2014 (1) TMI 820 - AT - Service Tax

Levy of service tax on Lease of ropeway installed - Assessee claims refund of service tax paid because they were of the view that they will not be covered by the definition of tour - whether the appellant is a tour operator - Held that - Once tourists are not governed by any planning scheduling organising or arranging for their journey and not dependent on the licensee appellant for such planning scheduling organizing or arranging for their tours but only avails the facility of ropeway provided by appellant licensee during working hours from 6 A.M. to 11 P.M. on payment of fees prescribed by Clause 8 of licence deed they were not beneficiary of any planning scheduling or arranging of tours since tour to be taxable has to follow its preceding activities enumerated by Section 65(115) of the Act. Accordingly the appellant had not acted as tour operator within the meaning of Section 65(115) of the Act for which the taxing Entry 65(105)(n) thereof is not attracted. There shall not be liability to tax - decision in the case of CCE Meerut-I v. M/s. Usha Breco Ltd 2013 (2) TMI 357 - UTTARAKHAND HIGH COURT followed. - The issue decided in favor of assessee by the larger bench.

Summary

Issues Involved:
1. Definition and applicability of "tour operator" under Section 65(115) of the Finance Act, 1994.
2. Jurisdiction of the State versus Central Government in levying taxes on ropeways.
3. Requirement of Show Cause Notice (SCN) for appropriating tax paid under protest.
4. Relevance of non-issuance of demands for subsequent periods and to other operators.

Issue-wise Detailed Analysis:

1. Definition and Applicability of "Tour Operator":
The core issue revolves around whether the appellants, who operate a ropeway, fall under the definition of a "tour operator" as per Section 65(115) of the Finance Act, 1994. The appellants argued that they do not engage in planning, scheduling, organizing, or arranging tours but merely operate a ropeway leased from the Municipality. They relied on the Tribunal's decision in Usha Breco Ltd. v. CCE, which held that the operation of ropeways did not constitute tour operator services. The Tribunal, however, noted that the definition of "tour operator" includes any person engaged in operating tours by any mode of transport. The Tribunal concluded that the appellants' activity of operating the ropeway falls within the scope of "tour operator" as it involves the operation of tours, even without additional planning or organizing.

2. Jurisdiction of the State vs. Central Government:
The appellants contended that ropeways fall under Entry 13 of List-II of the Seventh Schedule of the Constitution of India, implying that only State Governments can legislate on this subject. They also highlighted that the State Government levies entertainment tax on the ropeway operations. The Tribunal clarified that Entry 13 pertains to the control and supervision of ropeways by the State Government, but does not preclude the Central Government from levying service tax on the operation of ropeways. The Tribunal referenced other instances where service tax is levied on services despite state-level taxes, such as goods transport agencies.

3. Requirement of Show Cause Notice (SCN):
The appellants argued that no Show Cause Notice (SCN) was issued for appropriating the tax paid under protest, thus entitling them to a refund. The Tribunal held that when an order rejecting the refund claim is passed following due procedure, it constitutes the finalization of the protest, and no separate SCN is required.

4. Non-issuance of Demands for Subsequent Periods:
The appellants pointed out that no demands were issued for service tax for the period after September 2005, and other operators in Haridwar were not being taxed. The Tribunal deemed these submissions irrelevant for deciding the legality and propriety of the impugned order, emphasizing that the case at hand must be judged independently of such factors.

Separate Judgments:

Majority Opinion:
The majority opinion held that the operation of the ropeway by the appellants constitutes "tour operator" services under Section 65(115) of the Finance Act, 1994. The Tribunal rejected the appeal, concluding that the appellants' activity falls within the scope of the taxable service.

Dissenting Opinion:
The dissenting opinion argued that the operation of a ropeway between two fixed points does not amount to tour operator services. It emphasized that the appellants do not engage in planning, scheduling, organizing, or arranging tours, and the ropeway itself cannot be considered a mode of transport in the context of tour operator services. The dissenting member referenced the Tribunal's decision in Usha Breco Ltd., which indicated that ropeway rides do not attract service tax. The dissenting opinion concluded that the appellants' activities do not fall under the category of tour operator services and should not be subject to service tax.

Final Resolution:
The matter was referred to a third member due to the difference of opinion. The third member, referencing the High Court of Uttarakhand's judgment in CCE, Meerut-I v. M/s. Usha Breco Ltd., held that the appellants were not "tour operators" within the meaning of Section 65(115) of the Finance Act, 1994. Consequently, the appeal was allowed, and the appellants were not liable to pay service tax on the operation of the ropeway.