2007 (6) TMI 113 - AT - Service Tax

Tribunal upholds penalties for tour operator's taxable services in tourist vehicles under Motor Vehicles Act

The Tribunal upheld penalties imposed on the appellant for providing taxable services as a 'tour operator' in 'tourist vehicles' covered by permits issued ... Tour operator service taxable - tourist vehicle - contract carriage - stage carriage - permit endorsement decisive - exemption under Notification No. 15/2007-ST - re-quantification of tax and penalty - benefit under Section 80Tour operator service taxable - tourist vehicle - contract carriage - stage carriage - permit endorsement decisive - Liability to service tax as a 'tour operator' in respect of vehicles endorsed as tourist vehicles - HELD THAT: - The Tribunal held that the appellant's vehicles fall within the definition of 'tourist vehicle' under the Motor Vehicles Act and that the vehicles were used for operating 'tours' as defined in the Finance Act provisions relied upon by the Department. The panel rejected the appellant's contention that actual use as a 'stage carriage'-i.e. picking up and setting down passengers en route-would exclude liability. The decision rests on the combined effect of the statutory definitions and the fact that the vehicles were authorized by the appropriate authority and endorsed as tourist vehicles; once the authority has classified and permitted the vehicle as a tourist vehicle meeting prescribed specifications, subsequent use by the permit holder does not declassify it for the purposes of service tax. [Paras 9, 11, 13]Appellant is liable to service tax as a tour operator in respect of vehicles endorsed as tourist vehicles; the challenge that vehicles were used as stage carriages is rejected and the impugned finding on liability is confirmed.Exemption under Notification No. 15/2007-ST - re-quantification of tax and penalty - benefit under Section 80 - Need for re-quantification of tax and penalty in light of subsequent Notification No. 15/2007-ST and consideration of appellant's claim under Section 80 - HELD THAT: - The Tribunal noted that after the adjudicating authority's order the Central Government issued Notification No. 15/2007-ST granting exemption under the relevant statutory power and that this notification was not before the lower authorities. Given that application of the notification (and the appellant's plea for relief under Section 80 regarding non-filing of returns and prevalent departmental practice) could materially affect the amount of tax and the penalties imposed, the Tribunal directed remand to the adjudicating authority to reconsider and re-determine the quantum of tax and penalty payable taking the notification and the Section 80 contention into account. [Paras 14, 15]Matter remanded to the adjudicating authority for re-quantification of tax and penalty in the light of Notification No. 15/2007-ST and for consideration of the appellant's claim under Section 80; rest of the order is confirmed.Final Conclusion: Appeal partly allowed inasmuch as the matter is remitted to the adjudicating authority for re-quantification of tax and penalty in light of Notification No. 15/2007-ST and the appellant's plea under Section 80; the finding of liability as a tour operator in respect of vehicles endorsed as tourist vehicles is upheld and the balance of the order is confirmed. Issues:1. Challenge to order-in-appeal of Commissioner (Appeals-II), Jaipur dated 8-11-2002.2. Determination of whether the appellant is engaged in providing taxable services as a 'tour operator' in 'tourist vehicles' covered by permits issued under Section 88(9) of the Motor Vehicles Act, 1988.3. Contention regarding the usage of vehicles as 'stage carriages' and not as 'tourist vehicles.'4. Interpretation of the definition of contract carriage under sub-section (7) of Section 2 of the Motor Vehicles Act, 1988.5. Compliance with eligibility criteria for the use of vehicles as 'contract carriage.'6. Time-barred show cause notice issued for the period from 1-4-2000 to December 2003.7. Legal implications of holding a tourist permit for vehicles.8. Application of Notification 15/2007-ST dated 4-4-2007 granting exemption under Section 11C of the Central Excise Act, 1944.Analysis:1. The appeal challenges the order-in-appeal of Commissioner (Appeals-II), Jaipur dated 8-11-2002. The appellant is found engaged in providing taxable services as a 'tour operator' in 'tourist vehicles' covered by permits issued under Section 88(9) of the Motor Vehicles Act, 1988. Penalties imposed by the adjudicating authority have been upheld.2. The appellant argues that their vehicles are used as 'stage carriages' for picking and dropping passengers en route between the place of departure and destination. They contend that despite having a tourist permit, they should not be classified as 'tour operators.' The appellant presents documents from travel agencies to support their claim.3. The definition of contract carriage under the Motor Vehicles Act, 1988 is examined to determine if the appellant's vehicle usage falls under this category. The appellant's counsel asserts that the vehicles do not meet the criteria for contract carriage, emphasizing the distinction between contract carriage and stage carriage.4. The Department's representative highlights that the appellant is authorized by motor vehicle authorities to use vehicles as 'contract carriages,' regardless of actual usage. Compliance with eligibility criteria under Section 2(43) of the Act is emphasized, stating that once vehicles are approved as 'tourist vehicles,' operators are subject to taxation.5. The Tribunal finds that the appellant's vehicles meet the definition of 'tourist vehicles' under the Motor Vehicles Act, 1988 and have been endorsed by appropriate authorities. The vehicles have been used for operating 'tours' as defined in the Act, supporting their classification as 'tourist vehicles.'6. The Tribunal rejects the appellant's argument that vehicles were used as 'stage carriages,' emphasizing that the vehicles' capability and authorized classification as 'tourist vehicles' are crucial, regardless of actual usage.7. The Tribunal orders a remand to re-determine the tax and penalty leviable on the appellants in light of Notification 15/2007-ST dated 4-4-2007, which grants exemption under Section 11C of the Central Excise Act, 1944. The Tribunal directs consideration of benefits under Section 80 of the Act due to prevalent practices at the relevant time. The appeal is partly allowed for re-quantification of tax and penalty, confirming the rest of the order.