TaxTMI 
TaxTMI 
2024 (1) TMI 681
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....of Demands dated 22.10.2018 and 12.04.2019 issued under sections 73 and 73A of the Finance Act 1994 [the Finance Act] with interest and penalty. 2. Service Tax Appeal No. 51845 of 2021 and Service Tax Appeal No. 51846 of 2021 have been filed by the Vice President (Finance) and Groups CFO, and the Director of the appellant to assail that part of the order dated 29.07.2021 that imposes penalties upon them. 3. The appellant, which is an Indian online travel company, owns an online platform named 'makemytrip.com' which allows the customers to book hotel rooms, flight bookings, train bookings and bus tickets through its website application. It registered itself with the Service Tax Department for provision of air travel agents services and tour operator services. 4. The online website/ mobile application of the appellant lists various hotels which provide hotel accommodation services. Rooms in these hotels can be booked by the customers on the website of the appellant. The booking process has been explained by the appellant in the following manner: (a) The customers access the appellant's website/mobile application [mobile-app] and fill the requisite details such as th....
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....l; (ii) A specific number of hotel rooms are allocated to appellant for booking through website; and (iii) Booking of hotel rooms on commission basis. 7. During the relevant period, the appellant discharged the service tax liability on the entire amount received from the customers (which is inclusive of taxes) under the category of 'tour operator services' by availing the benefit of abatement of 90 percent under notification dated 01.03.2006 (till 30.06.2012) and under notification dated 20.06.2012 (w.e.f. 01.07.2012) [the Abatement Notifications]. 8. An investigation was carried out by the Directorate General of Central Excise Intelligence at the premises of the appellant and it was noticed that the appellant had wrongly claimed that it was rendering tour operator services to customers as it was providing short-term hotel accommodation services and was not discharging service tax liability under this category. 9. The show cause notice and the Statement of Demands were issued to the appellant primarily containing the following allegations against the appellant: (i) The appellant is engaged in the provision of service of short term hotel accommoda....
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....he appellant is not acting as an agent of the hotel and is not facilitating the provision of any service. The appellant has absolute control over charging of gross amount from the customers for hotel accommodation. Thus, the price at which the hotel room is sold to the customer by the appellant is fixed and decided by appellant on its own and not as per the express authorization of the hotels; (iii) The appellant is not entitled to avail the abatement of 90% under the Abatement Notifications as tour operator as it does not plan or conduct any tours in respect of its standalone hotel bookings and has failed to submit any defense against paragraph 4.8 of the show cause notice, which specifies three conditions to be fulfilled for service to qualify as 'tour operator' service; and (iv) The appellant has collected amount from the customers as representing service tax on hotel accommodation service and service tax assessment was done under tour operator service. Thus, the amount collected by the appellant is in excess of the service tax paid by it and thus, both the conditions stipulated under section 73A of the Finance Act have been satisfied. 12. To appreciate ....
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.... (i) and (ii) of the aforesaid paragraph 14 relate to the demand proposed under section 73 of the Finance Act and clauses (iii), (iv) and (v) relate to the demand proposed under section 73A of the Finance Act. 14. The following chart would demonstrate the demand confirmed under sections 73 and 73A of the Finance Act, and the demand dropped: Show Cause Notice dated Period Involved Demand of Service Tax under Demand dropped (if any) Section 73/ (in Rs.) Section 73A /(in Rs.) Except hotels located in J & K and of hotels having room tariff less than Rs. 1000/- For hotels located in J&K For hotels having tariff less than Rs. 1000/- 17.10.2016 May 2011 to September 2015 143,83,73,710 82,44,25,109 1,55,89,142 73,94,424 22.10.2018 October 2015 to March 2016 99,61,68,684 46,59,22,753 1,18,72,148 60,28,437 40,73,81,206 (abatement extended in respect of short- term accommodation service) 12.04.2019 April 2016 to June 2017 380,83,50,090 249,32,48,127 3,85,80,813 2,26,81,143 173,97,69,058 (abatement extended in respect of short- term accommodation service) TOTAL 624,28,92,484 378,35,95,9....
