2011 (2) TMI 663 - AT - Service Tax

Demand, interest and penalty - Tour operators service - The appellants contended that the outbound tours are taken abroad and therefore no service tax can be levied in India on the same is prima facie not tenable - What is being sought to be taxed is the service provided by the appellants in India by way of planning, scheduling, organizing or arranging tours including arrangements for accommodation, sight-seeing or other similar services and they are being paid for the said purpose of India - As such, prima facie the appellants have not made out a case for total waiver of the predeposit.

Summary

Issues:
1. Demand of service tax on outbound tours and use of Amadeus software.
2. Validity of Department's circular regarding service tax applicability.
3. Prima facie view on waiver of predeposit based on financial difficulty.

Analysis:

Issue 1: Demand of service tax on outbound tours and use of Amadeus software
The appellants were facing a total demand of service tax exceeding Rs.76 lakhs, along with interest and penalty of Rs.70 lakhs, confirmed under the impugned order. The appellants argued that the demand mostly pertained to outbound tours and partially to the use of the Amadeus software. They contended that the Department's circular had clarified that outbound tourism was not subject to service tax, which was withdrawn later. The appellants claimed they had been paying service tax on outbound tourism post the withdrawal of the circular but should not be liable for the earlier period. Regarding the Amadeus software, the appellants asserted they were only using the software and not providing any service to the software owner.

Issue 2: Validity of Department's circular regarding service tax applicability
The Department argued that the circulars cited by the appellants were issued under a previous definition of tour operators' service, which was narrower in scope. The Department contended that the circular's clarification was not applicable after the definition was expanded to cover a broader range of services related to tour planning and organization. The Department emphasized that a circular merely explained the legal position and did not establish the law itself. The Department maintained that the demand within the normal period of limitation, around Rs.24 lakhs, was indisputable.

Issue 3: Prima facie view on waiver of predeposit based on financial difficulty
After considering both sides and reviewing the case records, the tribunal opined that the circular's validity did not persist after the law had changed, and the outbound tours were taxable in India as they involved services provided in India for tours organized abroad. The tribunal found the appellants had not justified a complete waiver of the predeposit. However, considering the appellants' financial constraints, the tribunal directed them to predeposit Rs.12,00,000 within eight weeks and report compliance. The tribunal waived the predeposit requirement for the remaining amounts during the appeal's pendency, subject to the specified condition.

This detailed analysis of the judgment from the Appellate Tribunal CESTAT, Chennai, provides insights into the issues of service tax demand, circular validity, and predeposit waiver, as deliberated by the tribunal in the case.