TaxTMI 
TaxTMI 
2017 (4) TMI 852
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.... as required for foreign travel. 2. The demand of duty was confirmed by the Commissioner. Penalties were also imposed under Section 76, 77 and 78 in one case under Section 76 and under Section 76 only in the 2^nd case. The demand of interest was also confirmed in both the cases. Aggrieved by the said order, the appellants are before the Tribunal. 3. Learned Counsel for the appellants argued that the service tax is destination based consumption tax and should be levied at the location where the services are consumed or in other words where the services are used. Learned Counsel relied on the decision of the Hon'ble Apex Court in the case of All India Federation of Tax Practitioner's V. UOI 2007 (7) STR 625 (S.C.). He argued that in the light of what is stated above, it is clear that service tax is a VAT which in turn is destination based consumption tax. He argued that it is a tax on commercial activities, it is not a charge on the business but on the consumer and it would logically be leviable only on services provided within the country. Learned Counsel argued that these services are consumed outside the territory of India. Thus even if services are rendered in India they ha....
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....e there under." The definition as given in section 65 (115) of the Finance Act w.e.f. of 'Tour Operator' w.e.f. 10/09/2004 reads as follows: - "Tour operator mean any person engaged in the business of planning, scheduling, organizing or arranging tours (which may include arrangements for accommodation, sightseeing or other similar services) by any mode of transport, and includes any person engaged in the business of operating tours in a tourist vehicle covered by a permit granted under the Motor Vehicles Act, 1988 (59 of 1988) or the rules made thereunder." 3.3 Learned Counsel argued that after 10^th September 2004, the words planning, scheduling, organizing or arranging the tours by any mode of transport have been incorporated in the definition. Prior to this, the definition did not specifically contain the terms planning, scheduling and organizing and the tour services were taxable only when the tour was undertaken in a tourist vehicle. The appellant submits that no tour can be conducted without planning, scheduling and organizing. Every tour operator has to perform the following basic functions before any tour is undertaken: (i) The tour operator identifies the place....
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.... Learned Counsel argued that in terms of Export of Services Rules, 2005 that the tour operators are classifiable under Rule 3(ii). In the said category in order to consider the said service of export if such service is performed outside India. Thus the learned Counsel argued that the performance of the service outside India is a mandatory condition for considering the service of tour operator as export of service. The learned Counsel relied on the Board's Circular No. III/05/2009-ST dated 24.02.2009 which reads as follows:- "2. The matter has been examined. Sub-rule (1) of rule 3 of the Export of Services Rule, 2005 categorizes the services into three categories: (i) ----------- (ii) Category (II) [Rule 3(1)(ii)] : For services (such as Rent-a-Cab operator, Market Research Agency service, Survey and Exploration of Minerals service, Convention service, Security Agency service, Storage and Warehousing service) where the place of performance of service can be established, it is provided that provision of such services would be 'export' if they are performed (or even partly performed) outside India (iii) ------------ 3. Similarly, if an Indian event man....
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.... • The Export of Service Rules 2005 were further amended by notification no.13/2006-ST dated 19.04.06 wherein the condition to receive foreign currency was provided in rule 3(2) whereas rule 3(1) provided the various conditions for treating any service as Export of Service. Rule 3(2) & rule 3(1) were completely independent & hence the provisions of rule 3(2) did not apply to rule 3(1). 3.8 Learned Counsel further argued that the amount received for the services should be considered cum-duty price and service tax should be calculated accordingly by extending duty benefit. Learned Counsel further argued that service tax has been paid on the airfare portion of the Outbound Tours and therefore the demand if confirmed is required to be reduced to that extent. 3.9 Learned Counsel further raised the issue of jurisdiction. Learned Counsel argued that their branches have been located at 13 different places and each one is registered with the respective jurisdictional Central Excise Commissionerate. They obtained the centralized registration only on 17^th November 2009. Learned Counsel argued that for the period before 17^th November 2009 in the respective jurisdictional Comm....
