Tour operator exempt from service tax on outbound tours under Export of Service Rules but liable for domestic tours

CESTAT New Delhi held that appellant tour operator was not liable for service tax on outbound tours as these services are performed outside India territory, covered under Export of Service Rules exemption. However, service tax was confirmed on domestic inbound tours provided to Indian travelers, as these fall within Indian territory and attract taxation under tour operator service provisions. The demand for service tax on web design charges was set aside, as domain names do not constitute intellectual property rights or trademarks under applicable law. Appeal was partly allowed with demands on outbound tours and web charges set aside, while domestic tour tax liability was upheld.

---

---

Issues Involved:
1. Liability of appellant to pay tax on outbound tours and inbound tours for foreign travelers.
2. Entitlement of the appellant to pay service tax on domestic outbound tours.
3. Service tax liability on the amount received as web design charges.

Issue No. 1:
The issue revolves around the demand for service tax on outbound tours provided by the appellant. The definition of Tour Operator under Section 65(115) of the Finance Act, 1994 is crucial in determining the tax liability. The Tribunal clarified that outbound tours conducted outside India are not subject to service tax, as per Rule 3(2) of Export of Service Rules, 2005 and Notification No. 09/2005 dated 03.01.2005. Citing relevant legal precedents, the Tribunal ruled in favor of the appellant, setting aside the demand related to outbound tours.

Issue No. 2:
This issue concerns the liability of the appellant to pay service tax on domestic outbound tours provided to Indian travelers. The definition of a tour operator underwent changes over the years, and the value of tour operator services includes charges for accommodation and other facilities related to the tour. The Tribunal upheld the demand for service tax on domestic tours within India, as clarified by TRU clarification No. 43/10/1997. The order confirming the demand on inbound tours was sustained based on the applicable legal framework.

Issue No. 3:
The Department treated web domain charges as payments received for intellectual property services. However, the Tribunal analyzed the definition of intellectual property right services under the Finance Act, 1994 and trademark under the Trade Marks Act, 1999. It was concluded that domain names do not fall under the definition of trademarks, and payments for domain names cannot be considered payments for intellectual property rights services. Therefore, the demand related to web domain charges was set aside.

In conclusion, the Tribunal partially allowed the appeal by setting aside the demands for outbound tours and web domain charges, while confirming the demands for domestic tours provided to Indian travelers and renting of immovable property used for commercial purposes. The judgment provides a detailed analysis of each issue, applying relevant legal provisions and precedents to determine the tax liability of the appellant.

---