TaxTMI 
TaxTMI 
2026 (6) TMI 897
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....ainst the impugned order, to the extent it has not recovered interest till the actual day of payment of confirmed service tax demands under Section 75 of the Finance Act, 1994; not aligned imposition of penalty under Section 76 ibid along with the findings and not correcting certain typographical errors in wrong imposition of penalty beyond 10.05.2008. 1.3 Both the appellant and Revenue have filed the Miscellaneous applications bearing No. 85981, 86103 both of 2025, seeking change of name and address of the respondent arising on account of change in jurisdiction of the Central Goods and Service Tax authorities. The prayer made by both the appellant and Revenue is considered and revised name has been duly incorporated in the cause title and accordingly, the Registry is also directed to incorporate the following changed name and address of the respondent in the appeal records for the purpose of disposal of the appeal:- "Commissioner of Central Goods Service Tax & Central Excise, Mumbai South Commissionerate, 13th Floor, Air India Building, Marine Drive Nariman Point, Mumbai - 400 021". 2.1 Brief facts of the case, leading to this appeal, are summarized herein below: ....
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....overy of interest learned Commissioner had restricted the same upto 09.05.2008 and imposed penalties on the appellants under Section 76, 77 and 78 ibid. Feeling aggrieved with the impugned order, both the appellant and Revenue have filed these appeals before the Tribunal. 3.1 Learned Advocate for the appellant submitted that they organize pre-planned package tours. In other words, the appellant schedules a tour based on their understanding, costing, travel seasons, availability of flights, hotels etc. and prepares a "pre-planned package tour" to be offered to the customer for sale. Such activity of the appellant can be classified into three broad categories: (a) Domestic tours; (b) Inbound tours and (c) Outbound tours. In case of domestic tours category, tours are provided within India for Indian residents. In case of inbound tours category, tours are for the places within India but provided for foreign tourists. The said inbound tour package would commence, be wholly performed and terminate in India. He further stated that the appellant has been paying service tax under the taxable category "Tour Operator" both in respect of domestic tours and inbo....
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....our, he further submitted that the airfare for transportation from India to outside India is not part of the Tour Package. The service provided by the appellant as tour operator commences from destination outside India. The customer has the option to book their own flight tickets or through any other source. However, if the customer books the flight tickets separately through appellant, then the appellant raise a separate invoice for such air travel. The airline pays service tax on the air transportation service provided by the airline, as applicable. This is for the reason that the air transport service has always been treated as a distinct and independent taxable service, separate from "Tour operator" service. He also submitted that under service tax framework, each such transportation service whether road transport, rail transport, passenger transport by vessel, cargo transport and air transportation is recognized as a separately taxable service, governed by its own charging and valuation mechanism. He stated that the intention of the government was never to subsume transportation service within the scope of Tour Operator service. Accordingly, in respect of the commission receiv....
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....orized Representative (AR) had submitted that nature of services provided by the appellant fall under the definition of 'tour operator service' under Section 65(115) of the Finance Act, 1994. Further, since the consideration for the service was received in Indian Rupees, he stated that it cannot qualify as export under Export of Service Rules, 2005. He reiterated the stand of Revenue that in the impugned order, the learned Commissioner had mistakenly failed to impose penalty under Section 76 ibid in the operative portion of the order, and had not demanded recovery of interest till the actual date of payment of adjudged demands, as these does not reflect the findings recorded in the said order. 5. Heard both sides and perused the case records. The additional submission made in the form written paper book in this case was also perused carefully. 6.1 The learned Commissioner had confirmed the adjudged demands of service tax on the appellant vide impugned order dated 19.11.2012, on the basis of his conclusion that the appellant have failed to assess and pay service tax on outbound tours under the taxable head 'Tour Operator service' for the period April, 2005 to March, 2010. 6....
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....r the period after 10.05.2008 no penalty is imposable under Section 76 for the 1st Show Cause Notice, however penalty under Sec.78 is imposable due to the duty evasion resorted to by the noticee by suppression facts and not indicating the collections made with regard to out-bound tours in the ST-3 returns as brought out in my findings above. Finally, due to non-filing of proper returns under Section 70, without indicating the value of out-bound tours, penalty under Section 77 is rightly imposable on them. 48. I, therefore pass the following order: ORDER 49. i) The amount of Rs. 15,97,82,742/- (Rupees Fifteen Crores Ninety Seven Lakhs Eighty Two Thousand Seven Hundred Forty Two only) is confirmed under Section 73(2) of the Finance Act, 1994. ii) Recovery of interest at the rate applicable during the relevant period of time, on the amount confirmed at (i) above, from the date it became due till the date of payment, is hereby ordered under Section 75 ibid for the period up to 09.05.2008, I do not impose any penalty from 10.05.2008, under Section 76 ibid. iii) I impose penalty of Rs.200/- per day or @2% of tax payable, per month whichever is highe....
