2018 (4) TMI 777 - AT - Service Tax

Government of Rajasthan Prevails in Service Tax Dispute for Ranthambore National Park Fees

The Tribunal ruled in favor of the appellant, a department of the Government of Rajasthan, in a case concerning the liability for Service Tax on amounts ... Tour Operator - service tax on tour operator services - sovereign function - statutory duty to protect environment and wild life - fee collected under statute not taxable as service - CBEC master circular No.96/7/2007 ST - fees collected for statutory functions not servicesTour Operator - service tax on tour operator services - Whether amounts recovered by the Forest Department from tourists for providing vehicles and permits fall within the definition of 'Tour Operator' and are liable to service tax as tour operator services. - HELD THAT: - The Tribunal examined the statutory definition of 'Tour Operator', which applies to any person engaged in planning, scheduling, organising or arranging tours including operating tours in permitted tourist vehicles. The factual finding is that the Forest Department collected amounts from tourists in relation to entry permits and making vehicles available for safari within the Ranthambore National Park. However, those activities arose from the Department's role under the Wild Life (Protection) Act and rules governing notification and management of National Parks. The Tribunal held that mere collection of amounts in the course of discharging those functions does not transform the Department into a commercial tour operator providing taxable tour operator services. [Paras 7, 8, 9]Amounts recovered by the Forest Department were not held to fall within the definition of 'Tour Operator' for service tax purposes.Sovereign function - statutory duty to protect environment and wild life - fee collected under statute not taxable as service - CBEC master circular No.96/7/2007 ST - fees collected for statutory functions not services - Whether the sums collected by the Forest Department are fees collected in discharge of a statutory/sovereign function and therefore not chargeable to service tax. - HELD THAT: - The Tribunal noted that the Wild Life (Protection) Act authorises the State to notify and manage National Parks and to restrict entry and movement within them for conservation objectives; tourism is permitted only within those constraints. The Department's obligations to restrict entry and regulate vehicles flow from that statutory mandate and Article 48A. The Tribunal relied on the CBEC master circular which clarifies that fees collected under statute for performing mandatory statutory functions are not to be treated as consideration for taxable services. In the present case the amounts (after reimbursing vehicle owners) were credited to the State Treasury and were therefore treated as fees/amounts collected in discharge of statutory functions, not consideration for organizing tours. [Paras 10, 11, 12]The sums collected are fees/amounts recovered for performance of statutory/sovereign functions and are not exigible to service tax.Final Conclusion: The Tribunal set aside the demand of service tax, interest and penalties; the Forest Department's recovery of amounts for entry permits and vehicle availability for Ranthambore National Park was held to be in discharge of statutory/sovereign functions and not liable to service tax under the tour operator category. Issues:1. Whether the appellant, a department of the Government of Rajasthan, falls under the definition of a Tour Operator as per Section 65(115) of the Finance Act, 1994.2. Whether the activity of restricting entry of tourists and vehicles in Ranthambore National Park by the Forest Department constitutes a sovereign function.3. Whether the amounts collected by the Forest Department from tourists for entry permits and vehicle rentals are liable for Service Tax under the category of Tour Operator Service.Analysis:1. The appellant contested that as a department of the Government of Rajasthan, they were not functioning as a Tour Operator. They argued that their activities were in line with the sovereign function of protecting the environment and wildlife, mandated by the Constitution and the Wild Life (Protection) Act, 1972. The appellant highlighted that all collected amounts were reimbursed to vehicle owners, and they were not engaged in organizing tours. They also referred to CBEC clarification that charges by sovereign/public authorities for statutory functions are not subject to Service Tax.2. The Department of Forests restricted entry into Ranthambore National Park to protect wildlife and forests, in accordance with constitutional and statutory obligations. The Forest Department's actions were aimed at maintaining the ecological balance, and the fees collected for entry permits and vehicle rentals were deposited into the State Treasury after reimbursing vehicle owners. This indicated that the amounts collected were in the nature of statutory fees for performing mandatory functions, not for organizing tours.3. The Tribunal examined the definition of a Tour Operator under the Finance Act, 1994, both before and after a specific date. It was noted that the Forest Department's activities did not align with the definition of a Tour Operator. Referring to a CBEC circular, it was clarified that fees collected for statutory functions under relevant statutes are not considered services for consideration. The Tribunal concluded that the Department's actions were in line with statutory obligations, and the amounts collected were not subject to Service Tax as they were not for organizing tours.In conclusion, the Tribunal set aside the Service Tax demand on the amounts collected by the Forest Department, ruling in favor of the appellant based on their sovereign function and statutory obligations.