Tour operator exemption denied for cab-only operations, but penalties waived due to registration and regular return filing.

Notification No. 39/97-ST was held unavailable where the assessee operated only cabs and no tourist bus, because the exemption applied to tour operator service and the activity was treated as rent-a-cab service. On that basis, the service tax demand was sustained. Penalties, however, were set aside because the assessee was registered, had paid tax under the declared category, and had filed statutory returns, so the circumstances did not justify penal action.

---

---

Issues: (i) Whether the appellant was entitled to the benefit of Notification No. 39/97-ST while providing only cab services without operating a tourist bus, and whether the demand of service tax was sustainable; (ii) Whether penalties were exigible in view of the appellant's registration, tax payment practice, and filing of statutory returns.

Issue (i): Whether the appellant was entitled to the benefit of Notification No. 39/97-ST while providing only cab services without operating a tourist bus, and whether the demand of service tax was sustainable.

Analysis: The appellant had no tourist bus and was providing only cabs. On that factual basis, the activity did not fall within the scope of tour operator service. The notification in question applied only to tour operator service, and therefore its benefit was not available. Since the appellant was in substance providing rent-a-cab service, the demand confirmed in the impugned order suffered from no infirmity.

Conclusion: The demand of service tax was upheld and the appellant was held not entitled to the benefit of Notification No. 39/97-ST.

Issue (ii): Whether penalties were exigible in view of the appellant's registration, tax payment practice, and filing of statutory returns.

Analysis: The appellant was registered, had been paying tax under the declared category, and had filed statutory returns. In these circumstances, the case did not warrant penalty, and the bar against penalty applied.

Conclusion: The penalties were set aside.

Final Conclusion: The service tax demand was sustained, but the penal consequences were removed, resulting in only partial relief to the appellant.

Ratio Decidendi: Where the taxable activity is not covered by the category for which a notification grants exemption, the benefit of that notification cannot be claimed; however, penalties may be waived when the assessee has acted under a declared classification and filed regular statutory returns.

---