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....as operating tours then there was no need of the specific component of the definition. In the said decision it has been held in the absence of word operating in the generic fact of the definition applied in the tour operators. It was argued that the Tribunal has wrongly held that the specific component of the definition would have been surplusage in legislative drafting if the generic facet of the definition was considered to include operating tours. He argued that this specific component of the definition from 01.04.2000 and the definition after 09.09.2004 are included in the earlier definition. He pointed out that the generic facet and the specific facet are joined by conjoined law. 4.2 Learned A.R. relied on the decision of the Hon'ble Apex Court in the case of Doypack Systems Pvt. Ltd. - 1988 (36) ELT 201 (SC) wherein it has been held that the purpose of interpretation of statute is to discover the intention of the legislature as expressed in the Statute. He argued that where the grammatical construction is clear and manifest and without doubt, that construction ought to prevail unless there are some strong and obvious reasons to the contrary. He pointed out that in the same....
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....the application of artificial rules invented either by judges as art of the judge made law of the land, or by some legislative authority". Similarly Hon'ble Supreme Court observed that "the situs of sale" can only be fixed wither by the appropriate legislature or by judge made law, and there is no settled principles for determining the situs of sale". He argued that the legislature has vide Export of services rules prescribed that service provided by a tour operator would be deemed to have been provided in India unless the conditions of the said rules are satisfied. 4.6 Learned A.R. further relied on the fact that the services of "Tour Operator" was placed in Rule 3(1) (ii) of Export of Service Rules, 2005. As such, till the time the tour operator is located within India service would be deemed who have been provided within India. He argued that the said rule was approved by the Parliament, it is law of the land in view of the decision of the Apex Court in the case of Bengal Immunity Company Ltd. (supra). He argued that the Hon'ble Apex Court in the case of All India Federation of Tax Practitioners has held that "service tax is a VAT which in turn is a destination based consumpt....
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....rovided and consumed beyond the Indian territory; and (d) Without prejudice to the conclusions summarized in (a) to (c) supra, we hold : (i) Planning and scheduling of outbound tours may not be components of services provided to tourists, would amount to an incidental activity undertaken as a prelude to providing tours and thus the service if at all provided is to the service provider itself. Nevertheless, since organizing and/or arranging of outbound tours are components of the service provided to tourists and these are the primary and substantive purposes of the service provided and consumed, the composite activity of planning, scheduling, organizing or arranging tours falls within the scope of the taxable service defined in Section 65(115) of the Act; (ii) Whether an outbound tour amounts to export of service and is thus immune to levy of Service Tax, under the Export of Service Rules, 2005 is not decided and is left open, as not necessary in view of our ruling on other issues? (iii) The assessees would be entitled to abatement benefits in terms of any exemption/abatement benefits provided qua Notifications issued by the Central Government under Sec....
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....efined in Section 65(115) of the Act, post-amendment of the definition by the Finance Act, 2004 (w.e.f. 10-9-2004)? (ii) Does the 2004 amendment alter the contours of the expression and if so, to what extent? b Whether "outbound tours" are outside the purview of the taxable service enumerated in Section 65(105)(h) of the Act? 6.1 The scope of expression of "Tour Operator" as defined under Section 65(115) of the Act post amendment of the definition of the Finance Act, 2004 with effect from 10.09.2004 has been examined. This issue has been examined in sub-para (c) of para 17 of the said order which reads as follows:- (c) W.e.f. 10-9-2004 "tour operator" was amended again. We are concerned with the scope of the expression, post-10-9-2004. As amended, a person engaged in the business of planning, scheduling, organising or arranging tours (which may include arrangement for accommodation, sightseeing, or other similar services) by any mode of transport is the taxable service. This amendment incorporates an inclusionary clause, whereby any person engaged in the business of operating tours in a vehicle covered by a permit granted under the Motor Vehicles Act, 1988 or the rules ....
