Service tax liability for tour operators hinges on vehicles meeting the tourist vehicle definition under Motor Vehicles Act.

The case involved a challenge to a service tax demand against two companies for operating vehicles as tour operators. The court clarified that the vehicles must meet the definition of tourist vehicles under the Motor Vehicles Act to attract service tax liability. The appellants argued that their vehicles did not qualify as tourist vehicles under the Act's definition. The Tribunal directed the adjudicating authority to verify if the vehicles met the criteria for tourist vehicles and hold permits under the Motor Vehicles Act. The original order was set aside, and the cases were remanded for further examination based on the guidelines provided.

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Issues:
Service tax demand confirmation against M/s. Ajith Travels and M/s. Ajith Transports under section 73(1) and 73(2) of the Finance Act, 1994 challenged on the ground of rendering tour operators service using contract carriages as tourist vehicles.

Analysis:
The appellants argued they only possess a permit under section 74 of the Motor Vehicles Act for contract carriage operators, not under section 88(9) for tourist vehicles. Referring to a High Court judgment, it was clarified that the requirement is not a 'tourist permit' but a 'user of tourist vehicle' by the tour operator, covered under a permit granted under the Motor Vehicles Act. The judgment emphasized that the vehicle should be a tourist vehicle under section 2(43) of the Motor Vehicles Act, dismissing the argument that a permit under section 74 for contract carriages would not attract service tax liability unless it is a tourist permit. The Court highlighted that the vehicle should be used for a tour and covered by a permit under the Motor Vehicles Act or its rules.

The appellants contended that the vehicles they operate are not tourist vehicles as they do not meet the specifications under rule 128 of the Motor Vehicles Rules, hence not falling within the definition of tourist vehicles under section 2(43) of the Motor Vehicles Act. The Commissioner's order lacked a finding on whether the vehicles are tourist vehicles as per the Act's definition. The Tribunal emphasized the need for the adjudicating authority to verify if the vehicles operated by the appellants meet the definition of tourist vehicles under the Motor Vehicles Act and its rules. It was highlighted that if the vehicles qualify as tourist vehicles, the appellants are liable for service tax; otherwise, the demand cannot be sustained. The authority was instructed to examine this aspect and verify if the assessees hold permits under section 88(9) of the Motor Vehicles Act. The impugned order was set aside, and the cases were remitted for a fresh decision based on the provided guidelines, allowing the appeals through remand for further examination.

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