2019 (9) TMI 1498 - AT - Service Tax

Tribunal Upholds 75% Tax Abatement for Package Tour Services, Dismisses Rs. 21.76 Lakh Demand and Associated Penalties.

The Tribunal dismissed the Department's appeal, affirming the Respondent's entitlement to a 75% abatement under Sl. No. 2(n)(i) of Notification No. ... Classification of services - tour operator service - services like transportation, entry to monuments and joyrides etc. to the main tour operator in relation to a ‘package tour’ - case of the Department is that the Respondent is providing service contemplated under Rule 2(n)(iii) of the Notification, while the case of the Respondent is that it is providing service as contemplated under entry at Sl. No. 2(n)(i) of the Notification - benefit of abatement of Service Tax of 75% of the amount charged in gross receipts as per the Exemption Notification No. 01/2006 dated 01 March, 2006 as amended by Notification No. 38/2007 dated 23 August, 2007. HELD THAT:- Entry at Sl. No. 2(n)(i) relates to services provided or to be provided to any person by a tour operator in relation to a package tour. The Explanation to the entry defines the expression “package tour” to mean a tour wherein transportation, accommodation for stay, food, tourist guide, entry to monuments and other similar services in relation to tour are provided by the tour operator as part of the package tour to the person undertaking the tour. According to the Department, if even one service mentioned at Sl. No. 2(n)(i) is not provided, the service provider will not be entitled to the abatement contemplated under Sl. No. 2(n)(i) - It is not possible to accept the submission of the Department. Entry at Sl. No. 2(n)(i) does not require the service provider to provide each and every service mentioned in the Explanation. The meaning assigned to “package tour” in the Explanation is when transportation, accommodation for stay, food, tourist guide, entry to monuments and other similar services in relation to tour are provided by the tour operator as part of the package tour to the person undertaking the tour. There is no reason why if some of the service(s) are not provided, the abatement as contemplated under Sl. No. 2(n)(i) should not be available to the service provider. The service has to be provided by a tour operator in relation to a package tour. It would also be pertinent to refer to the decision of the Supreme Court in Doypack Systems Pvt. Ltd. [1988 (2) TMI 61 - SUPREME COURT]. The Supreme Court observed that the expression ‘in relation to’ is a very broad expression and the observations are that “relating to” has been held to be equivalent to or synonymous with as to “concerning with” and “pertaining to”. The expression “pertaining to” is an expression of expansion and not of contraction.” The services provided by the Respondent would fall under entry at Sl. No. 2(n)(i) of the Notification and the Respondent would be entitled to 75% abatement - Appeal dismissed - decided against Revenue. Issues Involved:1. Eligibility for 75% abatement under Notification No. 01/2006 as amended by Notification No. 38/2007.2. Applicability of penalties under sections 76 and 78 of the Finance Act, 1994.Issue-wise Detailed Analysis:1. Eligibility for 75% Abatement under Notification No. 01/2006 as amended by Notification No. 38/2007:The primary issue in the appeal was whether the Respondent, a tour operator, was entitled to a 75% abatement on service tax under Sl. No. 2(n)(i) of Notification No. 01/2006 as amended by Notification No. 38/2007. The Department contended that the Respondent did not provide all the services listed under the definition of a 'package tour' and thus should only be eligible for a 60% abatement under Sl. No. 2(n)(iii). The Respondent argued that the services they provided fell within the scope of Sl. No. 2(n)(i) as they were 'in relation to' a package tour, even if not all services listed were provided.The Tribunal analyzed the explanation of 'package tour' which includes transportation, accommodation, food, tourist guide, entry to monuments, and other similar services. It was noted that the Respondent provided some of these services. The Tribunal rejected the Department's argument that all services must be provided to qualify for the 75% abatement, citing that the expression 'in relation to' is broad and does not necessitate the provision of every listed service. The Tribunal affirmed the Commissioner (Appeals)’s interpretation that providing any of the services listed as part of a package tour qualifies for the abatement under Sl. No. 2(n)(i).The Tribunal referred to the Supreme Court’s decisions in Doypack Systems Pvt. Ltd. and Renusagar Power Co. Ltd., which emphasized the broad scope of the expression 'in relation to.' The Allahabad High Court’s decision in Touraids (I) Travel Services also supported this interpretation, stating that services aiding a tour fall within the ambit of 'in relation to' a tour.2. Applicability of Penalties under Sections 76 and 78 of the Finance Act, 1994:The Department issued a show cause notice to the Respondent for non-payment of service tax amounting to Rs. 22,62,511/- and proposed penalties under sections 76 and 78 for contravening sections 67 and 68 of the Finance Act, 1994, and Rule 6 of the Service Tax Rules, 1994. The Additional Commissioner confirmed the demand and imposed penalties.The Respondent appealed, arguing that they had deposited Rs. 85,556/- suo moto after being informed by the Department about the incorrect abatement rate. The Commissioner (Appeals) partially reversed the original order, setting aside the demand with interest but imposing a penalty equal to the service tax for the delayed deposit.The Tribunal upheld the Commissioner (Appeals)’s decision, noting that the Respondent’s services fell under Sl. No. 2(n)(i) and were entitled to the 75% abatement. Consequently, the demand of Rs. 21,76,955/- along with interest was not sustainable, and the penalties under sections 76 and 78 were also not upheld.Conclusion:The Tribunal concluded that the services provided by the Respondent fell under entry at Sl. No. 2(n)(i) of the Notification, entitling them to a 75% abatement. The appeal filed by the Department was dismissed, and the decision of the Commissioner (Appeals) was upheld. The penalties imposed were also set aside as the demand itself was found unsustainable.Final Order:The appeal filed by the Department was dismissed. The services provided by the Respondent were held to be covered under Sl. No. 2(n)(i) of the Notification, entitling them to a 75% abatement. Penalties under sections 76 and 78 were not upheld. The judgment was pronounced on 30 September, 2019.