2008 (9) TMI 161 - AT - Service Tax

Tour operator - Commissioner has clearly noted that the special permits were obtained by the appellants and specifically for tourist places - Prima facie, they were carrying on certain tour operator services to the religious places and sightseeing places. Therefore we cannot say that the appellants were not carrying on specific activity of tour operator as defined under Section 65(115) - However taking into consideration of financial hardship pleaded by appellant, stay is granted partly

Summary

Issues: Determination of liability for service tax under the category of "Tour Operator" as per Section 65(115) of the Finance Act, 1994; Applicability of pre-deposit requirements under Sections 76, 77, and 78 of the Finance Act, 1994; Consideration of financial hardship as a ground for waiver of pre-deposit; Examination of time-bar in issuing demands.

Analysis:

1. Liability for Service Tax as "Tour Operator":
The appellant, a State Undertaking unit engaged in transport operations, contested the categorization as a "Tour Operator" under Section 65(115) of the Finance Act, 1994. The appellant primarily operated stage carriage services and argued that their services did not fall under the definition of "Tour Operator" as they were not engaged in planning, scheduling, or organizing tours under a permit granted under the Motor Vehicles Act. The Revenue, however, contended that the special permits obtained by the appellant for organizing tours to specific places indicated their activities as falling within the ambit of a "Tour Operator." The Commissioner noted that the appellant provided services to religious and sightseeing places, indicating a tour operator service. The Tribunal held that the appellant's activities prima facie fell under the definition of a "Tour Operator," considering the special permits obtained for tourist services, and directed a partial pre-deposit of the service tax amount.

2. Pre-Deposit Requirements and Financial Hardship:
The appellant sought a total waiver of the pre-deposit amount due to financial hardship, citing substantial losses in their Annual Accounts for the year 2004-05. The Tribunal acknowledged the financial difficulty faced by the appellant but emphasized the need to safeguard the Revenue's interest. Despite reducing the demand to some extent, the Tribunal directed the appellant to pre-deposit a specific sum within a stipulated period, with the balance amount of service tax and penalty waived upon compliance. The Tribunal balanced the financial hardship of the appellant with the Revenue's interest, ensuring a partial pre-deposit to continue the appeal process.

3. Time-Bar Consideration:
The appellant raised the issue of time-bar, arguing that the demands dated back to 2004, while the show cause notice was issued in February 2006. The Tribunal did not find the time-bar argument compelling, emphasizing the Commissioner's reasonable examination of the issue and the reduction of the demand amount. The Tribunal focused on the substance of the case rather than the time elapsed between the demands and the notice, ensuring a fair consideration of the appellant's contentions.

In conclusion, the Tribunal upheld the categorization of the appellant as a "Tour Operator" based on the activities conducted with special permits for tourist services. While acknowledging the financial hardship faced by the appellant, the Tribunal balanced it with the Revenue's interest, directing a partial pre-deposit to proceed with the appeal process. The Tribunal's decision highlighted the importance of considering both the financial circumstances of the appellant and the Revenue's interest in resolving the service tax liability issue.