2024 (9) TMI 1252 - AT - Service Tax

Tour operators cannot claim service tax exemption for J&K tours when planning occurs in taxable territory

Heena Tours & Travels and Heena Enterprises Versus C.C.E. & S.T. -Surat-I

CESTAT Ahmedabad ruled on service tax liability for tour operators providing services in Jammu Kashmir. The appellant claimed exemption arguing services ... Taxability of services provided by the appellant in Jammu & Kashmir - non-inclusion of cost of planning, scheduling etc which happens prior the customers approaching the appellant - place of provision of services outside India - time limitation. HELD THAT:- In the instance case, it is seen that the service provider is located in the taxable territory. The service recipient is also located in the taxable territory. It is the claim of the appellant that the service is performed partly within India but partly in territory excluded from the jurisdiction of Finance Act, 1994 by virtue of Section 64. According to the appellant place of the performance of Service is relevant. The learned Counsel has heavily relied on the decision of Larger Bench in the case of M/S COX & KINGS LIMITED (FORMERLY KNOWN AS COX AND KINGS (INDIA) LIMITED) VERSUS COMMISSIONER (TAR) -MUMBAI [2023 (10) TMI 1388 - CESTAT MUMBAI - LB] - The decision of Larger Bench related to outbound tours to locations outside India. In the instant case, the issue relates to conducting of tours within territory India. The decision in the case of M/s. Cox & Kings India Ltd. related to service provided in respect of clients who would travel outside India. Thus, the ratio of this decision is not relevant for the instant case where the destination of tours is within India. In the said decision great reliance has been placed on the provision in Export of Services Rules, 2005. The said Rules relate to the services where either the client or the location of performance or immovable property is located outside India. In the instance Case, the entire services are provided within the territory of India and therefore, the provisions of the Export of Services Rules, cannot be applied to the instant case. The claim of the appellants that in case of Pre-Planned Package Tours activities of Planning, Scheduling, Organizing and Arranging are already completed before the customer approaches the appellants. In that sense, the only an offer is prepared before the customer approaches and all activities of Planning, Scheduling, Organizing and Arranging happen after the approach of customer. These, facts are however no evidence is available on record to show that the appellant complete the activity of Planning, Scheduling, Organizing and Arranging prior to customer approaching and therefore the said claim remains unsubstantiated and not tenable. The entire activity of PLANNING, Scheduling, Organizing And Arranging is undertaken in the taxable territory in the instant case. The taxable service is activity of Planning, Scheduling, Organizing and Arranging. In these circumstances, even if the client tours a non taxable territory, while the service of Planning, Scheduling, Organizing and Arranging is provided in taxable territory, the service will remain taxable as provided in taxable territory. The tax has therefore been rightly demanded. Time Limitation - HELD THAT:- The issue involved in the instant case, Section 64 of the Finance Act, 1994 which specifically excludes the State of Jammu and Kashmir from levy of Service Tax provision. The definition of ‘tour operator’ and “tour” itself was a contested issue which was considered in detail by the Larger Bench in the case of M/S COX & KINGS LIMITED (FORMERLY KNOWN AS COX AND KINGS (INDIA) LIMITED) VERSUS COMMISSIONER (TAR) -MUMBAI [2023 (10) TMI 1388 - CESTAT MUMBAI - LB]. In these circumstances, it is opined that they may not have been any intent to evade payment of duty as a person might hold bonafide belief in the instant case that he is not liable to levy of service tax. No specific act of mis-declaration or suppression has been pointed out in the earlier proceedings. Consequently, the extended period of limitation cannot be invoked for recovery of taxes. The appeal is therefore allowed partly in so far as the issue of limitation is concerned - The matter is remanded to the original adjudicating authority for determination of duty liability if any within the period of limitation. Issues Involved:1. Taxability of services provided by the appellant in Jammu & Kashmir.2. Application of Export of Services Rules, 2005.3. Determination of the place of provision of services.4. Invocation of the extended period of limitation.Issue-Wise Detailed Analysis:1. Taxability of Services Provided by the Appellant in Jammu & Kashmir:The appellants argued that their services, particularly for pre-planned package tours, are not taxable as they are performed in Jammu & Kashmir, which is excluded from the purview of the Finance Act, 1994. They contended that the activities of planning, scheduling, organizing, and arranging tours are completed before the client approaches them, and therefore, these activities are self-services and not taxable. The Tribunal, however, found that these activities are performed in the taxable territory and are taxable as the service of planning, scheduling, organizing, and arranging tours happens in the taxable territory. The Tribunal held that the service tax is on the tour operator services and not on the tour itself.2. Application of Export of Services Rules, 2005:The appellants relied on Export of Services Rules, 2005, and related circulars to argue that their services should be treated as export of services since they are partly performed outside India. The Tribunal found that these rules and circulars are not applicable as the services in question are provided within the territory of India. The Tribunal emphasized that the Export of Services Rules, 2005, apply to services where either the client or the location of performance is outside India, which is not the case here.3. Determination of the Place of Provision of Services:The appellants argued that the services are consumed in Jammu & Kashmir, and therefore, should not be taxed. The Tribunal refuted this by explaining that the taxable service provided by the appellant is planning, scheduling, organizing, and arranging, which are conducted in the taxable territory. The Tribunal used analogies to illustrate that the place of consumption of the service (Jammu & Kashmir) does not change the place of provision of the service (taxable territory). The Tribunal concluded that the service remains taxable as it is provided in the taxable territory.4. Invocation of the Extended Period of Limitation:The appellants argued that they had a bona fide belief that their services were not taxable and that there was no intent to evade duty. The Tribunal agreed, noting that the issue involved the interpretation of statutes and that there was no specific act of mis-declaration or suppression by the appellants. Consequently, the Tribunal held that the extended period of limitation could not be invoked for the recovery of taxes.Conclusion:The Tribunal concluded that the services provided by the appellants are taxable as they are performed in the taxable territory. The Export of Services Rules, 2005, and related circulars do not apply to the case. The place of provision of the service is the taxable territory, not Jammu & Kashmir. The extended period of limitation cannot be invoked due to the appellants' bona fide belief and the lack of intent to evade duty. The appeal was allowed partly on the issue of limitation, and the matter was remanded to the original adjudicating authority for determination of duty liability within the period of limitation.