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.... which would come under the scope of 'taxable service' by enumerating specific activities or services, inter-alia, relevant phrases by way of definition have been provided under Sections 66, 64 and 65(105), 65(113), 65(115)/65(48), 65(50), 65(52)/ 65(41), 65(43), 65(44) of the Finance Act, 1994. The levy of service tax on the services provided by a 'tour operator' was introduced in the Finance Act, 1994 for the first time during the Union Budget 1997. Subsequently, the definition of the term 'tour operator' was amended in the Union Budget, 1998 through the Finance Act, 1998 and later in the Finance Act, 2004; Finance Act, 2008. The extracts of these provisions are quoted below: "Finance Act, 1994 Chapter V SERVICE TAX Section 64. Extent, commencement and application. (1) This Chapter extends to the whole of India except the State of Jammu and Kashmir. (2) It shall come into force on such date as the Central Government may, by notification in the Official Gazette, appoint. (3) It shall apply to taxable services provided on or after the commencement of this Chapter. Section 66. Charge of service tax.- [Substituted by the Finance A....
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....y :-- XXX XXX XXX XXX (3) With effect from the date notified under section 84 of the Finance Act, 1997, there shall be charged a :service tax at the rate of five per cent. of the value of the taxable services referred to in sub-clauses (g), (h), (i), (!), (k), (!), (m), (n), (o), (p), (q) and (r) of clause (41) of section 65 which are provided to any person by the person responsible for collecting the service tax."; (41) "taxable service" means any service provided,- (a) to an investor, by a stock-broker in connection with the sale or purchase of securities listed on a recognised stock exchange; (b) to a subscriber, by the telegraph authority in relation to a telephone connection; (c) to a subscriber, by the telegraph authority in relation to a pager; (q) to any person, by a tour operator in relation to a tour; "66. (1) On and from the date of commencement of this Chapter, there shall be charged a tax (hereinafter referred to as the service tax), at the rate of five per cent. of the value of the taxable services referred to in sub-clauses (a), (b) and (d) of clause (41) of section 65 which are provided to any p....
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....ly :- *66. (1) On and from the date of commencement of this Chapter, there shall be levied a tax C (hereinafter referred to as the service tax), at the rate of five per cent. of the value of the taxable services referred to in sub-clauses (a), (b) and (d) of clause (48) of section 65 and collected in such manner as may be prescribed. (2) With effect from the date notified under section 85 of the Finance (No. 2) Act, 1996, there shall be levied a service tax at the rate of five per cent. of the value of the taxable services referred to in sub-clauses (c), (e) and (f) of clause (48) of section 65 and collected in such manner as may be prescribed. (3) With effect from the date notified under section 88 of the Finance Act, 1997, there shall be levied a service tax at the rate of five per cent. of the value of the taxable services referred to in sub-clauses (g), (h), (i), (). (k), (I), (m), (n) and (o) of clause (48) of section 65 and collected in such manner as may be prescribed. (4) With effect from the date notified under section 116 of the Finance (No. 2) Act, 1998, there shall be levied a service tax at the rate of five per cent. of the value of ....
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....ur and includes the charges for any accommodation, food or any includes the charges for any accommodation, food or any other facilities provided in relation to such tour. 2.2 As per rule 82 of the General Motor Vehicle Rules, 1989 a tourist permit is granted only a tourist vehicle. As per the Motor Vehicles Act, Section 2 (43) a tourist vehicle means a contract carriage constructed or adapted and equipped and maintained in accordance with such specifications as may be prescribed. The term tour operators covers any person who holds a tourist permit in respect of any vehicle. The service tax on tour operators is on operators who run / operate a tour on a motor vehicle provided that the tour operator holds a tourist permit under the Motor Vehicles Act, 1988 in respect of any motor vehicle. Service tax will be chargeable on all domestic and inbound tourist service provided by a tour operator holding a tourist permit. Service tax will also be chargeable on journeys / tours undertaken by tourist taxis and tourist buses (which also hold tourist permits) within and outside the State where they have been registered as tourist vehicles. 2.3 The tour operator can be a self-e....
