Tour operator service tax applies only when contract carriage meets tourist vehicle requirements under motor vehicle rules

Service tax on tour operator service applies only where the contract carriage answers the statutory description of a tourist vehicle under the Motor Vehicles law. The applicants argued that their vehicles were merely contract carriages and were not constructed, adapted, equipped, or maintained to meet the prescribed requirements for tourist vehicles; this position was not disputed by the Revenue. Relying on its earlier view, the Tribunal found a prima facie case for waiver of pre-deposit and granted stay of recovery pending the appeal, with recovery proceedings remaining stayed during the appeal.

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Issues: Whether the applicants made out a prima facie case for waiver of pre-deposit and stay of recovery in a demand of service tax on alleged Tour Operator Service.

Analysis: Liability to service tax under the definition of tour operator depended on the vehicle answering the description of a tourist vehicle under the Motor Vehicles law. The applicants contended that their vehicles were only contract carriages and had not been constructed, adapted, equipped, or maintained to satisfy the prescribed requirements for tourist vehicles. That position was not disputed by the Revenue. The request for pre-deposit was also supported by the Tribunal's earlier view that tax liability would arise only where the contract carriage fulfilled the requirements of a tourist vehicle under the Motor Vehicles Rules.

Conclusion: The applicants were entitled to waiver of pre-deposit and stay of recovery pending the appeal.

Final Conclusion: Interim relief was granted and the recovery proceedings remained stayed during the pendency of the appeal.

Ratio Decidendi: Service tax on tour operator service attaches only when the contract carriage satisfies the statutory requirements of a tourist vehicle under the applicable motor vehicle rules.

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