service Tax:

+ Section 67 provides valuation of taxable service for charging the service tax. It provides that value of any taxable service shall be gross amount charged by the service provider of such service. It includes certain value of taxable service and excludes certain amount. The amount received towards supplementary services does not fall within the purview of exclusion clauses. Therefore, being a part of the gross amount, they are to be treated as the value of taxable service.

Penalties:

+ Neither the Commissioner of Central Excise nor the Tribunal has addressed the levy of penalty with reference to the provisions of Section 80 of the Act.

+ In view of the decision of the Division Bench of this Court in Central Excise Appeal No. 67 of 2014, M/s Daurala Organics the issue relating to penalty requires fresh consideration by the Commissioner of Central Excise in view of the law laid down by this Court.

Order:

The appeal is allowed in part.

The order of the Tribunal, so far as it relates to levy of service tax is concerned, is upheld and so far as the penalty is concerned, it is hereby set aside and the matter is relegated to the Commissioner of Central Excise to re-compute the quantum of service tax as per the direction of the Tribunal and re-adjudicate the issue with regard to penalty.

The questions raised in the appeal are answered accordingly.

(See 2014-TIOL-1062-HC-ALL-ST)