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

CESTAT New Delhi held that the appellant, operating as a tour operator booking agent, was not providing short-term accommodation services but merely facilitating bookings between hotels and customers. The tribunal ruled that as a qualified tour operator, the appellant was entitled to 90% abatement under Abatement Notifications regardless of providing only booking services. The demand under Section 73A of the Finance Act was set aside as the appellant had not collected unauthorized amounts representing service tax, having properly discharged its service tax liability after claiming legitimate abatement. The tribunal also noted duplication in demands under both Section 73 and 73A on the same gross amount. Penalties imposed on company officers were also set aside. Appeal allowed.

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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 Service
The 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 Abatement
The 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 73A
The 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.

Conclusion
The 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.

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