Bus services outside tour operator levy where vehicles and contracts do not satisfy statutory tour-arranging requirements.

Chartered, contract and casual bus services were not taxable as 'tour operator' service for the period before 10-09-2004 because the vehicles were stage carriage buses on temporary or special permits and were not shown to satisfy the statutory requirements of a tourist vehicle or contract carriage. For the period from 10-09-2004, the expanded definition still did not apply because the assessees only supplied buses under contractual arrangements and did not plan, schedule, organize or arrange tours. The service tax demands were therefore unsustainable, and the department's challenge to the dropped demand also failed.

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Issues: (i) Whether the assessees' chartered, contract and casual bus services were classifiable as 'tour operator' service for the period prior to 10-09-2004; (ii) Whether the same activities were taxable as 'tour operator' service for the period from 10-09-2004 onwards under the expanded definition.

Issue (i): Whether the assessees' chartered, contract and casual bus services were classifiable as 'tour operator' service for the period prior to 10-09-2004.

Analysis: For the relevant period, 'tour operator' under the Finance Act required operating tours in a tourist vehicle covered by a permit. A tourist vehicle, by reference to the Motor Vehicles Act, had to be a contract carriage conforming to the prescribed specifications under Rule 128 of the Motor Vehicles Rules. The assessees used stage carriage buses on temporary or special permits, and there was no finding that the vehicles satisfied the statutory requirements of a tourist vehicle or contract carriage. A permit under section 88(8) did not, by itself, convert the vehicle into a tourist vehicle for service tax purposes.

Conclusion: The services were not taxable as 'tour operator' service for the period prior to 10-09-2004.

Issue (ii): Whether the same activities were taxable as 'tour operator' service for the period from 10-09-2004 onwards under the expanded definition.

Analysis: The amended definition expanded the levy to persons planning, scheduling, organizing or arranging tours by any mode of transport, but the legislative intent, clarified by the departmental circular, was to cover package tours and not merely the supply of buses under contract. The assessees were found to be providing vehicles on demand under contractual arrangements, without engaging in package tour planning or similar tour-arranging activity. On that basis, the expanded definition was held inapplicable.

Conclusion: The services were not taxable as 'tour operator' service for the period from 10-09-2004 onwards.

Final Conclusion: The service tax demands against the assessees could not be sustained, while the department's challenge to the dropped demand also failed.

Ratio Decidendi: A bus service does not fall within 'tour operator' service unless the statutory ingredients of a tourist vehicle or of planning, scheduling, organizing or arranging tours are satisfied according to the applicable definition for the relevant period.

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