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....he Finance Act is contained in Chapter V; (vii) Section 73A of the Finance Act is not invokable with respect to bookings made for hotels having a tariff of less than of Rs. 1000/-; (viii) The extended period of limitation could not have been invoked in the facts and circumstances of the case; (ix) Since the demand itself is not admissible, penalty and interest are not imposable; and (x) Penalties could not have been imposed under section 78A of the Finance Act on the Vice President (Finance) and Groups CFO and Director of the appellant as mens rea cannot be alleged on their part. 17. Shri Mihir Ranjan, learned special counsel appearing for the department, however, supported the impugned order and made the following submissions: (i) The appellant provided short-term accommodation to its customers in the rooms under its control. The appellant offers a list of hotels to its customers on the website and the customers pay the amount online to the appellant at the time of booking as per the price displayed. The appellant assures basic facilities in the hotel and the customer approaches the appellant for any deficiency the hotel. The custome....
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....sequent period can be issued under section 73A of the Finance Act; (ix) The department was justified in invoking the extended period of limitation under the proviso to section 73(1) of the Finance Act; and (x) The department was justified in imposing penalty on the appellant and its officials in the facts and circumstances of the case. 18. The submissions advanced by the learned counsel for the appellant and the learned special counsel appearing for the department have been considered. 19. The period involved in the present appeal is from May 2011 to June 2017. 20. The main issues involved in the appeals are: (i) Whether the appellant provided 'short-term accommodation' service made taxable under section 65(105) (zzzzw) of the Finance Act, or 'tour operator' service made taxable under section 65(105)(n) of the Finance Act; (ii) Whether the appellant was entitled, as a tour operator, to abatement of 90% on the gross amount charged under the Abatement Notifications in respect of service of a tour operator; and (iii) Whether the Department is justified in invoking section 73A of the Finance Act in requiring the appellant to pay the....
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.... offered by the Hotel and Hotel should not give undue selling advantage to its offline selling agent. Hotel shall not, during the term of this Agreement, allow other OTA's to do self funded marketing driven promotions and hotel shall within 6 hours of being intimated by MMT of such promotion shall instruct and ensure that such OTA withdraws the promotion of the Hotel. 4.2 Hotel shall never deny honoring MMT's bookings. In the event of any such occurrence, it shall offer an alternative equivalent accommodation. If Hotel fails to do so, Hotel agrees to refund the booking amount to MMT towards damages in addition to indemnifying MMT against any consumer complaint, unless it is due to an error on part of MMT and established with written confirmation from hotels email ID. xxxxxxxxxx 5. Rates and Commission: 5.1 Parties agree that the inventory rates, the blocking and releasing timelines for booking done shall be as agreed from time to time. 5.2 A commissionable rate of 35% for the Financial Year 2012-13. The Commissions for each subsequent year shall be mutually agreed between the parties. 6. Payment terms: Hotel will deduct....
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.... employees, successors, and assigns harmless against any claims arising out of any physical and personal injury suffered by MMT's customers or any damage or loss incurred by such customers while availing the services under this Agreement to the extent the same is not attributable to MMT. ... 11. Limitation of Liability 11.1 MMT shall not be liable to the hotel for any direct, indirect, incidental, punitive, special or consequential damages or losses (including without limitation loss of profit or revenue etc), whether under contract or in tort, and even if the other party had been advised of the possibility of such damage or loss. xxxxxxxxx 14. General 14.3 Nothing in this Agreement shall be construed a to create the relationship of employer-employee, partners, collaborators, joint-venture or principal-agent between the parties hereto. The parties shall be independent contractors and neither party shall bind the other by its acts, deeds or omissions, other than to the extent set out in this Agreement." (emphasis supplied) 23. The following relevant points emerge from the aforesaid Agreement: (a) The Hotel is in th....
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....iding confirmed booking through its online portal. The relevant clauses of the User Agreement are reproduced below: "FORCE MAJURE CIRCUMSTANCES The user agrees that there can be exceptional circumstances where the service operators like the airlines, hotels, the respective transportation providers or concerns may be unable to honor the confirmed bookings due to various reasons like climatic conditions, labor unrest, insolvency, business exigencies, government decisions, operational and technical issues, route and flight cancellations etc. If MMT is informed in advance of such situations where dishonor of bookings may happen, it will make its best efforts to provide similar alternative to its customers or refund the booking amount after reasonable service charges, if supported and refunded by that respective service operators. The user agrees that MMT being an agent for facilitating the booking services shall not be responsible for any such circumstances and the customers have to contact that service provider directly for any further resolutions and refunds. ... RESPONSIBILITES OF THE USER VIS-I-VIS THE AGREEMENT The User expressly agrees....
