2007 (1) TMI 592 - Commissioner - Service Tax

Summary

Issues Involved:
1. Whether the appellants fall under the category of "Tour Operator" as defined u/s 65(115) of the Finance Act, 1994.
2. Whether the vehicle used by the appellants qualifies as a "Tourist Vehicle" u/s 2(43) of the Motor Vehicles Act, 1988 read with Rule 128 of the Central Motor Vehicles Rules, 1989.
3. Whether the appellants are liable to pay service tax, penalty, and interest as demanded by the Adjudicating Authority.

Summary:

Issue 1: Category of "Tour Operator"
The appellants contested the order of the Adjudicating Authority, arguing that they do not fall under the category of "Tour Operator" as defined u/s 65(115) of the Finance Act, 1994. They claimed that the vehicle was hired out to M/s. Vikram Woolens, Malanpur, and was not used for operating tours. The Adjudicating Authority had concluded that the appellants fell within the category of Tour Operators based on the amended definition effective from 10-9-2004.

Issue 2: Qualification as "Tourist Vehicle"
The appellants argued that the vehicle in question, Bus No. MP 07 F 0538, did not qualify as a "Tourist Vehicle" u/s 2(43) of the Motor Vehicles Act, 1988 read with Rule 128 of the Central Motor Vehicles Rules, 1989. They provided evidence that the vehicle was registered as a "Private Service Vehicle" and lacked the prescribed standards of comforts and amenities required for a "Tourist Vehicle." The appellants cited the Madras High Court judgment in Secretary Federation of Bus-operators Association of Tamilnadu v. UOI, which supported their claim that the vehicle did not meet the definition of a "Tourist Vehicle."

Issue 3: Liability for Service Tax, Penalty, and Interest
The Adjudicating Authority had confirmed the demand for service tax amounting to Rs. 1,37,951/- along with interest and imposed penalties u/s 77 and 78 of the Finance Act, 1994. The appellants contended that since their vehicle was not a "Tourist Vehicle," they were not liable for service tax. The judgment referenced the Bangalore Tribunal's decision in Praseetha Suresh v. CCE Thiruvananthpuram and the Karnataka High Court's decision in L.V. Sankeshwar v. Superintendent of C.Ex Jayanagar, which held that service tax applies only to Tour Operators using tourist vehicles.

Conclusion:
The appeal was allowed, setting aside the demand for service tax, penalties, and interest. The judgment clarified that the appellants would fall within the purview of "Tour Operator" only if the vehicle used was a "Tourist Vehicle" conforming to the relevant sections of the MV Act and Rules. The departmental officers were under a wrong impression regarding the amendment in the definition of "Tour Operator" effective from 10-9-2004. The appellants were not required to pay the service tax, penalties, or interest as demanded by the Adjudicating Authority.