2008 (7) TMI 119 - AT - Service Tax

Transport of passengers - running vehicles as stage carriages having tourist permits since demand pertains to period 1-4-01 to 31-3-04, Not. No. 15/07 is applicable - Since the Government itself in this notification has not levied tax during period from 1-4-2000 to 4-2-04 on the service provided by tour operators operating under Contract Carriage permits (other than package tour services) there will be no justification holding the Appellant guilty of wilful suppression - time-barred demand

Summary

Issues Involved:
1. Classification of vehicles as "Contract Carriage" or "Stage Carriage".
2. Liability to pay service tax under the definition of "tour operators".
3. Applicability of penalties under various sections of the Finance Act, 1994.
4. Validity of the service tax demand considering the notification No. 15/07-ST and the limitation period.

Issue-wise Detailed Analysis:

1. Classification of Vehicles as "Contract Carriage" or "Stage Carriage":
The appellants argued that their vehicles were not operating as "Contract Carriages" but were instead booking seats for regular journeys, thus not fitting the "tour operators" definition under section 65(52) of the Finance Act, 1994. They cited the Hon'ble Madras High Court's definition distinguishing "Stage Carriage" from "Contract Carriage". However, the tribunal noted that despite the appellants' claims, the vehicles had been issued "tourist permits" by the Regional Transport Authority, which are only given to "Tourist Vehicles" as per rule 82 of the Central Motor Vehicle Rules, 1989. Therefore, the vehicles must be treated as tourist vehicles, and the appellants' activity falls under the definition of "tour operators".

2. Liability to Pay Service Tax Under the Definition of "Tour Operators":
The appellants contended that due to financial difficulties, they were not operating tours and thus should not be categorized as "tour operators". However, the tribunal held that the issuance of tourist permits by the transport authorities, after verifying all parameters, means the vehicles are "tourist vehicles". Consequently, the appellants, who operate tours in these vehicles, meet the definition of "tour operators" under section 65(52) of the Act, making them liable for service tax.

3. Applicability of Penalties Under Various Sections of the Finance Act, 1994:
The tribunal examined whether penalties under sections 75A, 76, 77, and 78 of the Finance Act, 1994, were applicable. Given the notification No. 15/07-ST, dated 4-4-2007, which acknowledged the prevalent practice of non-levy of service tax on certain services during the disputed period, the tribunal found no justification for holding the appellants guilty of willful suppression of information with intent to evade tax. Thus, the penalties were deemed inapplicable.

4. Validity of the Service Tax Demand Considering the Notification No. 15/07-ST and the Limitation Period:
The tribunal noted that the notification No. 15/07-ST acknowledged a general practice of non-levy of service tax on services provided by tour operators under Contract Carriage permits during the period from 1-4-2000 to 4-2-2004. Therefore, the appellants could not be held liable for service tax for this period. Additionally, the tribunal found that the service tax demand was time-barred as the show-cause notice issued on 13-6-2005 was beyond the permissible period for the demand covering 1-4-2001 to 31-3-2004.

Conclusion:
The tribunal concluded that the appellants' vehicles, classified as "tourist vehicles" by virtue of their tourist permits, made the appellants liable as "tour operators" under section 65(52) of the Act. However, due to the acknowledged practice of non-levy of service tax during the disputed period and the time-barred nature of the demand, the tribunal set aside the impugned order and allowed the appeal, nullifying the service tax demand and associated penalties.