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....eproduced below: "65(105) Any service provided or to be provided- (zh) to any person, by any person, in relation to on- line information and database access or retrieval or both in electronic form through computer network, in any manner; (zzb) to a client, by any person in relation to business auxiliary service; (zzq) to any person, by any other person, in relation to commercial or industrial construction service;" 29. It is, therefore, clear that for any service to qualify as 'short- term accommodation' service, the service should be provided specifically by a hotel. 30. Learned counsel for the appellant also pointed out that the hotel industry is a regulated industry and hotels have to be registered with appropriate regulator and have to seek various approvals like: (i) Building permit, (ii) fire safety permit, (iii) police license, (iv) Health trade license or trade license, (v) bar license, (vi) FSSSAI food business license, (vii) service tax registration for the hotel (viii) VAT Registration 31. The contention of the learned counsel for the appellant is that the....
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....gaged in the business of planning, scheduling, organising 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 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 or the rules made thereunder." (emphasis supplied) 36. With effect from 01.07.2012, the definition of a 'tour operator' is in terms of the Notification No. 26/2012-ST dated 20.06.2012 which is as follows: "2. For the purposes of this notification, unless the context otherwise requires, - (a) ***** (b) ***** (c) "tour operator" means any person engaged in the business of planning, scheduling, organizing, 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." (emphasis supplied) 37. It is clear that any person who is engaged in the business of planning, schedul....
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....e for abatement of 90 percent to a tour operator providing services solely of arranging or booking accommodation in relation to a tour. In other words, the service tax liability of the provider of tour operator service with respect to sole provision of service of arranging or booking of accommodation is limited to 10 percent of the gross taxable value, subject to fulfillment of certain conditions. 42. The Madurai Commissionerate, by a Circular dated 22.08.1997, while dealing with the scope of tour operator service clarified that a tour operator has to be seen qua the person and not qua the transaction and the relevant portion of the Circular is reproduced below: "2.5 The service tax on services rendered by tour operators in relation to a tour shall be the gross amount charged by such operator from the client and shall include the charges for other services provided such as accommodation, food and other facilities in relation to such tour. In other words, it will be on the gross amount charged to the customer. However, in cases where the tour operator provides a package tour i.e. which necessarily includes accommodation for stay and may also include other facilities such....
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.... alleged that the appellant has collected an amount representing service tax from the customers, in excess of the service tax assessed and paid by the appellant, but has not paid the amount so collected to the credit of the Central Government. 46. The relevant portion of section 73A of the Finance Act is reproduced below: "Section 73A. Service tax collected from any person to be deposited with Central Government:- (1) Any person who is liable to pay service tax under the provisions of this Chapter or the rules made thereunder and has collected any amount in excess of the service tax assessed or determined and paid on any taxable service under the provisions of this Chapter or the rules made thereunder from the recipient of taxable service in any manner as representing service tax, shall forthwith pay the amount so collected to the credit of the Central Government. (2) Where any person who has collected any amount, which is not required to be collected, from any other person, in any manner as representing service tax, such person shall forthwith pay the amount so collected to the credit of the Central Government." 47. It is evident that for the invoc....
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.... paid by the Appellant 66 - - Net Paid to Appellant by Customer 4751 - - 52. It is, therefore, clear that the taxes collected by the appellant from customer has been paid to the hotel and the appellant has also discharged has service tax liability by paying service tax on the amount collected by from the customer after availing the benefit of the Abatement Notifications as a tour operator. The appellant had not collected any amount, which was not required to be collected, from any person, in any manner as representing service tax. Section 73A of the Finance Act would, therefore, not be attracted. 53. Reliance can be placed on the judgment of the Supreme Court in R.S. Joshi, Sales Tax Officer, Gujarat vs. Ajit Mills Limited and Another (1977) 4 SCC 98, wherein the Supreme Court held that the word 'collected' can only refer to cases where a person collects an amount from another with an intention to retain the said amount. The relevant portion of the judgment is as follows: "Section 37 (1) uses the expressions, in relation to forfeiture, 'any sum collected by the person shall be forfeited'. What does 'collected' mean here? Words cannot be construed....