Tour operator classification and limitation in service tax were decided by tourist permits and the recognised non-levy practice.

Vehicles issued valid tourist permits remained tourist vehicles for service tax purposes, so operators of such vehicles fell within the statutory definition of tour operator even if the vehicles were sometimes used as stage carriages. At the same time, the demand for the relevant period was held time-barred because the prevailing non-levy practice was recognised by notification and the ingredients for invoking extended limitation, including wilful suppression with intent to evade tax, were not established. The demand and penalties were therefore set aside.

---

---

Issues: (i) Whether the appellants' vehicles, having been issued tourist permits, were covered by the definition of tour operator under the service tax law even though they were allegedly used as stage carriages; (ii) Whether the service tax demand for the period 1-4-2001 to 31-3-2004 was barred by limitation in view of the prevailing non-levy practice and the subsequent notification.

Issue (i): Whether the appellants' vehicles, having been issued tourist permits, were covered by the definition of tour operator under the service tax law even though they were allegedly used as stage carriages.

Analysis: A tourist permit under the Central Motor Vehicle Rules, 1989 can be issued only in respect of a tourist vehicle. A tourist vehicle is a contract carriage under the Motor Vehicles Act, 1988, and the statutory definition of tour operator in the Finance Act, 1994 covers a person engaged in operating tours in a tourist vehicle covered by a permit granted under the Motor Vehicles Act or the rules made thereunder. The mere assertion that the vehicles were sometimes used as stage carriages did not alter their character for tax purposes once tourist permits had been issued by the transport authority. The legal position also supported coverage where vehicles remained tourist vehicles notwithstanding their use otherwise.

Conclusion: The appellants were liable to be treated as tour operators and their activity fell within the taxable service.

Issue (ii): Whether the service tax demand for the period 1-4-2001 to 31-3-2004 was barred by limitation in view of the prevailing non-levy practice and the subsequent notification.

Analysis: The notification issued under section 83 of the Finance Act, 1994 read with section 11C of the Central Excise Act, 1944 recognised the general practice of non-levy for the relevant period in respect of such services. In the light of that admitted practice, the element of wilful suppression with intent to evade tax was not sustainable, and the extended limitation period could not be invoked. The show cause notice was also beyond the limitation applicable on the facts of the case.

Conclusion: The entire demand was time-barred and could not be sustained.

Final Conclusion: The demand and penalties were set aside, and the appeal succeeded in full on limitation, leading to relief for the appellants.

Ratio Decidendi: Where transport vehicles remain tourist vehicles by reason of valid tourist permits, they continue to fall within the statutory definition of tour operator, but a demand for the relevant period cannot survive where the government itself recognises a prevalent non-levy practice and the conditions for invoking extended limitation are not established.

---