2016 (6) TMI 774 - AT - Service Tax

Appellant not liable for service tax as a tour operator. Appeal allowed, penalties unsustainable.

The Tribunal concluded that the appellant was not liable for service tax under the category of tour operator service during the period in question. The ... Tour operator - tour - tourist vehicle - contract carriage - stage carriage permit - service tax liability - extended period of limitationTour operator - tourist vehicle - service tax liability - appellant's liability as a tour operator for the period prior to the 2008 amendment - HELD THAT: - The Court held that, prior to the 2008 amendment, the inclusive limb of the definition of tour operator applied only to persons operating tours in a tourist vehicle as defined by Section 2(43) of the Motor Vehicles Act and conforming to specifications in Rule 128 of the Central Motor Vehicle Rules. The appellant's vehicles were registered/permited as contract carriages under state rules and there was no evidence that the buses conformed to the Rule 128 specifications or that a competent authority had certified them as tourist vehicles. The original authority's inference (that an all-India permit implied conformity) was found unsupported by evidence. Consequently, the department failed to establish that the appellant fell within the pre-2008 inclusive definition of a tour operator and thus the service tax demand for that period was unsustainable. [Paras 10]Pre-2008 liability as tour operator rejectedTour operator - contract carriage - stage carriage permit - tour - service tax liability - appellant's liability as a tour operator for the period after the 2008 amendment - HELD THAT: - Post-2008 the definition was extended to include persons operating tours in a tourist vehicle or a contract carriage covered by a permit other than a stage carriage permit. The Tribunal examined the nature of the appellant's operations and the evidence produced, including vehicle check reports indicating operation akin to stage carriage services where individual passengers paid prefixed fares and embarked/disembarked at different stages for distinct destinations and purposes. The Court found that mere carriage of passengers on journeys (even if each journey qualifies as a tour in the literal sense) does not convert ordinary passenger transport into the business of operating tours. There was no cogent evidence that the appellant conducted organised tours (planning, scheduling, arranging accommodation/sightseeing) or that the vehicles operated as non-stage contract carriages as required by the amended definition. Reliance on isolated statements and permit classification without corroborative evidence was insufficient. Therefore, the appellant was not shown to be a tour operator post-2008 either. [Paras 11, 13, 14]Post-2008 liability as tour operator rejectedExtended period of limitation - penalty - service tax liability - sustainability of the demand (including extended period and penalty) following conclusions on liability - HELD THAT: - Having concluded that the appellant was not a tour operator for the periods in question, the Tribunal held that the departmental demand of service tax (raised under the extended period of limitation), interest and penalty could not be sustained. The findings that the essential elements of tour operation were not proved rendered the entire demand and consequential imposition of penalty and interest untenable. The impugned order confirming demand, interest and penalty was therefore set aside. [Paras 15, 16]Demand, interest and penalty set aside; appeal allowedFinal Conclusion: The Tribunal set aside the impugned order and allowed the appeal, holding that the Revenue failed to prove that the appellant was a tour operator during 01-04-2005 to 31-03-2010 (2005-06 to 2009-2010) and consequently the demand, interest and penalty were unsustainable. Issues Involved:1. Liability to service tax under the category of tour operator service during the period 2005-06 to 2009-10.2. Scope of the term 'tour operator' as per Section 65(115) of the Finance Act, 1994, before and after the amendment by the Finance Act, 2008.3. Engagement in the business of operating tours in a tourist vehicle (up to 2008) and tourist vehicle/contract carriage (post-2008).4. Coverage of the appellant's activities under the term 'tour' as per Section 65(113) of the Finance Act, 1994.5. Sustainability of demand for the extended period and imposition of penalty.Issue-wise Detailed Analysis:1. Liability to service tax under the category of tour operator service during the period 2005-06 to 2009-10:The appeal challenges the demand of service tax amounting to Rs. 1,93,87,293/- along with interest and penalty on the premise that the appellant provided tour operator services during the period from 01-04-2005 to 31-03-2010. The Tribunal had previously dismissed the appeal, but the Hon'ble High Court of Andhra Pradesh remanded the matter for fresh consideration with reasons and findings.2. Scope of the term 'tour operator' as per Section 65(115) of the Finance Act, 1994, before and after the amendment by the Finance Act, 2008:The definition of 'tour operator' under Section 65(115) of the Finance Act, 1994, before the 2008 amendment, included any person engaged in the business of operating tours in a tourist vehicle covered by a permit under the Motor Vehicles Act, 1988. Post-2008, the definition was expanded to include any person operating tours in a tourist vehicle or contract carriage by whatever name called, covered by a permit other than a stage carriage permit.3. Engagement in the business of operating tours in a tourist vehicle (up to 2008) and tourist vehicle/contract carriage (post-2008):The appellant argued that their activities did not fall within the definition of tour operator service as their buses had contract carriage permits and were not tourist vehicles as defined under Section 2(43) of the Motor Vehicle Act, 1988. The department contended that the appellant was operating tours in a tourist vehicle or contract carriage and was thus liable for service tax. The Tribunal found that prior to the 2008 amendment, there was no evidence to support the department's case that the appellant operated tours in a tourist vehicle.4. Coverage of the appellant's activities under the term 'tour' as per Section 65(113) of the Finance Act, 1994:Section 65(113) defines 'tour' as a journey from one place to another irrespective of the distance between such places. The Tribunal noted that the appellant's activities were more akin to transporting passengers from one place to another rather than operating tours. The appellant's buses operated as stage carriages, collecting individual fares from passengers traveling to different destinations, which did not fit the definition of a tour operator.5. Sustainability of demand for the extended period and imposition of penalty:The Tribunal found that the demand for the extended period and the imposition of penalty were unsustainable. The appellant's activities did not meet the criteria for being categorized as a tour operator, and there was no evidence to support the department's claims. The Tribunal set aside the impugned order and allowed the appeal with consequential reliefs.Conclusion:The Tribunal concluded that the appellant was not liable for service tax under the category of tour operator service during the period in question. The appellant's activities did not fall within the scope of the term 'tour operator' as defined in Section 65(115) of the Finance Act, 1994, both before and after the 2008 amendment. The demand for the extended period and the imposition of penalty were found to be unsustainable, and the appeal was allowed with consequential reliefs.