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....e rules made thereunder; and the later inclusionary clause would amount to a surplusage. We are compelled to the above interpretation of the amended definition since it is an established principle of statutory interpretation that attribution of surplusage in legislative drafting, must clearly be avoided. Patanjali Shastri, C.J.I. observed in Aswini Kumar Ghose v. Arabinda Bose - AIR 1952 SC 369: It is not a sound principle of construction to brush aside words in a statute as being inapposite surplusage, if they can have appropriate application in circumstances conceivably within the contemplation of the statute. Jagannadhadas, J. pointed out in Rao Shiv Bahadur Singh v. State of U.P. - AIR 1953 SC 394 that : It is incumbent on a Court to avoid a construction, if reasonably permissible on the language, which would render a part of the statute devoid of any meaning or application. In J.K. Cotton Spinning & Weaving Mills Co. Ltd. v. State of U.P. - AIR 1961 SC 1170 Das Gupta J. observed that: In the interpretation of a statute, the Court always presumes that the Legislature inserted every part thereof for a purpose and the legislative intention is that every part of the statute should....
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....s (including arrangements for accommodation, sightseeing or other similar services), by a mode of transport other than a tourist vehicle, such activity falls outside the scope of "tour operator". However, the activity of planning, scheduling, organising or arranging tours including operating the tour in a tourist vehicle covered by a permit granted under the 1988 Act or the rules made thereunder, falls within the ambit of "tour operator", as a consequence of the second inclusionary clause. 6.2 Thus it has been held in the said order that the term "Tour Operator" does not include the persons operating tours on any mode other that specific motor vehicles operated by operators having permit under Motor Vehicle Act, 1988 or rules made thereunder. The conclusion in the said order can be summarized in simple terms as follows: i) The appellants are operating tours and not merely planning, scheduling, organising or arranging tours. ii) There are two facets of the definition of the term "Tour operator", one generic and one specific (inclusive part of definition). Since appellants are operating tours they do not fall in the generic facet of the definition of the term tour operator a....
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....ation, sightseeing or similar services) by any mode of transport (not limited to tours in a tourist vehicle covered by a permit granted under the Motor Vehicles Act, 1988 or the rules made thereunder).' (emphasis supplied) It is incorrect to say that the expression 'tour operator' includes or excludes any 'taxable service'. BY definition all services provided by a 'tour operator' in relation to tour' are taxable, irrespective of the fact if the same services qualify him to be a 'tour operator' or not. In our considered view the changes made in the definition of the term 'Tour Operator' only makes changes in the definition of the person providing the service, and the nature of taxable service has to be construed accordingly. The only conclusion that needs to be made on the basis of the definition of the term 'Tour Operator' is if the appellant falls within the definition of term 'Tour Operator' or not. 6.4 As discussed in para above, the said order acknowledges that the appellant has at least provided the service of organising and arranging the tours. In such circumstances they clearly fall under the category of 'Tour Operator'. In our considered view the taxable service is no....
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....etc. operator (d) someone who is skilled at dealing with people and getting what he or she wants from a situation: He has shown himself to be a can any operator in wagenegotiations. From these definitions of the word 'Operator', the definition of term 'Tour operator' appearing in the Finance Act 94, would mean 'a person' doing a business of tours. An "Operator" is a person who operates a business. Operating business of tour could involve any one or more of the activities like planning, scheduling, organizing or arranging tours (which may include arrangement for accommodation, sightseeing or other similar services). Thus any person involved in any one or more of the activities of these activities in relation to a tour would be a tour operator. 6.6 Following had been argued in the said order 19 (a) The planning, scheduling, organising or arranging outbound tours is merely incidental to the operating and conducting of outbound tours The said contention of the appellant was rejected in the said decision with following observation 19 (a) (vi) We therefore hold that this contention is without merit or force. The assessees had clearly organised and arranged the tours for....
