Tour operator tax on contract carriage buses rejected for the pre-amendment period; extended limitation and penalties also failed.

Bus transport using contract carriage vehicles without tourist permits did not fall within pre-amendment tour operator service, because the levy then applied only to operations in a tourist vehicle covered by a Motor Vehicles Act permit. The Revenue's demand for the period before 10.09.2004 therefore failed. The extended period of limitation was also unavailable where similar activities had been the subject of contrary views and the assessee entertained a bona fide belief that the service was not taxable; the penalties founded on that demand were accordingly set aside. The post-amendment exemption issue was remitted for fresh consideration.

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Issues: (i) Whether the appellant's bus transport activity was taxable as tour operator service for the period prior to 10.09.2004. (ii) Whether the demand and penalties could be sustained by invoking the extended period of limitation.

Issue (i): Whether the appellant's bus transport activity was taxable as tour operator service for the period prior to 10.09.2004.

Analysis: For the period prior to the amendment, tour operator service was confined to operating tours in a tourist vehicle covered by a permit under the Motor Vehicles Act. The appellant's vehicles were contract carriages, not tourist vehicles, and the appellant did not hold tourist permits. On the facts found, the activity did not satisfy the pre-amendment statutory requirement for levy under tour operator service.

Conclusion: The activity was not liable to service tax as tour operator service for the period prior to 10.09.2004, and the Revenue's appeal on that issue failed.

Issue (ii): Whether the demand and penalties could be sustained by invoking the extended period of limitation.

Analysis: The record showed contrary decisions on similar activities and the assessee's belief that the service was outside the taxable category. In that setting, the ingredients necessary for the extended period were not made out. Once the extended period failed, the penalties founded on the same demand also could not survive.

Conclusion: The extended period of limitation was not applicable and the penalties were set aside.

Final Conclusion: The decision relief was partly in favour of the assessee: the pre-amendment levy was negatived, the extended-period demand and penalties were set aside, and the post-amendment exemption issue was remitted for fresh consideration.

Ratio Decidendi: A transport operator using contract carriage vehicles without tourist permits does not fall within pre-amendment tour operator service, and the extended period cannot be invoked where the dispute is supported by competing legal views and bona fide doubt.

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