2011 (9) TMI 817 - AT - Service Tax

Out Bound Tours - department has held that the entire amount collected from the tourists including airfare to-and-fro and towards expenses incurred in connection with arrangements like hotel stay and sight seeing was to be included under the category of Tour Operator Services Held that - Board s Circular F. No. B. 43/10/97-TRU dated 22.8.1997 has treated the activities of out-bound tours as outside the purview of service tax. the service tax undisputedly stands paid on airfares from India to the first destination in foreign country and for airfares from last destination abroad to first destination in India as air travel services. pre-deposit waived

Summary

Issues: Service Tax liability on 'Out Bound Tours' - Classification under "Tour Operator Services" - Applicability of Board's Circular - Pre-deposit of dues.

Analysis:

1. Service Tax Liability on 'Out Bound Tours':
The dispute in this case revolves around the Service Tax liability of the applicant concerning 'Out Bound Tours'. The applicant, engaged in arranging tours within and outside India, faced a demand for Service Tax amounting to Rs. 62,59,120/- for the period 1/4/2004 to 31/3/2008. The department contended that the entire amount collected from tourists, including airfare and expenses for arrangements like hotel stay and sightseeing, should be categorized under "Tour Operator Services."

2. Classification under "Tour Operator Services":
The learned Advocate argued that while some planning activities occur in India, the actual execution of travel, stay, and sightseeing takes place abroad. Referring to a Board's Circular and a stay order in a similar case, it was contended that out-bound tours are not subject to Service Tax under the category of "Tour Operator Services." The Tribunal noted that the activities primarily related to out-bound tours involve coordination with agencies outside India and that the relevant Circular from 1997 excludes out-bound tours from service tax.

3. Applicability of Board's Circular:
The Tribunal considered the Circular from 1997 which stated that out-bound tours are not within the purview of service tax. It was highlighted that the service tax was already paid on airfares for travel between India and the first foreign destination, as well as for travel between the last foreign destination and the first destination in India. Relying on this Circular and a stay order in a similar case, the Tribunal waived the pre-deposit of dues and stayed the recovery until the appeal's disposal.

4. Pre-deposit of Dues:
The Tribunal, after careful consideration of submissions and records, found that the planning and arrangements for out-bound tours primarily occurred outside India and were in line with the Circular exempting such activities from service tax. Given the payment of service tax on relevant airfares and the stay order in a similar case, the Tribunal decided to waive the pre-deposit of dues and stayed the recovery until the appeal's finalization.

5. Conclusion:
The Tribunal's decision in this case hinged on the interpretation of the Board's Circular regarding out-bound tours and the classification under "Tour Operator Services." By considering the nature of activities and coordination involved in out-bound tours, the Tribunal ruled in favor of the applicant, allowing for the waiver of pre-deposit and staying the recovery of dues until the appeal's resolution.