High Court upholds service tax on facilitation fees from shop owners along tourist route for Palace on Wheels luxury train.

The High Court upheld the imposition of service tax on facilitation fees collected by the Rajasthan Tourism Development Corporation (RTDC) from shop owners along the tourist route for the luxury train "Palace on Wheels." The court determined that the activity constituted business auxiliary services under Section 65(19) of the Finance Act, 1994, involving the promotion of goods for sale. The judgment emphasized that the arrangement aimed at marketing goods to tourists, leading to the dismissal of RTDC's appeal.

---

---

Issues:
1. Whether a government company operating a luxury train can be charged with rendering business auxiliary service for collecting facilitation fees from shop owners along the tourist routeRs.

Analysis:
The Rajasthan Tourism Development Corporation (RTDC) appealed against the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) judgment challenging the imposition of service tax on facilitation fees collected from shop owners enroute the luxury train "Palace on Wheels." The key issue was whether RTDC's actions constituted business auxiliary services subject to service tax. The appellant argued that the arrangement aimed to provide reliable shopping avenues for foreign tourists, not to develop the shop owners' businesses. Conversely, the department contended that the transaction fell within the broad definition of business auxiliary services under Section 65(19) of the Finance Act, 1994, encompassing promotion for marketing or sale of goods. The tribunal found the activity to be marketing goods for sale, a view upheld by the High Court. The agreements between RTDC and shop owners involved the payment of facilitation fees for tourists to stop at the shops, clearly promoting the sale of goods. Consequently, the court dismissed the appeal, stating no legal question arose as the activity aligned with the definition of business auxiliary services.

In conclusion, the judgment reaffirmed that RTDC's collection of facilitation fees from shop owners along the tourist route for the luxury train "Palace on Wheels" constituted business auxiliary services involving the promotion of goods for sale. The court upheld the imposition of service tax on these fees, emphasizing the broad scope of the definition under the Finance Act, 1994. The decision clarified that the primary purpose of the arrangement was to market goods to tourists, leading to the dismissal of the appeal.

---