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.... his own vehicle or has taken a vehicle on lease for this purpose for a period of at least one year and is recognised by the Department of Tourist of the Government of India;] It can be seen that the term 'operator', applies to a wide range of businesses, from a person engaged in the business of 'providing tourist transport vehicles on tourist circuits', to a travel agency (engaged in provides all tickets for travel by air, rail, ship, passport, visa and also arrange accommodation, tours, entertainment and other tourism related services) and to a tour operator (engaged in transport, accommodation, sight-seeing, entertainment and other tourist related services for tourist). It is obvious that the term operator applies to persons engaged in any of these activities. It is not necessary that a person should be providing all the services to become an 'operator'. By just providing one or more of these services a person can become an 'operator'. In fact the list is not exhaustive and includes in its ambit 'other tourist related services'. Use of expression 'other tourist related services' in the definition means that it is not necessary to provide all the services to qualify as tour op....
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....s outside the description of 'planning, scheduling, organizing or arranging tours (which may include arrangements for accommodation, sightseeing or other similar services) by any mode of transport' and which leads to the said conclusion that they are 'operating tours'. The said order describes the business of conducting and operating package tours as follows:- (ii) the business of conducting and operating package tours outside India involve several steps such as determining the probable dates and venues of tours, finalising the itinerary; booking of accommodation in hotels in foreign countries; planning and booking for travelling through bus, railways, travelling cruise liners, etc., in foreign locations, sightseeing on tours, breakfast/meals; providing service of foreign guides, providing a tour leader to accompany the touring party; Air ticketing, arranging visa and travel insurance to guests as required for foreign travel, complementary bags/snacks hampers, shopping bags, passport pouches, etc.; the business of conducting and operating package tours outside India involve several steps such as determining the probable dates and venues of tours, finalising the itinerary; bookin....
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....rrange the tickets and visa's. From the above analysis it is apparent that the appellant is engaged in activities of planning, scheduling, organising or arranging tours. Since the appellant is engaged in these activities they fall within the definition of 'Tour Operator'. In fact by providing each of these services individually also they qualify to be a tour operator. Thus any service given by the appellants in relation to the tour, including so called 'operating tours', would fall within the scope of taxable service. 6.9 Activities of 'planning, scheduling, organising or arranging tours' each individually amounts to 'Operating tours' The interpretation of words 'Operating' vis a vis 'planning, scheduling, organising or arranging tours', is not relevant for determining the scope of the taxable service, but it is relevant only for determination of the meaning of the words 'Tour Operator'. While it is not relevant in interpreting the scope of the 'taxable service', the said order proceeds on the assumption that the appellants are providing the service of 'operating tour' which is different from 'planning, scheduling, organising or arranging tours'. We will revisit the activi....
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.... also qualify to be covered by the term 'operating' tours. If the activity of the appellant is considered to be 'operating' tours then the activity of 'operating' is synonymous with the activity of 'planning, scheduling, organising or arranging tours'. 6.10 Each of the activities of the appellant individually qualify them under the category of 'Tour Operator'. In our considered view even if the it is considered that the there is some difference between the term 'Operating tours' and 'planning, scheduling, organising or arranging tours', still it is not disputed that the appellants are involved one or more of the activities of either planning or scheduling or organising or arranging tours. The only argument can be that they are doing something (though nothing has been identified in the said order) which goes beyond the activities of 'planning, scheduling, organising or arranging tours' and brings them in the scope of the activity of 'operating' tours. It is not in dispute that they are engaged in the activity of 'planning, scheduling, organising or arranging tours'. So long as they are involved in any one or more of these activities of 'planning, scheduling, organising or arra....
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....sist of one or more of these activities is excluded from the definition defies logic and results in absurdity. 6.12 The principle of surplusage. The term 'Tour operator' has been defined as follows (i) 10-9-2004 to 15-5-2008 : "Tour Operator" means any person engaged in the business of planning, scheduling, organising or arranging tours (which may include arrangements for accommodation, siteseeing, or other similar services) by any mode of transport, and includes any person engaged in the business of operating tours in a tourist vehicle covered by a permit granted under the Motor Vehicles Act, 1988 or the rules made thereunder, (amendments are emphasised). (iv) 16-5-2008 to 30-6-2012 : "Tour Operator" means any person engaged in the business of planning, scheduling, organizing or arranging tours (which may include arrangements for accommodation, site-seeing, or other similar services) by any mode of transport, and includes any person engaged in the business of operating tours in a tourist vehicle or a contract carriage by whatever name called, covered by a permit, other than a stage carriage permit, granted under the Motor Vehicles Act, 1988 (59 of 1988) or the rules....