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....words, service tax would be leviable of 40% of the total amount charged in cases where the tour operator provides a package tour and the price of which mandatory includes charges for accommodation for stay provided during the course of the tour (Notification No. 39/97-ST refers). Further an abatement of 90% from the gross amount charged to the client has been provided where the tour operator provides the services solely of booking or arranging accommodation and the bill issued for this purpose includes cost of such accommodation (Notification No. 40/97-ST refers). However, this abatement will not be allowed in case the bill issued does not include the cost of such accommodation. 2.6 Service tax on services rendered by tour operators is only on services rendered in India in respect of a tour within Indian territory. Services rendered by tour operators in respect of out-bound tourism i.e. for tours abroad, do not attract service tax. In case of a composite tour which combines tour within India and also outside India, service tax will be leviable only on services rendered for tours within India provided separate billing has been done by the tour operator for services provided....
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....es Act, 1988 or the rules made thereunder; (b) for section 66, the following section shall be substituted, namely :- "66. There shall be Charge of service tax. levied a tax (hereinafter referred to as the service tax) at the rate of ten per cent. of the value of the taxable services referred to in sub- clauses (a), (b),(c), (d), (e), (f),(g), (h),(i), (j), (k), (l, (m), (n), (o), (p), (q), (r), (s), (t),(u), (v), (w), (x), (y), (z), (za), (zb), (zc), (zd), (ze), (zf), (zg), (zh), (zi), (zj), (zk), (zl), (zm),(zn), (zo), (zq), (zr), (zs), (zt), (zu), (zv), (zw), (zx), (zy), (zz), (zza), (zzb), (zzc), (zzd), (zze), (zzf), (zzg), (zzh), (zzi), (zzj), (zzk), (zzl), (zzm), (zzn), (zzo), (zzp), (zzq), (zzr), (zzs), (zzt), (zzu), (zzv), (zzw), (zzx) and (zzy) of clause (105) of section 65 and collected in such manner as may be prescribed."; Finance Act, 2008 (No.18 of 2008) (Assent of the President of India was given on 05.10.2008) (18) for clause (115), the following clause shall be substituted namely:- '(115) "tour operator" means any person engaged in the business of planning, scheduling, organising or arranging tours (which may include arr....
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....These have been elaborately dealt with by the Larger Bench and accordingly the questions referred to it have been answered in the above referred Interim Order dated 19.10.2023. Further, the appellant Travel Corporation of India Limited have also filed miscellaneous application No.85360 of 2013 with a prayer to allow their submission as an intervener in the case heard by the Larger Bench, since it will have a bearing on the appeal filed by them which is pending before the Tribunal. This application was heard by the Larger Bench on 19.04.2023 and applicant was permitted to intervene in the matter. Therefore, the order of the Larger Bench in the M/s Cox & Kings India Limited (supra) will also have an application to the matter being examined in the present case of the appellant. The relevant paragraphs of the said order of the Larger Bench of the Tribunal in the case of M/s Cox & Kings India Limited (supra) are reproduced below: "18. The first issue that has been referred to the larger bench is whether the service that the appellant is providing is a taxable service under section 65(105)(n) of the Finance Act. 19. The division bench in Cox & Kings examined, as noticed....
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....uch places" 23. The text of the above provisions have not undergone any change whatsoever, whether prior to 10.9.2004 or post 10.9.2004, except for renumbering of the clause. 24. The definition of 'tour operator' has undergone various changes during different periods, which are as under: "(i) 1-9-1997 to 6-10-1998: (44) "Tour Operator" means a person who holds a tourist permit granted under the rules made under the Motor Vehicles Act, 1988; (ii) 7-10-1998 to 9-9-2004: (44) "Tour Operator" means 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; (iii) 10-9-2004 to 15-5-2008: (115) "Tour Operator" means any person engaged in the business of planning, scheduling, organising 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 covered by a permit granted under the Motor Vehicles Act, 1988 or the rules made thereunder, (amendments ar....
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....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." 29. This definition can conveniently be divided into two parts: "tour operator" means 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 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." 30. In the first part of the definition, "tour operator' has been defined to mean any person engaged in the business of planning, scheduling, organizing or arranging tours by any mode of transport. This, of course, includes arrangements for accommodation, sightseeing or other similar activities. 31. The second part of the definition is exact reproduction of the definition of a 'tour operator' from 16.10.1998 to 09.09.2004. It provides that a tour operator would incl....
