2017 (9) TMI 260 - AT - Service Tax

Tour Operator Service - levy of tax - penalty - Held that - appellant let its vehicles on hire during the period November, 2004 to September, 2006 even though it was a tour operator. The vehicles so hired out being excluded from the purview of tax exemption granted by Section 72(1) of the Finance Act, 1994, to the extent of the hire charges received shall be exigible to Service Tax in respect of the vehicles let on hire - penalty set aside in view of the difficulties of appellant due to confusion in levy - decided partly in favor of appellant.

Summary

Issues:
1. Interpretation of the definition of "tour operator" under the Finance Act, 1994.
2. Exemption from Service Tax under Section 72 of the Finance Act, 2011.
3. Dispute regarding levy of Service Tax on tour operator services.
4. Tax liability for vehicles hired out by the appellant.

Analysis:
1. The judgment revolves around the interpretation of the term "tour operator" as defined in Section 65(115) of the Finance Act, 1994. The appellant claimed to be a tour operator based on the adjudicating authority's recognition. The definition encompasses persons involved in planning, organizing, or arranging tours by any mode of transport, excluding journeys organized for educational bodies. The appellant's status as a tour operator was acknowledged, leading to the applicability of Service Tax on tour operator services.

2. The judgment delves into the exemption granted to tour operators from Service Tax under Section 72 of the Finance Act, 2011. This section retrospectively exempted tour operators from Service Tax leviable under Section 66 of the Act from April 1, 2000. The appellant argued that being excluded from taxation, they were not liable to pay Service Tax. The Tribunal acknowledged the exemption provided under Section 72(1) and ruled in favor of the appellant, stating that the service falls outside the purview of Service Tax due to the retrospective effect of the exemption.

3. The dispute regarding the levy of Service Tax on tour operator services arose from the Revenue's contention that the appellant, being a tourist permit holder and not a tour operator with a tourist permit, was liable for Service Tax. However, the Tribunal clarified that despite being considered a tour operator by the Revenue, the appellant was eligible for exemption under Section 72(1) of the Finance Act, 1994. Consequently, the adjudication against the appellant regarding Service Tax liability was deemed unsustainable, leading to the partial allowance of the appeal.

4. Additionally, the judgment addressed the tax liability concerning vehicles hired out by the appellant during a specific period. The Tribunal noted that vehicles let out on hire by the appellant, despite being a tour operator, were excluded from the tax exemption provided by Section 72(1) of the Finance Act, 1994. Therefore, the hire charges received for these vehicles were deemed exigible to Service Tax. The appellant was instructed to calculate the tax liability for the hired vehicles and submit the details to the department for scrutiny, with no penalty imposed due to the confusion in levy.

In conclusion, the judgment clarifies the interpretation of the term "tour operator," discusses the exemption from Service Tax under Section 72, resolves the dispute over Service Tax liability for tour operator services, and addresses the tax liability for vehicles hired out by the appellant, ensuring a comprehensive analysis of the legal issues involved.