2014 (7) TMI 542 - HC - Service Tax

Tour and travel services - levy and collection of service tax from the assessee where principal tour operator has paid service tax - double taxation - foreigner tourists - packaged tour - valuation - inclusion of reimbursement of expenses - amounts received by the appellant from Principal Tour Operator (PTO) as reimbursement of actual expenses - validity of circular creating the service tax liability - extended period of limitation - levy of penalty - Held that - the appellant is not able to adduce any evidence in the form of assessment order of the Principal Tour Operator or any other documents issued by the service tax authorities to substantiate the claim that service tax has been paid on the entire amount by the Principal Tour Operator, which includes the amount paid to the appellant. Merely on the basis of the certificates issued by the Principal Tour Operator enclosed with the memorandum of appeal, the claim of the appellant cannot be accepted inasmuch as it is doubtful whether these certificates have been filed before the authorities below. Extended period of limitation - Held that - The position regarding the taxable services provided to any person in relation to a tour has already been explained in the year 1997 and in 2001 itself. Therefore, the appellant ought to have given the information about the supplementary services being provided in ST-3 return or otherwise. In any view of the matter, such information without any doubt ought to have been given after 10.9.2004 when the definition of Tour Operator has been amended, but the appellant wilfully failed to disclose such information. Further, appellant has availed the benefit of abatement/exemption under the Notification No. 39/97-ST to the extent of 60% of the total amount charged treating the entire services provided as a package tour, including the facilities such as Air and Railway Tickets, porterage, fooding and lodging, monuments visit services, guide services, and general assistance services etc. This clearly shows that the appellant was fully aware that it is a package tour in which supplementary services are also included, but failed to disclose the receipts towards supplementary service - Decided against the assessee. Supplementary services claimed to have been received by way of reimbursement, on actual basis - Held that - the amount paid to the appellant towards supplementary services, apart from the payments received towards transport services are liable to be included in the gross amount and are the value of taxable service which are liable to service tax. Waiver of penalty levied u/s 78 invoking the provisions of section 80 - Held that - Tribunal was in error in coming to the conclusion that there would be no occasion to establish a reasonable cause within the meaning of section 78, once, the extended period of limitation had been validly invoked under the proviso to section 73(1). If the analogy which has been used by the Tribunal is extended, it would have to be held that section 80 would have no application whatsoever to a case which falls within the purview of section 78 since as we have noted, the language of section 78 is similar to the language which is used in the proviso to section 73(1). Accepting such an interpretation would involve re-writing the provisions of section 80 by excluding the provisions of section 78 from the non-obstante clause which is contained in section 80. - therefore while confirming the levy of service tax, penalty set aside - Decided partly in favor of assessee.

Issues Involved:
1. Double taxation of service tax on the same service.
2. Tribunal's failure to decide arguments on merits.
3. Service tax on reimbursement of expenses.
4. Double taxation on amounts received as reimbursement.
5. Tribunal's deviation from co-ordinate Bench decisions.
6. Notice period and limitation.
7. Applicability of extended period of limitation.
8. Prospective applicability of amended definition of tour operators.
9. Reliance on Circular dated 23-8-2007.
10. Applicability of extended period in case of conflicting Tribunal decisions.
11. Justification for penalty under Section 78 of the Finance Act.

Detailed Analysis:

1. Double Taxation of Service Tax:
The appellant contended that the Principal Tour Operator (PTO) had already paid service tax on the entire amount received from tourists, including amounts reimbursed to the appellant. The Tribunal did not address this issue. The court found no substance in this argument as the appellant failed to provide evidence that PTOs paid service tax on the entire amount, including amounts paid to the appellant.

2. Tribunal's Failure to Decide Arguments on Merits:
The appellant argued that the Tribunal did not address specific arguments raised during the hearing. The court noted that the appellant had filed a recalling application, which was rejected by the Tribunal, and no appeal was filed against this rejection.

3. Service Tax on Reimbursement of Expenses:
The appellant claimed that reimbursements received on an actual basis should not be subject to service tax. The court held that any service provided by a tour operator in relation to a tour, including supplementary services, is taxable. The definition of "taxable service" and "tour operator" includes all services related to a tour, and thus, reimbursements are part of the gross amount charged and subject to service tax.

4. Double Taxation on Reimbursement:
The appellant argued that taxing reimbursements amounts to double taxation since PTOs had already paid service tax on the gross amount. The court rejected this argument due to a lack of evidence proving that PTOs paid service tax on the entire amount, including reimbursements.

5. Tribunal's Deviation from Co-ordinate Bench Decisions:
The appellant cited previous Tribunal decisions that supported their position on non-taxability of reimbursements. The court found these decisions not applicable as they did not relate to services provided by tour operators in relation to a tour.

6. Notice Period and Limitation:
The appellant argued that the notice dated 19.10.2007 for the period 01.04.2002 to 31.3.2007 was barred by limitation. The court held that the extended period of limitation under Section 73(1) of the Finance Act was applicable due to wilful suppression of facts by the appellant.

7. Applicability of Extended Period of Limitation:
The court found that the appellant's failure to disclose supplementary services in the ST-3 return amounted to wilful suppression of facts, justifying the extended period of limitation.

8. Prospective Applicability of Amended Definition of Tour Operators:
The appellant argued that the amended definition of tour operators should apply prospectively from 10.09.2004. The court held that the amendment was clarificatory and supplementary services were always included in the definition of taxable services provided by tour operators.

9. Reliance on Circular Dated 23-8-2007:
The appellant contended that the Circular dated 23-8-2007, issued after the disputed period, should not create tax liability. The court noted that similar clarifications had been issued in 1997 and 2001, and the appellant was aware of the tax liability on supplementary services.

10. Applicability of Extended Period in Case of Conflicting Tribunal Decisions:
The appellant cited conflicting Tribunal decisions to argue against the extended period of limitation. The court found these decisions not applicable to the present case, as they did not relate to services provided by tour operators in relation to a tour.

11. Justification for Penalty Under Section 78 of the Finance Act:
The court held that the issue of penalty under Sections 76 and 78 of the Act requires fresh consideration by the Commissioner of Central Excise in light of Section 80, which allows for the non-imposition of penalties if reasonable cause is proven.

Conclusion:
The appeal was allowed in part. The court upheld the Tribunal's decision on the levy of service tax but set aside the penalty and remanded the matter to the Commissioner of Central Excise for re-adjudication on the issue of penalty.

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