2024 (1) TMI 681 - AT - Service Tax

Tour operator booking agent entitled to 90% abatement despite providing only booking services, not accommodation

M/s Make My Trip (India) Private Limited, Shri M.K. Pallai, Vice President (Finance) and Shri Mohit Kabra, Group CFO & Director M/s Makemy Trip (India) Private Limited Versus Additional Director General, Directorate General of GST Intelligence, New Delhi

CESTAT New Delhi held that the appellant, operating as a tour operator booking agent, was not providing short-term accommodation services but merely ... Levy of service tax - tour operator service - providing short-term accommodation service or not - entitlement to abatement of 90% on the gross amount charged under the Abatement Notifications in respect of service of a tour operator - invocation of Section 73A of the Finance Act - penalties. Whether the appellant is providing short-term accommodation services? - HELD THAT:- The show cause notice and the impugned order have placed reliance upon clauses of the Privilege Partnership Agreement entered into between the appellant and the hotels. The show cause notice nor the impugned order mention that the appellant is a hotel. The appellant is merely a booking agent and not an agent of the hotel, as is evident from Privilege Partnership Agreement and the User Agreement entered into between the appellant and the customers. It is the hotel that has provided the service of short-term accommodation to the customers, and the appellant has merely acted as a facilitator between the hotel and the customer for the provision of short-term accommodation service by the hotels to the customers. The appellant is thus not a hotel. The appellant cannot, therefore, be said to be the provider of short-term accommodation service to the customers. Whether the appellant is entitled to, as a tour operator, ninety percent abatement under the Abatement Notifications? - HELD THAT:- A tour operator can provide for a host of services, including booking of accommodation, transportation and food facility. However, when a person, otherwise is qualified as a tour operator but provides only booking of accommodation service, then such a tour operator would be entitled to ninety percent abatement. What is required is the qualification of a tour operator itself (qua the person), and not as the services rendered (qua transaction). It is, therefore, not possible to accept the contention of the learned special counsel for the department that each transaction relating to the service that is provided has to be examined. Thus, as the appellant is a tour operator it would be entitled to claim abatement under the Abatement Notifications. Whether the demand proposed under section 73 can be confirmed? - HELD THAT:- The appellant is providing tour operator service and is entitled to claim abatement of ninety percent. The demand under section 73 of the Finance Act has been confirmed holding that the appellant is providing short-term accommodation service. The demand that has been confirmed under section 73A of the Finance Act, therefore, deserves to set aside. Whether the provisions of section 73A would be applicable? - HELD THAT:- The taxes collected by the appellant from customer has been paid to the hotel and the appellant has also discharged has service tax liability by paying service tax on the amount collected by from the customer after availing the benefit of the Abatement Notifications as a tour operator. The appellant had not collected any amount, which was not required to be collected, from any person, in any manner as representing service tax. Section 73A of the Finance Act would, therefore, not be attracted - Reliance can be placed on the judgment of the Supreme Court in RS. JOSHI, SALES TAX OFFICER, GUJARAT VERSUS AJIT MILLS LIMITED AND ANOTHER (AND ANOTHER CASE) [1977 (8) TMI 140 - SUPREME COURT], wherein the Supreme Court held that the word ‘collected’ can only refer to cases where a person collects an amount from another with an intention to retain the said amount - Thus, the provisions of section 73A of the Finance Act could not have been resorted to by the department. Whether the demand under section 73A can be confirmed? - HELD THAT:- The demand under section 73A of the Finance Act could not have been proposed. The confirmation of demand, therefore, deserves to be set aside - What is also important to notice is that the impugned order has confirmed the demand of service tax under section 73 of the Finance Act on the gross amount collected by the appellant from the customers, which included the amount remitted to the hotels as well. The impugned order has also confirmed the demand made under section 73A of the Finance Act on the same gross amount. There is, therefore, duplication of the demand. Penalties - HELD THAT:- The penalties imposed upon the Vice President and the Director of the appellant that have been assailed in Service Tax Appeal No. 51845 of 2021 and Service Tax Appeal No. 51846 of 2021, therefore, cannot also be sustained. Appeal allowed. Issues Involved: 1. Whether the appellant provided 'short-term accommodation' service or 'tour operator' service.2. Whether the appellant was entitled to abatement of 90% on the gross amount charged under the Abatement Notifications.3. Whether the Department is justified in invoking section 73A of the Finance Act for requiring the appellant to pay the alleged taxes collected from the customers and passed on to the hotels.Issue 1: Short-term Accommodation vs. Tour Operator ServiceThe department contended that the appellant provided short-term accommodation service, not tour operator service, and confirmed the demand under section 73 of the Finance Act. The Tribunal examined the Privilege Partnership Agreement between the appellant and the hotel, which indicated that the appellant merely acted as a facilitator between the hotel and the customers. The Tribunal concluded that the appellant provided access to an online platform for booking hotel rooms and charged a commission for this service, which does not qualify as providing short-term accommodation service. Thus, the appellant is not a hotel and cannot be said to provide short-term accommodation service.Issue 2: Entitlement to AbatementThe appellant claimed entitlement to 90% abatement under the Abatement Notifications as a tour operator. The Tribunal noted that the appellant operates an online portal for booking various travel services and is registered under the category of 'tour operator services.' The definition of a 'tour operator' includes arranging tours, which may include accommodation. The Tribunal concluded that the appellant qualifies as a tour operator and is entitled to the abatement, rejecting the department's contention that each transaction must be examined separately.Issue 3: Invocation of Section 73AThe department invoked section 73A of the Finance Act, alleging that the appellant collected amounts representing service tax from customers but did not pay these amounts to the Central Government. The Tribunal found that the appellant collected taxes under the head 'hotel taxes and fees' and remitted them to the hotels. The appellant also discharged its service tax liability on the commission and service fee. The Tribunal concluded that section 73A was not applicable as the appellant did not collect any amount representing service tax.ConclusionThe Tribunal set aside the demand under section 73 and 73A of the Finance Act, finding that the appellant provided tour operator services and was entitled to abatement. The penalties imposed on the Vice President and the Director of the appellant were also set aside. The appeals were allowed, and the impugned order dated 29.07.2021 was set aside.