Travel agents win major service tax relief on outbound tours and foreign exchange transactions

CESTAT NEW DELHI set aside service tax demands on Business Auxiliary Services, outbound tours, Eurail pass sales, and foreign exchange transactions. The tribunal held that travel agents using CRS systems do not provide promotional services to passengers, outbound tours consumed outside India are not taxable, Eurail pass resale doesn't constitute tour operator services, and foreign exchange transactions lacked proper classification. Extended limitation period was deemed inapplicable due to contradictory legal precedents. Only service tax on inbound and domestic tours for normal period was upheld.

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Issues Involved:
1. Taxability under "Business Auxiliary Service" for using Galileo CRS.
2. Taxability under "Tour Operator's Service" for domestic and outbound tours.
3. Taxability on incentives received for selling Eurail passes.
4. Taxability under "Banking and Other Financial Services" for sale/purchase of foreign exchange.
5. Invocation of extended period for issuing the show cause notice.

Summary:

1. Business Auxiliary Service:
The appellant was alleged to have promoted GIPL/ITQPL by using their Computerized Reservation System (CRS) and receiving incentives. The Tribunal referred to the Larger Bench decision in *Kafila Hospitality and Travels Pvt Ltd Vs. Commissioner of Service Tax, Delhi* (2021) and held that the appellant merely used the CRS and did not promote it. Thus, the demand for service tax under "Business Auxiliary Service" was set aside.

2. Tour Operator's Service:
The appellant was accused of providing taxable services for domestic and outbound tours. The Tribunal analyzed the definition of "tour operator" u/s 65(115) of the Finance Act and concluded that the appellant's activities fell under this category. However, for outbound tours, it was held that these services, provided outside India, qualify as export of services and are not liable to service tax as per the Board Circular No. 36/4/2001 and the Larger Bench decision in *Cox & Kings Limited Vs. Commissioner (TAR) - Mumbai* (2023). Consequently, the demand for outbound tours was set aside, while the demand for domestic tours was upheld for the normal period.

3. Eurail Passes:
The appellant was alleged to have arranged tours in Europe by selling Eurail passes. The Tribunal found that the appellant merely resold Eurail passes and did not arrange tours. Thus, the commission earned on resale was not subject to service tax under "Tour Operator's Service." The demand on this count was set aside.

4. Banking and Other Financial Services:
The appellant was accused of rendering taxable services in respect of sale/purchase of foreign exchange. The Tribunal observed that the appellant did not directly deal with foreign exchange but facilitated its purchase through authorized dealers. Referring to CBEC Circular No. 96/7/2007-S.T., it was held that such activities do not fall under "Banking and Financial Services." The demand on this count was set aside.

5. Extended Period:
The Tribunal noted that the appellant's activities were under consideration with contradictory decisions at the relevant time. There was no evidence of mala fide intent to evade tax. Hence, the invocation of the extended period for issuing the show cause notice was not justified. The demand for the period beyond the normal period was set aside.

Conclusion:
The order confirming the demand for service tax on inbound and domestic tours under "Tour Operator's Services" was upheld for the normal period. The rest of the demands were held to be non-sustainable, and the order was set aside to that extent. The appeal was partly allowed.

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