2026 (1) TMI 1517 - AT - Service Tax

Tour operator service classification for intercity bus operations and CENVAT credit denial affirmed; limitation scrutiny upheld.

Whether point-to-point intercity bus operations qualify as taxable tour operator services was considered; tribunal applied the principle that mere ... Tour operator service - CENVAT credit - extended period of limitation - suppression of facts - stage carriage - Suppression of facts - Show cause notice (SCN) - ST-3 return scrutiny - Non-payment of service tax on tour operator services. - HELD THAT:- The dispute is not with regard to the services provided by the appellant operating stage carriage buses. In addition to the stage carriage buses, the appellant had entered into an agreement with RTDC according to which in order to promote tourism within Rajasthan and also from point to point between Jaipur and Delhi and Jaipur and Agra, the appellant operates buses. RTDC provides hotel accommodation, food etc., at specific points. The entire amount of money collected by the appellant for transporting people from point to point between Jaipur and Delhi and Delhi and Agra and also from point to point within Rajasthan is retained by the appellant. A token amount of 10 paise is given to the RTDC. The question which arises is whether running of buses in this fashion from point to point is covered by definition of tour operator service. According to the appellant, it does not amount to providing tour operator service and hence no service tax needs to be paid. Appellant relied on the decisions indicated above. According to SVR Tour & Travels [2016 (6) TMI 774 - CESTAT HYDERABAD] only if a tour is organized for a group through a common planning, scheduling etc., service tax as a tour operator service is payable. If a vehicle merely transports passengers from one place to another without a common contract and charges each passenger a fare it is more akin to transportation of passengers than a tour operation. Wrong availment of CENVAT credit - HELD THAT:- No CENVAT credit can be availed on inputs and input services used in manufacture of exempted goods or for providing non-taxable services. The service provided by the buses is undisputedly not taxable. Therefore, service tax paid on third party insurance of buses which are used for carrying passengers cannot be taken by the appellant. Therefore, the denial of CENVAT credit on this count needs to be upheld. Limitation - HELD THAT:- Once the ST-3 returns are filed or even if they have not been filed by the due date, it is for the Range officer to scrutinize the ST-3 Return, call for any additional information or accounts required. Since the Range officer must be already aware of the issues in dispute, it is incumbent upon him to scrutinize the Returns and raise demands within the normal period of limitation. The department cannot say that it was not aware about the activities of the assessee and claim suppression of facts or mis-statement to invoke extended period of limitation. This is the law laid down by the Supreme Court in Nizam Sugar Factory versus Collector of Central Excise, [2006 (4) TMI 127 - SUPREME COURT]. Issues: (i) Whether service tax demand on 'tour operator service' is sustainable; (ii) Whether CENVAT credit availed on third party insurance of buses is admissible; (iii) Whether demands of service tax on license fee for transport of goods and bus stand fee are sustainable; (iv) Whether demands of service tax on income from rent, canteen contracts, rent-a-cab, and advertising space/time services (not pressed) are to be upheld; (v) Whether extended period of limitation was correctly invoked by the Revenue.Issue (i): Whether service tax demand on 'tour operator service' in relation to point-to-point bus operations under an arrangement with a tourism body is sustainable.Analysis: The Tribunal examined the nature of the appellant's operations in light of the statutory definition of 'tour operator' before and after 2008, prior decisions distinguishing pure passenger transport from organized tour operations, and the factual arrangement where the appellant retained fare collections and remitted only a token amount to the tourism body while the tourism body merely provided accommodation facilities. The Tribunal contrasted decisions where common planning, scheduling and a group contract distinguished a tour operation from mere passenger transport.Conclusion: Demand of service tax on 'tour operator service' is not sustainable and is set aside.Issue (ii): Whether CENVAT credit availed on service tax paid on third party insurance for buses used in stage carriage (exempt) services is admissible.Analysis: The Tribunal applied the settled rule that input credit cannot be availed for inputs or input services used in providing exempted or non-taxable services. The buses operated as stage carriage services are undisputedly non-taxable; therefore, the service tax paid on insurance for those buses is not an allowable credit. The appellant had reversed a portion but sought broader entitlement which was rejected.Conclusion: Denial of CENVAT credit on third party insurance is upheld and the wrongful availment is sustained within the normal period of limitation.Issue (iii): Whether service tax demands on license fee received for transport of goods and on bus stand fee are sustainable.Analysis: The parties agreed these issues are covered in favour of the assessee on merits; the Tribunal recorded that the legal position supports setting aside these demands.Conclusion: Demands of service tax on license fee for transport of goods and on bus stand fee are set aside even for the normal period of limitation.Issue (iv): Whether service tax demands on income from rent, canteen contracts, rent-a-cab operator service and advertising space/time service (issues not pressed by the appellant) should be upheld.Analysis: The appellant's counsel expressly did not press these issues on merit. Where issues are not pressed, the Tribunal recorded that the demands are to be upheld within the normal period of limitation.Conclusion: Demands in respect of rent, canteen contracts, rent-a-cab operator service and advertising space/time service are upheld on merit within the normal period of limitation.Issue (v): Whether invocation of the extended period of limitation by Revenue is valid given prior SCNs and the knowledge of authorities.Analysis: The Tribunal applied the principle that extended period based on suppression cannot be invoked where the relevant facts were already in the knowledge of authorities and earlier SCNs had been issued; reliance was placed on the settled precedent that when initial SCNs or returns disclose facts, subsequent similar facts do not amount to suppression enabling extended limitation.Conclusion: Invocation of the extended period of limitation is not justified; the demands and denial of CENVAT credit to the extent based on extended limitation are set aside.Final Conclusion: The appeal is partly allowed: demands and denial of credit for the extended period of limitation are set aside; specific demands for tour operator service, license fee for transport of goods and bus stand fee are set aside on merits; demands on rent, canteen contracts, rent-a-cab and advertising services are upheld on merits; wrongful availment of CENVAT credit on third party insurance is upheld for the normal period of limitation; matter remanded for limited computation.Ratio Decidendi: Where the relevant facts were within the knowledge of authorities and earlier show cause proceedings or disclosures existed, subsequent demands invoking the extended period of limitation for suppression cannot be sustained.