Tour operator service tax applies to luxury bus hiring for passenger transport, but penalties fail without intent to evade duty.

Hiring out a luxury bus for transport of employees and their family members was held taxable as tour operator service because the activity involved organised passenger transport and the vehicle satisfied the statutory specifications of a tourist vehicle. The expression "tour" was treated as including a journey from one place to another, and the definition of "tour operator" covered arranging tours by transport in a tourist vehicle or contract carriage, so service tax was upheld. Penalties, however, were not sustainable because the record contained no finding of intent to evade duty and showed a bona fide belief that the activity was outside tax net. The assessment remained otherwise undisturbed.

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Issues: (i) Whether hiring out a luxury bus to carry employees and their family members constituted taxable service under the category of "tour operator" because the vehicle used was a tourist vehicle. (ii) Whether penalties were sustainable in the absence of a finding of intent to evade duty.

Issue (i): Whether hiring out a luxury bus to carry employees and their family members constituted taxable service under the category of "tour operator" because the vehicle used was a tourist vehicle.

Analysis: Service provided by a tour operator in relation to a tour is taxable. The expression "tour" was held to include a journey from one place to another. The definition of "tour operator" covered a person engaged in planning, scheduling, organising or arranging tours by any mode of transport and also operating tours in a tourist vehicle or contract carriage. The bus used was treated as a contract carriage, and on the facts recorded it satisfied the specifications of a tourist vehicle under the relevant motor vehicle law and rules. Accordingly, the service rendered fell within the taxable category of tour operator service.

Conclusion: The issue was decided against the assessee and in favour of the Revenue.

Issue (ii): Whether penalties were sustainable in the absence of a finding of intent to evade duty.

Analysis: The penalty order contained no finding that the assessee acted with intent to evade duty. The record showed a bona fide belief that the activity was outside the service tax net because the assessee considered that a tourist vehicle was not being used. In the absence of mens rea or an intention to evade tax, the basis for penalty was not made out.

Conclusion: The issue was decided in favour of the assessee and against the Revenue; the penalties were not warranted.

Final Conclusion: The liability to service tax on the tour operator service was upheld, but the penalties were set aside, leaving the assessment otherwise undisturbed.

Ratio Decidendi: A vehicle used for organised passenger transport that satisfies the statutory specifications of a tourist vehicle can attract tour operator service tax, but penalties for suppression or failure to comply cannot be sustained without a finding of intent to evade duty.

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