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....lanning, scheduling, organizing or arranging tour by any mode of transport. "Inclusive' part would best be interpreted in the normal standard sense to comprise of or consist of. The second part of the definition only removes any doubt that any person engaged in the business of operating tour in a tourist vehicle covered by a permit granted under the Motor Vehicles Act or Rules made thereunder would not be excluded from the definition of a "tour operator' contained in the first part. It needs to be noted that a permit granted under the Motor Vehicles Act or the Rules made thereunder does not operate beyond the jurisdiction of the country. The first part of the definition of a "tour operator' is by any mode of transport and, therefore, there is no restriction about the territorial jurisdiction of the country. It only deals with the planning, scheduling, organizing or arranging tours (which may include arrangements for accommodation, sightseeing or other similar services) by any mode of transport. 36. It is, therefore, not possible to hold that what is contained in the inclusive clause of the definition is necessarily not contained in the first part of the definition as was h....
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....mended definition brings within its ambit activity of planning, scheduling, organizing or arranging tours by any mode of transport. 43. Thus, before this larger bench is a reference arising from doubt about the interpretation of "tour operator', as per section 65 (115) of Finance Act (earlier section 65 (52) of Finance Act) intended to delineate the extent to which the "taxable service' envisaged by section 65(105) (n) of Finance Act stretches in the "inclusive' segment of the definition as controlling the rest of the definition when the activity is not limited to "planning, scheduling, organising or arranging tours' but involves utilisation of means of transport. 44. From the analysis and reasons elaborated above, it can safely be deduced that the decision of the Principal Bench in Cox & Kings, based on validation of the Circular of 1997 as not being impacted by the several changes in the definition of "tour operator', may not be applicable in case of "outbound tours' over the period of time that the activity had been taxable. 45. Several aspects of the relevant definitions and even the evolution of the extent of coverage of the levy intended by section ....
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.... service. Therefore, in the dispute before the division bench, geographical significance was not "taxable territory', which could be situated anywhere in the world according to the nature of activity undertaken, but within "whole of India...' without having to look for any other framework. 49. Accordingly, we answer the reference thus: (i) The taxability of activity undertaken by the appellant will have to be decided on the facts peculiar to the case and in accordance with intent of section 65, section 66 and section 67 of the Finance Act; and (ii) The dispute in this appeal, i.e., from 01.04.2005 to 31.03.2011, pertaining to the period prior to the "negative list' regime does not have to consider "taxable territory' as affecting the decision thereon." 9.3 Therefore, in terms of the issues decided by the Larger Bench in the case of M/s Cox & Kings India Limited (supra) vide Interim Order No.104/2023 dated 19.10.2023, in order to decide on the issue of taxability of services rendered by the appellant in respect of 'outbound tours', for the period post 10.09.2004, we have carefully examined the legal provisions existing at the relevant point of time vis-....
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.... a journey from one place to another, generally known as point-to-point tour, in a vehicle having contract carriage permit, even if the vehicle does not meet the criteria specified for tourist vehicles. With this amendment, journey from one place to another conducted in a vehicle having contract carriage permit shall be leviable to service tax under tour operator service. Service tax is not leviable under tour operator service only if the tour is conducted in a vehicle having stage carriage permit. Field formations may collect data from transport authorities regarding details of contract carriage permits issued. 5.3.3 It may be noted that services provided in relation to a journey from one place to another conducted in a tourist vehicle having contract carriage permit for use by educational bodies shall be excluded from the scope of the taxable service. Educational bodies do not include commercial training or coaching centres." 9.4 In terms of the nature of services provided by a 'Tour Operator', these service providers can be categorized on the basis of nature of tour, types of business and their area of operation of package tours. These include inbound, outbound, dome....
