CESTAT, new DELHI BENCH

Pandit Motor Service

v.

Commissioner of Central Excise, Jaipur

Justice R.K. Abichandani, President and Dr. T.V. Sairam, Technical Member

final order no. 391 of 2007-St

Service Tax Appeal No. 43 of 2006

June 29, 2007

TOUR OPERATOR

Section 65 of the Finance Act, 1994 - Tour Operator - Assessee was found to be engaged in providing taxable services as a ‘Tour operator’ in ‘tourist vehicles’ covered by permits issued under section 88(9) of Motor Vehicles Act, 1988 - Service tax was demanded from assessee under category of ‘Tour operator’ and penalty was imposed upon it - Assessee contended that, though it had obtained permit as tourist vehicle, yet said vehicles were actually used as ‘stage carriages’ and services rendered in that regard could not be made liable to service tax - Whether once concerned authorities had permitted assessee for using a particular vehicle as a ‘tourist vehicle’, having verified various parameters, such a vehicle by virtue of its being used otherwise cannot be declassified and treated as a ‘non-tourist vehicle’ - Held, yes - Whether therefore, there was no force in assessee’s contention that it was not covered under provisions of service tax law - Held, yes - Whether however, a notification was issued by Central Government granting exemption to services provided by a tour operator in relation to transport of passengers from one place to another and said notification had not been part of proceedings before lower authorities, matter was to be remanded to adjudicating authority for re-quantification of tax/penalty after taking said notification into consideration - Held, yes [Paras 13, 14 and 15]

Circulars and Notifications : Notification No. 15/2007-ST, dated 4-4-2007

>> Facts

The assessee was found to be engaged in providing the taxable service as a ‘Tour operator’ in ‘tourist vehicles’ covered by the permits issued under section 88(9) of the Motor Vehicles Act, 1988. The adjudicating authority demanded service tax from assessee under category of ‘Tour operator’, and also imposed penalty upon it. The Commissioner (Appeals) upheld the order of the adjudicating authority.

On appeal, the assessee contended that, though it had obtained permit as tourist vehicles yet it used the same as ‘stage carriages’, and service rendered in that regard was not covered under the service tax net.

>> Held

As per the definition available under the Act, the vehicles used by the assessee clearly fell under the meaning and category of ‘tourist vehicle’ in accordance with clause (43) of section 2 of the Motor Vehicles Act, 1988. This was further strengthened by the fact that the said vehicles stood endorsed by a permit issued by the appropriate authorities under the law. It was also evident that such vehicles had been put to use by the assessee for operating ‘tours’ as defined under clause (94) of section 65. [Para 9]

The provisions under clauses (94), (95) and (96) of section 65 and also the definition of ‘taxable service’ as available under clause (90) of section 65, read together and the definition as available under the Motor Vehicles Act, 1988 in respect of contract carriage /‘tourist vehicle’ all go together to state that it is not necessary as to how the vehicle had been used or abused. What is important is whether the vehicles are capable of being used as ‘tourist vehicles’ and whether the same have been permitted by the appropriate authorities for such use as ‘tourist vehicle’. [Para 11]

Form RS. 5.17 [which refers to All India Tourist Permit issued under rule 5.9(x) as issued to the assessee by the Office of the State/Regional Transport Authority] had been issued on the basis of certain specifications/conditions as referred to at S. No. 9 of para 13 of the said permit. On going through its attachment, it appeared that the assessee was required to ensure certain permissible specifications relating to month and year of manufacture of the vehicle, number of cylinders, H.P., seating capacity, weight, number of tyres, weightage, etc., which had to be declared for the purpose of obtaining a permit. A copy of such application before the concerned authority had, however, not been made available to the Tribunal to verify whether any undertaking before such authorities had been made by the assessee for issue of such permit. Even assuming that no undertaking had been made by the assessee before the appropriate authorities, it could safely be concluded that any vehicle that plies on the road cannot be sought for permission as ‘tourist vehicle’ and in order to be eligible for such a permit, the vehicle has to fulfil certain basic requirements. [Para 12]

As regards the plea taken by the assessee that, though it had obtained permit as tourist vehicle but it used the same as ‘stage carriage’, the decision of the Karnataka High Court in Suresh Kumar Sharma v. Union of India [2007] 7 STT 249 made it clear that there was no question of making enquiries about the real nature of business carried out by the appellant by virtue of the permit already obtained from the concerned authorities. Once the concerned authorities have permitted the assessee for using a particular vehicle as a ‘tourist vehicle’, having verified the various parameters, such a vehicle by virtue of its being used otherwise cannot be declassified and treated as a ‘non-tourist vehicle’. Therefore, it was to be held that once specifications make a particular vehicle eligible to be a ‘tourist vehicle’ and further an authority endorses such a classification, how the same was put into use by the permit holder, would not materially change the position under the law. Therefore, there was no force in the assessee’s contention that it was not covered under the provisions of the service tax law. [Para 13]

However, the Central Government having been satisfied that a practice was generally prevalent regarding levy of service tax (including non-levy thereof) under section 66 on services provided by a tour operator providing services in relation to transport of passengers from one place to another (other than services provided in relation to package tours operating under a contract carriage permit) had issued a Notification No. 15/2007-ST, dated 4-4-2007 granting exemption under section 11C of the Central Excise Act, 1944, read with section 83. This notification which had not been part of the proceedings before the lower authorities had come to be issued recently much after the Commissioner had passed his order and obviously the same had not been referred to by the assessee. [Para 14]

Had that notification been made applicable in the case of the assessee there would have been sizeable relief by way of payment of tax by it which would have altered the amount assessed in the impugned order and would also have had a consequent effect on the penalty that stood imposed under the said order. It was, therefore, necessary that this aspect had to be taken note of while arriving at the quantum of tax/penalty in the subject case. To that extent the matter was to be remanded to the adjudicating authority to go through the changed provisions under the law, particularly with reference to the Notification No. 15 of 2007 issued under section 11C of the Central Excise Act, read with section 83, so as to re-determine the quantum of tax and penalty leviable on the assessee. The assessee had also pleaded for benefits under section 80 contending that non-filing of the returns could not be a reasonable cause for levying penalty, especially since the Central Government is satisfied that the practice followed by it was generally prevalent at the relevant time. Therefore, the adjudicating authority was to be directed to take into account that aspect as well while passing an order of re-quantification of tax and penalty in the matter. The appeal was, accordingly, partly to be allowed by way of remand. [Para 15]