2012 (7) TMI 704 - AT - Service Tax

Waiver of pre-deposit - business of providing package tours - package tour involved providing of air transport, transportation from airport to hotel and back to airport, room accommodation in hotel, provision for food and beverages and sight-seeing for lumpsum price Held that - service tax on Domestic Air Travel came into force only with effect from 01-07-2010. Even when it was introduced the service tax element is only to the extent of Rs.100 per journey or 10% of the ticket whichever is lower. So prima facie there is something incongruous in demanding service tax at the rate of 10.2% for the period 10-09-04 to 17-04-2006 and at 12.24% for the period 18-04-2006 to March 2007 on the gross value for airfare, accommodation and food when such items were not taxable. The issue whether these items can be taxed as value of service for planning, scheduling, organizing or arranging tours needs careful examination. Pre-deposit waived.

Issues:
1. Taxability of package tours under entry 65 (105) (n) of Finance Act, 1994.
2. Eligibility for abatement of 60% from the value of taxable service.
3. Invocation of the extended period for demanding service tax.
4. Financial difficulties faced by the Appellant.
5. Stay application for waiver of the amounts arising from the impugned order.

Analysis:

Issue 1: Taxability of package tours under entry 65 (105) (n) of Finance Act, 1994
The Appellant, a national carrier, provided package tours involving air transport, accommodation, food, and sightseeing for a lump sum price. Revenue contended that this activity falls under the purview of service tax for tour operators. The Counsel for the Appellant argued that the tax should not apply to transportation costs and that other components like hotel charges and food were not taxable during the relevant period. The Tribunal noted the incongruity of demanding service tax on non-taxable items and decided to examine the issue further during the final hearing. Considering the financial hardship faced by the Appellant, the Tribunal waived the full dues for hearing the Appeal and granted a stay on collection of amounts during the pendency of the Appeal.

Issue 2: Eligibility for abatement of 60% from the value of taxable service
The Counsel for the Appellant argued that they were entitled to a 60% abatement from the taxable service value, which was not considered in confirming the demand. They disputed the Commissioner's interpretation regarding the utilization of tax credits and the denial of abatement under a specific notification. The Tribunal acknowledged the Counsel's arguments and found discrepancies in the application of the notification. The issue of abatement was deemed significant and required further examination during the final hearing.

Issue 3: Invocation of the extended period for demanding service tax
The Counsel contested the invocation of the extended period for demanding service tax, stating that most of the demand was time-barred. They emphasized that there was no intention to evade payment of service tax. The Tribunal noted the contentions and agreed to consider the limitation aspect during the proceedings.

Issue 4: Financial difficulties faced by the Appellant
The Appellant, a government-owned company, highlighted its dire financial situation, requesting not to be directed to deposit any money for the Appeal hearing. This aspect was crucial in the Tribunal's decision to waive the dues arising from the impugned order and grant a stay on collection during the Appeal process.

Issue 5: Stay application for waiver of the amounts arising from the impugned order
Both sides presented arguments regarding the stay application. The Tribunal considered the financial hardship faced by the Appellant and the incongruity in demanding service tax on non-taxable items. Balancing the interests of both parties, the Tribunal granted a stay on the collection of amounts during the pendency of the Appeal, taking into account the national carrier's financial crisis and the need for a detailed examination of the taxability issues raised.

This comprehensive analysis of the judgment addresses the key issues involved in the case, highlighting the legal arguments, interpretations, and decisions made by the Tribunal.

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