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....ated in India. This service provider does all the planning, scheduling, organizing or arranging of the outbound tour including travel document processing for the group and sends the tourists group to Singapore. 9.6 For illustrative purpose, in case of appellant, such package tours are, of :- (i) "Escorted Coach Tours of Canada" the details of such 8 days outbound tour consist of itinerary such as 8 days journey starting from Day 1 at Calgary airport arrival - Day 2 Calgary - Banff/Canmore city tour - Day 3 Canmore/Banff city exploration - Day 4 Canmore landscapes enroute to Glacier national park, Rogers Pass- Kamloops mountain ranges - Day 5 Kamloops - Whistler scenery and costal mountains - Day 6 Whistler - Vancouver sea to sky highway through jagged fjords and glaciated mountain peaks - Day 7 Vancouver scenic beauty of Pacific Ocean - Day 8 Vancouver transfer to international airport departure."; (ii) "Ontario & French Canada - 8 days" starting from Toronto and ending at Montreal airport; (iii) "Rockies Trail - 10 days" starting from Toronto and ending at Montreal airport; (iv) "Philippines - Best of Manila & Cebu - 7 days" starting from Man....
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.... the services specified under Section 65(105)(n) ibid, as amended, at the rate specified in Section 66 ibid and it is also required to be seen that the entire levy of service tax shall be within four corners of service tax statue as contained in Chapter V of the Finance Act, 1994, in order to sustain the amount collected as service tax as legally valid tax for the Government exchequer. Even though the disputed period in this case relates to 01.04.2005 to 31.03.2010, for complete understanding of the issue, it would be useful to read the contours of the definition of the phrases and the charging provisions right from the time of introduction of the levy of service tax. 9.9 The definition of 'taxable service' more or less remain unchanged and is provided during the relevant period of dispute under Section 65(105)(n) ibid which defines it as follows: taxable service means "any service provided, to any person, by a tour operator in relation to a tour". Similarly, the definition of the phrase 'tour' has also remained unchanged from the beginning of the levy on this taxable service. 'Tour' has been defined under Section 65(113) ibid "as a journey from one place to another irrespective....
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....our operator to any person for the journey performed within the geographical area to which the Chapter V of the Finance Act, 1994 apply. It is also important to note that it is not the case of the Revenue, that the services provided by the appellant for outbound tour is covered under the scope of Section 66A ibid, while planning, scheduling, organizing, arranging for or operating the tour, the appellant had liaised with various persons situated abroad who are actually rendering the service to the persons during their journey abroad, in order to bring the services under the service tax net. Therefore, we are of the considered view that the services provided in relation to outbound tour/ journey between two places out of the country, is not covered within the tax net of the service tax levy under the Finance Act, 1994. 9.10 The instructions issued by the Ministry of Finance while expanding the scope of the phrase 'tour operator' by explaining the changes brough in the Finance Act, 1994 w.e.f. 10.09.2004, also provides guidance on the true nature and scope of the legislative changes brought in by the Government. The said instructions issued to the filed formations states as follows....
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....tors engaged in operating tours in tourist vehicles remains as such, in case of a package tour (which are planned, scheduled, organized or arranged by tour operators), the scope of the levy is being extended by removing the limitation regarding transportation by tourist vehicles only. Such tourist operators would be subjected to service tax irrespective of the mode of transport used during such tours. The abatements (notification no.39/97- ST) in case of package tour operators (providing transportation and accommodation) would remain at 60%. xxx xxx xxx xxx The CENVAT Credit Rules, 2004 have been issued allowing credit across goods and services (refer Notification No.23/04- CE(NT), dated 10.09.2004). The above changes may be immediately brought to the notice of the field formations and the trade. All possible assistance and facilitation may be provided to providers of such services who have been subjected to the above changes, so that the implementation of these new levies or other changes is smooth and the tax payers do not face any problem in this regard. 9.11 On plain reading of the above, it transpires that the existing levy on services provided by a tour oper....
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....exclude tax on the activity which undisputedly does not occur in India. The Hon'ble Supreme Court in All India Federation of Tax Practitioners vs. UOI reported as 2007 (7) STR 625 (SC) clarified that the service tax is indirect tax levied on specified services provided by certain categories of person including by a company, association firm, body of individual etc. and that it is a value added tax which is a destination based consumption tax, in the sense that it is on commercial activities and not a charge on business but on the consumer and logically be leviable only on services provided within the country and that performance based services are provided by service provider including tour operators. This principle has subsequently also been reiterating by Hon'ble Apex Court in the case Association of Leasing and Financial Service Companies vs. Union of India reported as 2011 (2) SSC 352. The definition of taxable service, therefore, has to fit within this framework for it to be applicable. Since, arrangement of tours outside the territory of India i.e., the destination being outside India for outbound tours irrespective the service recipient is located in India or is a f....