2016 (11) TMI 193 - AT - Service Tax

Tour operator service - contract carriage permit - stage carriage permit - period of the dispute, 01-04-2000 to 2007-08 - whether Department claim that various chartered/contract/tour services provided by APSRTC to the public fall under the tour operator services as defined under the clause (115) of Sec.65 of the Finance Act, 1994 and that APSRTC were providing various tour operator services and evading payment of Service Tax? Held that - It is not disputed that the vehicles used by the assessee for the impugned services are stage carriage vehicles and are carrying out the impugned activities only on the basis of temporary permits issued by A.P. Transport Authorities. They do not at all become contract carriages as they do not conform to the definition of contract carriage in Section 2(7) of M.V. Act. The assessee admittedly obtains special permit for meeting special situation under Section 88(8) of the Act which does not fail in the definition of tourist vehicle or contract carriage and attract levy of service tax. - the impugned activities carried out by the assessee will not attract the definition of Tour operator under section Section 65 (52) of Finance Act, 1994 prior to 10.092004 and under Section 65 (115) for the remainder period covered in this case. This being so, the demands involved in the appeals filed by the assessee cannot sustain and the related impugned orders are liable to be set aside - appeal dismissed - decided against appellant.

Issues Involved:
1. Classification of services provided by APSRTC under "tour operator" services.
2. Applicability of service tax on activities of APSRTC.
3. Interpretation of the term "tour operator" under the Finance Act, 1994.
4. Use of "tourist vehicles" and "contract carriages" for service tax purposes.
5. Validity of demands and penalties levied by the adjudicating authorities.

Detailed Analysis:

1. Classification of Services Provided by APSRTC under "Tour Operator" Services:

The primary issue was whether the various chartered/contract/tour services provided by APSRTC fall under the "tour operator" services as defined in clause (115) of Section 65 of the Finance Act, 1994. APSRTC provided services such as regular pickup and dropping services to industries, institutions, and public sector undertakings without obtaining a contract carriage permit, using stage carriage permits instead. The department contended that these services should be classified as "tour operator" services and subject to service tax.

2. Applicability of Service Tax on Activities of APSRTC:

Show cause notices were issued to APSRTC proposing recovery of service tax on amounts received for the services provided during different periods. The adjudicating authorities confirmed these demands, leading to multiple appeals by APSRTC and the department. The department argued that APSRTC's activities fell under the "tour operator" category, thus attracting service tax. APSRTC contended that their services did not qualify as "tour operator" services since they did not use tourist vehicles as defined under the Motor Vehicles Act, 1988.

3. Interpretation of the Term "Tour Operator" under the Finance Act, 1994:

For the period from 01-04-2000 to 09-09-2004, the definition of "tour operator" required the use of a tourist vehicle covered by a permit granted under the Motor Vehicles Act, 1988. From 10-09-2004, the definition was expanded to include any person engaged in planning, scheduling, organizing, or arranging tours by any mode of transport. APSRTC argued that even after the amendment, their services did not fall under the "tour operator" category as they did not use tourist vehicles. The Tribunal agreed with APSRTC, stating that their activities did not attract service tax under the "tour operator" category as the vehicles used were stage carriage vehicles, not tourist vehicles.

4. Use of "Tourist Vehicles" and "Contract Carriages" for Service Tax Purposes:

The Tribunal examined the definitions of "tourist vehicle" and "contract carriage" under the Motor Vehicles Act, 1988. It concluded that APSRTC's vehicles, used for carrying passengers as per contract to destinations, did not conform to the specifications of contract carriages and were stage carriage vehicles. The Tribunal referred to the Hon'ble Madras High Court's judgment in the SFBAT case, which clarified that a vehicle must conform to the specifications prescribed in Rule 128 of the Motor Vehicle Rules to be considered a tourist vehicle. Since APSRTC's vehicles did not meet these specifications, they were not liable for service tax as tour operators.

5. Validity of Demands and Penalties Levied by the Adjudicating Authorities:

The Tribunal held that the demands and penalties levied by the adjudicating authorities were not sustainable. It noted that the department failed to prove that APSRTC's vehicles conformed to the specifications of tourist vehicles. The Tribunal also referred to various decisions, including those of the Hon'ble Madras High Court and the Tribunal, which supported APSRTC's contention that their activities did not fall under the "tour operator" category. Consequently, the Tribunal set aside the demands and penalties imposed on APSRTC and dismissed the department's appeal.

Conclusion:

The Tribunal concluded that APSRTC's activities did not attract service tax under the "tour operator" category for the entire period of dispute. It allowed the appeals filed by APSRTC, setting aside the demands and penalties, and dismissed the department's appeal. The Tribunal's decision was based on the interpretation of the relevant provisions of the Finance Act, 1994, and the Motor Vehicles Act, 1988, as well as the judicial precedents cited by APSRTC.

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