Tour operator wins service tax dispute, gets 90% abatement for facilitating hotel bookings not providing accommodation

CESTAT NEW DELHI ruled in favor of appellant in a service tax classification dispute. The court held that appellant operated as tour operator, not hotel accommodation service provider, and was entitled to 90% abatement under notification dated 20.06.2012. The tribunal found appellant merely facilitated hotel bookings and received commission, while taxes collected were remitted to hotels. Section 73A of Finance Act could not be invoked as appellant did not provide hotel accommodation services directly. Following precedent in Make My Trip case with identical facts, the impugned order was set aside and appeals were allowed.

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Issues Involved:
1. Classification of services provided by the appellant.
2. Entitlement to abatement as a tour operator.
3. Invocation of section 73A of the Finance Act.
4. Simultaneous invocation of sections 73 and 73A.
5. Demand under section 73A for specific cases.
6. Issuance of statement for subsequent period under section 73A or 73(1A).
7. Invocation of the extended period of limitation.
8. Imposition of penalty on the appellant and its officials.

Summary:

Issue 1: Classification of Services
The Tribunal held that the appellant, M/s. Make My Trip (India) Private Limited, was not providing short-term accommodation service but acted as a facilitator between the customer and the hotel, receiving commission for the same. The appellant did not qualify as a hotel and could not render the service of renting of rooms in a hotel.

Issue 2: Entitlement to Abatement
The Tribunal found that the appellant qualified as a tour operator and was entitled to abatement under the notification dated 20.06.2012, allowing a 90% abatement on the gross amount charged.

Issue 3: Invocation of Section 73A
The Tribunal held that the taxes collected by the appellant were paid to the hotels for further remittance, and hence, section 73A of the Finance Act could not be invoked.

Issue 4: Simultaneous Invocation of Sections 73 and 73A
The Tribunal did not find any justification for the simultaneous invocation of sections 73 and 73A of the Finance Act.

Issue 5: Demand under Section 73A for Specific Cases
The Tribunal ruled that the department was not right in demanding amounts under section 73A for cases where the customers stayed in hotels with a tariff value of less than Rs. 1000 per day or where the hotels were located in Jammu & Kashmir.

Issue 6: Issuance of Statement for Subsequent Period
The Tribunal did not support the issuance of statements for the subsequent period under section 73A or section 73(1A) of the Finance Act.

Issue 7: Invocation of Extended Period of Limitation
The Tribunal found that the department was not justified in invoking the extended period of limitation for recovery of tax under the proviso to section 73(1) and section 73A of the Finance Act.

Issue 8: Imposition of Penalty
The Tribunal concluded that the imposition of penalties on the appellant and its officials was not justified in the facts and circumstances of the present case.

Conclusion:
The Tribunal set aside the impugned order dated 28.09.2021 passed by the Additional Director and allowed the appeals filed by the appellant and its officials. The decision was based on the earlier Tribunal ruling in M/s. Make My Trip (India) Private Limited vs. Additional Director General, Directorate General of GST Intelligence, New Delhi [2024 (1) TMI 681 - CESTAT New Delhi].

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