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....s (including arrangements for accommodation, sightseeing or other similar services), by a mode of transport other than a tourist vehicle, such activity falls outside the scope of "tour operator". However, the activity of planning, scheduling, organising or arranging tours including operating the tour in a tourist vehicle covered by a permit granted under the 1988 Act or the rules made thereunder, falls within the ambit of "tour operator", as a consequence of the second inclusionary clause. It holds that the generic facet of the definition of the term 'Tour Operator', if understood to include the activity of 'operating tours', would make the specific facet surplusage. In other words it holds that if the specific inclusive facet of the definition does not include anything in the definition, the words become superfluous. It can be seen that it is not correct to say that the specific inclusive part of the definition is surplusage as it covers in the definition of 'tour operator' a person 'providing tourist transport vehicles on tourist circuits' who would otherwise be not covered by the generic definition. 7. The second main issue decided by the tribunal in the said order is if t....
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....these activities to the appellant. These activity could have been done by the client himself but the same is offloaded to the appellant due to appellants expertise in the activity of planning scheduling etc. The actual tour is undertaken by the client himself and not by the appellant on behalf of the clients. The activity of planning, scheduling, organizing or arranging is complete before the client leaves the shores of India. Thus provision of services of services of planning, scheduling, organizing or arranging tours is done by the appellant in India, before the client leaves the shores of India. Following is the analysis of the services provided by the appellant. Service received by client Where provided Where consumed Determination of the probable dates and venues of tours, finalising the itinerary; The entire scheduling and finalising of itinerary is conducted by the appellants in India It relieves the client of determining the right dates and venues of tours, finalising the itinerary. It is received and consumed before the tour starts when the client is still in India. Consumed in India booking of accommodation in hotels in foreign countries; Booking a....
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....and is not done outside the territory of India. 8. It is seen that the previous decision of the tribunal in the appellants own case shortlists the issues to be decided in the para 16 thereof in following terms: - "16. In view of the core dispute between the parties, the following are the substantive issues that fall for determination : Issues : a (i) What is the scope of the expression "tour operator" defined in Section 65(115) of the Act, post-amendment of the definition by the Finance Act, 2004 (w.e.f. 10-9-2004)? (ii) Does the 2004 amendment alter the contours of the expression and if so, to what extent? Whether "outbound tours" are outside the purview of the taxable service enumerated in Section 65(105)(h) of the Act?" It is apparent that the said decision I) Does not define the term "Operator". It presumes that the appellant are "Tour Operator" without examining the actual activities done by the appellant. II) The said decision fails to consider/ignores the definition of the 'Taxable Service' enumerated in Section 65(105)(h) in the reasoning given in the said decision. It is seen that the discussion in the said decision (Para 16 onw....
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....oint of law involved in the decision is not perceived by the court or present to its mind. The Court may consciously decide in favour of one party because of point A, which it considers and pronounces upon. It may be shown, however, that logically the court should not have decided in favour of the particular party unless it also decided point B in his favour; but point B was not argued or considered by the court. In such circumstances, although point B was logically involved in the facts and although the case had a specific outcome, the decision is not an authority on point B. Point B is said to pass sub silentio. In Gerard v. Worth of Paris Ltd. (k)., [1936] 2 All E.R. 905 (C.A.), the only point argued was on the question of priority of the claimant's debt, and, on this argument being heard, the Court granted the order. No consideration was given to the question whether a garnishee order could properly be made on an account standing in the name of the liquidator. When, therefore, this very point was argued in a subsequent case before the Court of Appeal in Lancaster Motor Co. (London) Ltd. v. Bremith, Ltd., [1941] 1 KB 675. the Court held itself not bound by its previous de....