By TIOL News Service

MUMBAI, OCT 21, 2014: APPEALS have been filed by, both the Revenue and the service provider, against the order passed by the CCE, Raigad.

The facts are that thecompany is engaged in the service of providing bus service to various companies for transporting their employees from the designated spots to the Company and back on a contract basis. The spot(s) from which the employees were to be picked up/dropped and timing at which they are to be picked up/dropped was determined by the Companies who hired the buses and the appellant was transporting the employees as per the schedule given by the companies. This activity was considered as taxable service as defined under the category of ‘Tour Operators' which was in vogue with effect from 01/04/2000.

The appellants were accordingly issued a SCN inter alia requiring them to pay ST amounting to Rs.72,91,057/- for the period October 2001 to September 2006.

The CCE, Raigad held that the appellant was not required to register themselves till 09/09/2004 but was required to do so and pay Service tax with effect from 10/09/2004 from which date the definition of ‘Tour Operators' was amended.

Accordingly, he dropped the demand for the period relating to October 2001 to 9th September 2004 and confirmed the demand amounting to Rs.40,99,449/- for the period 10 th October 2004 to September 2006 and imposed penalties and interest.

Both, the company and the Revenue, are in appeal against the order confirming/dropping of the service tax demand respectively.

The company has also filed a Miscellaneous Application urging that in view of exemption Notification 20/09-ST dated 07.07.2009 read along with Section 75 of the Finance Act, 2011 which gave retrospective effect to this notification from 01.04.2000, the services provided by the company stands exempted.The Bench allowed the application to take the additional evidence on record.

As for the appeal the appellant company submitted that for the period prior to 10/09/2004 the appellants are not covered under the definition of ‘tour operators' in view of the fact that the vehicle engaged by them is not a tourist vehicle and is not covered under the tourist permit granted under the Motor Vehicle Act or Rules made thereunder. Moreover, as the appellants are not undertaking any activity of planning, scheduling, organizing or arranging tours, therefore, they are not liable to pay service tax post 10/09/2004 also on the same premise that the appellants are not operating the tours in tourist vehicle.

The appellant also took up the plea of time bar and also relied upon a host of case laws in the matter. Reference is also made to the exemption notification 20/2009-ST and the retrospective effect given to the same & the CBEC Circular no. 334/13/2009-TRU dated 06.07.2009 in this regard. Mention is also made of the Circular No. 80/10/2004-ST dated 17/09/2004 in support.

The AR submitted that the case of the appellant is squarely covered by the decision of Sri Pandyan Travels Vs. CCE, Chennai-II - 2003-TIOL-34-HC-MAD-ST, wherein it was held that contract carriage vehicles although is not a tourist vehicle is covered for levy of service tax under the category of “tour operator”. Therefore, the demands raised in the show-cause notice are to be confirmed against the appellants and the impugned order setting aside the demands for the period prior to 10/09/2004 is to be set aside. It is further submitted that M/s. Capri is not entitled to take the benefit of Notification 20/09 dated 07.07.2009 and retrospective effect given by Section 75 of the Finance Act, 2011.

After considering the submissions made by both sides, the Bench observed –

++ Prior to 10/09/2004 the definition of ‘tour operator' was ‘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) and the rules made thereunder” and for the purpose of said definition ‘tour' means... journey from one place to another irrespective of the distance between such places; ‘tourist vehicle' means has the meaning assigned to it in clause (43) of Section 2 of the Motor Vehicles Act, 1988.

++ In this case, we have examined the records and the permit given to the appellant to operate the buses, which shows that the vehicles in question are not tourist vehicle &they are only contract carriage buses and also not holding the tourist permit. Therefore, for the period prior to 10/09/2004 tours operated by the appellant under the contract permit were not operated in the tourist vehicle; therefore, they are not liable to service tax under the category of tour operator.

++ The decision of Sri Pandyan Travel (supra) does not support the case of the Revenue inasmuch as it was observed by the High Court that if a tour operator is having tourist permit under Section 88 (9) of the Motor Vehicles Act, then the vehicle shall be treated as a tourist vehicle. Admittedly, in this case the appellant are neither having the tourist permit nor operating in the tourist vehicle. Therefore, the appellant are not held to be liable to pay service tax under the category of tourist operator prior to 10/09/2004. Accordingly, the appeal filed by the revenue fails and is dismissed.

++ Post 10/09/2004 amended definition of ‘tourist operator' applies. As the second part of the definition does not cover the activity of the appellants in the category of tour operator therefore only point of examination is whether the appellants are engaged in the business of planning, scheduling, organizing or arranging tours or not.

++ After analyzing the agreement, we find that M/s. Grasim Industries Ltd. has planned for providing buses of specific capacity with a particular schedule as per the instructions of their authorised representative from time to time at fixed charges, and the appellant have to provide/supply the buses only. The intent of the legislature was to expand the levy of service tax for planning/scheduling/organizing/arranging the package tours.In the present case, the appellants provide/supply the contract carriage business (not tourist vehicles) to their customers on their demand only.

++ Appellant has claimed the benefit of Notification 20/09-ST dated 07.07.2009 read with Section 75 of the Finance Act, 2011 which exempts the service provided to any person, by a tour operator having ‘contract carriage permits' for inter-state or intra-state transportation of passengers, excluding tourism, conducted tours, charter or hire service, from whole of the service tax leviable thereon under Section 66 of the said the Finance Act, which has been made applicable retrospectively w.e.f. 01.04.2000. As the said Notification and the Finance Act, 2011 were not contested by M/s. Capri before the Adjudicating Authority, therefore, matter needs examination at the end of the Adjudicating Authority to decide whether appellant is liable to pay service tax under the category of ‘Tour operator' or not.

++ We find that appellant has relied on several decisions of this Tribunal or by the lower authorities, and the decisions are contrary to each other. In view of this, we hold that the extended period of limitation is not applicable in this case. Therefore, the demands confirmed by invoking the extended period of limitation are set aside. Consequently, penalties are also set aside.

In fine, the Revenue appeal was dismissed and the appeal of the appellant was allowed by way of remand for the limited purpose mentioned.

(See 2014-TIOL-2051-CESTAT-MUM)