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. 01/2006, as amended. The Tribunal concluded that the services provided were within the scope of "in relation to" a package tour. Consequently, the demand of Rs. 21,76,955/- with interest was unsustainable, and penalties under sections 76 and 78 of the Finance Act, 1994, were not upheld. The decision of the Commissioner (Appeals) was upheld, and the penalties were set aside. The judgment was pronounced on 30 September 2019.

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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.

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