By TIOL News Service

MUMBAI, MAY 01, 2017: THE Appellants are engaged in the business of organizing "Outbound tours".

Demand notices were issued for recovery of Service Tax on the activity of outbound tours and the same were confirmed by the Commissioner of Service Tax, Mumbai along with penalties and interest.

The appellant is before the CESTAT and argues that the service tax is destination based consumption tax and should be levied at the location where the services are consumed or in other words where the services are used. By adverting to the decision of the Apex Court in the case of All India Federation of Tax Practitioner's - 2007-TIOL-149-SC-ST and the Board Circulars on the subject matter coupled with the legislative amendments made in the definition of Tour operator and the provisions of Export of Services Rules, 2005, the appellant submitted that no tax liability arises on outbound tours.

The AR submitted that the earlier decision in the appellant's own case - 2013-TIOL-1907-CESTAT-DEL relied upon by the appellant is per incuriam; that the Revenue appeal against this order was dismissed solely on the ground of delay and not on merits; that in view of the decision of the Apex Court in Paras Laminates, it is open to the Tribunal to refer the matter to Larger Bench when there is a reason to doubt the correctness of the earlier decision.

The Member (Technical), writing for the Bench,extracted the summary of conclusions made by the Delhi Bench of the CESTAT in the cited case of the appellant - 2013-TIOL-1907-CESTAT-DEL and viewed that since the Revenue appeal was dismissed by the Supreme Court on the ground of delay, the said Tribunal could not be considered as a binding precedent.

Having observed thus, the Division Bench in a verbose order offered its views on the two major aspects dealt with in the said order viz.

i) If the service provided by the appellant falls within the definition of the taxable service

ii) If the service is provided and consumed within the territory of India or otherwise

And concluded that the said decision (supra) is sub silentio and, therefore, not a binding precedent inasmuch as -

i) it does not identify any activities that make the appellant an 'Operator' as against 'planner, scheduler, organizer or arranger' of tours.

ii) it fails to consider the provisions of the Section 65(105)(h) of the Act in the said decision. The entire reasoning given in the order is on the assumption that 'Outbound Tours' are the taxable service and not 'Any service provided (or to be provided) to any person, by a tour operator in relation to a tour'.

iii) As a consequence of treating 'Tour' as service it considers the destination of 'Tour' as the place where the service was provided and consumed and not the place where the 'Services in relation to tour' were provided, as the place of provision and consumption of services.

Noting that the aforesaid points were not brought before the Tribunal and, therefore, the tribunal failed to consider these, the Division Bench took a view that the matter needs to be placed before the President for constitution of a Larger Bench to decide the following -

i) Whether the service that appellant are providing is taxable service under Section 65(105)(n) of the Finance Act as held by Tribunal in their own case or otherwise?

ii) Whether the appellant is said to be providing the said service within the taxable territory?

(See 2017-TIOL-1445-CESTAT-MUM)