By TIOL News Service

MUMBAI, DEC 20, 2016: IN respect of 'tour operator', exemption was provided by notification no. 20/2009-ST dated 7th July 2009 which operated thus -

"…exempts the taxable service referred to in sub-clause (n) of clause (105) of section 65 of the Finance Act, provided or to be provided to any person, by a tour operator having a contract carriage permit for inter-state or intrastate 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 Finance Act."

A corrigendum was issued on 31st August 2009 mandating that the words 'contract carriage permit' be read as 'contract carriage or tourist vehicles with a permit '.

Vide section 75 of Finance Act, 2011 the exemption of 2009 was accorded retrospective effect thus:

"75.(1) The notification of the Government of India in the Ministry of Finance (Department of Revenue) number G.S.R. 492 (E), dated the 7th July 2009, issued in exercise of the powers conferred by sub-section (1) of Section 92 of the Finance Act, 1994, granting exemption from the whole of service tax leviable under-section 66 of that Act to any person by a tour operator having a contract carriage permit for inter-State transportation of passengers, excluding tourism, conducted tour, charter or hire service, shall be deemed to have, and deemed always to have, for all purposes, validly come into force on and from the 1st day of April, 2000, at all material times."

M/s Benzy Travels, who had obtained registration as service provider only after June 2005 were in the business of transporting passengers from Mumbai to Kerala, and places en rout e, using buses issued with tourist permits or contract carriage permits and M/s SRS Travels , their direct sales agent, would remit collections from sale of tickets after deducting commission.

Three SCNs for the periods 2001-01 to 2004-2005, 2005-06 and 2006-07 demanding service tax amounts of Rs.1,69,76,430, Rs.32,94,067 and Rs.72,79,292 respectively were issued to the appellant for alleged non-payment of tax as provider of 'tour operator service'.

The adjudicating Commissioner took note of the above retrospective legislation and concurred with the appellant that all collections made in relation to contract carriage permits were not taxable . Consequently, the segregation of receipts was undertaken and the impugned order restricted demand of tax to Rs.90,05,889/-[ Rs.58,43,854/-, Rs. 9,37,548/- and Rs.23,56,519/-] in the three notices along with interest thereon and refrained from imposing any penalty. In arriving at the exclusion from the retrospective exemption, the adjudicating Commissioner was disinclined to consider the 'tourist vehicles' to have been covered; in so inferring, it was held that vehicles issued with 'contract carriage permits' was specified and there was no reference to 'tourist vehicles'. It was also held that collections of Rs.91,21,825/- relating to tours offered to holy places, excursions, school trips and marriage functions are not excluded from tax.

Both, the appellant and the Revenue are before the CESTAT.

Appellant-assessee disputes the finding that 'tourist vehicles' are not eligible for the benefit of the retrospective exemption. It is pointed out that this benefit was originally accorded prospectively by notification No. 20/2009-ST to eliminate the discriminatory benefit accorded to 'stage contract carriages' performing the same service. Inasmuch as the validation statute refers to the expressions in the original notification and, therefore, the clarificatory corrigendum is to be read along with this.

Revenue, in appeal, contends that the AA did not ascertain the compliance of the various vehicles of the appellant-assessee with the various types of permits issued by the Regional Transport Authority and has, erroneously, placed reliance on certificate furnished by a Chartered Accountant; failure to impose penalties is also challenged.

The Bench inter alia observed –

+ Taxability of 'tour operator services' was laden with various complications including the reference to the provisions of Motor Vehicles Act,1988 and divergent policies and practices in relation to use of vehicles for public transport in different states. The notification of 2009 to accord parity to state-run/state-operated bus services and private-operated bus services followed by the Validation Act in 2011 to extend this parity with retrospective effect from 2000 is adequate evidence of this. That the taxability was itself fraught with much confusion is demonstrated by the need to resort to the rarely-sued instrument of retrospective legislation. Invoking the ingredients of section 78 of Finance Act, 1994 in these circumstances can, hardly, be justified. However, to the extent that tax is leviable, it was not in accordance with the law for the adjudicating Commissioner to refrain from invoking Section 76 of Finance Act,1994.

+ The intent to accord parity to public and private point-to-point operations was embodied in exemption notification No. 20/2009-ST. On reference from operators, the distinction between 'tourist vehicles' and 'contract carriages' performing the same activity as state-run undertakings was eliminated by a corrigendum circular. Consequently, we find no difficulty in holding that, for the purpose of exclusion from tax, vehicles used by service providers is also to be so construed. The validation Act which refers to the notification cannot be said to have any other intent. Section 75 of Finance Act, 2011 makes no reference to the Motor Vehicles Act, 1988 or the distinctive permits issued thereunder. The Validation Act has not made any alterations to section 65(105) (n) of Finance Act,1994 but has accorded a privilege to a certain class of service providers. The validation is to accord retrospective exemption to the same class of providers to which the Central Government did, within its powers, accord prospective exemption . Accordingly, we hold that appellant-assessee is entitled to exemption of tax on collections generated from use of 'tourist buses' for passengers other than tour etc. there is no difference in the treatment accorded to the two categories of vehicles. Consequently, appeal of Revenue for re-quantification after ascertainment of the certification of the vehicles is not sustainable.

+ The impugned order has quantified the collection from conducted tour, charter etc. as Rs.91,21,825for 2006-07 on which tax of Rs.4,46,605 has been determined. The remaining amount confirmed in impugned order pertains to use of 'tourist vehicles' and does not sustain.

Conclusion: Tax of Rs.4,46,605/- for 2006-07 stands confirmed along with interest thereon. Appellant is also liable to penalty u/s 76 of FA, 1994. Appeal of Revenue is disposed of.

In passing:

++ Notes and Clauses of Finance Bill, 2011 mentions –

Clause 72 of the Bill seeks to give retrospective effect to the notification of the Government of India number G.S.R. 492(E), dated the 7th July, 2009, from the 1 st day of April, 2000, so as to allow the exemption to a tour operator having a contract carriage permit for inter-State or intra-State transportation of passengers, excluding tourism, conducted tour, charter or hire service, under the said notification.

++ Paragraph 12.7 of TRU letter D.O.F.No. 334/3/2011-TRU dated 28th February 2011 reads -

12.7 Exemptions with retrospective effect have been given by the Finance Bill:

(a) x x x; and

(b) To inter-state or intra-state transportation of passengers, in a vehicle bearing contract carriage and tourist vehicle permit for the period from 01.04.2000 to 06.07.2009.

(See 2016-TIOL-3272-CESTAT-MUM)