2017 (9) TMI 797 - HC - Service Tax

Tour operator Service - appellant had supplied a bus to IFFCO to carry its employees and family members from the factory premises at Phulpur to Allahabad and vice-versa - Held that - the CESTAT was justified in holding that renting of the vehicle by the appellant-assessee to the IFFCO falls within taxable service in the category of tour operator as defined under Section 65 (113) of the Finance Act, 1994 and that the appellant assessee had used tourist vehicle for providing such services - decided against assessee. Penalty - Held that - the facts of the case establishes that the appellant was under a bona fide belief that he is not a tour operator as he is not using the tourist vehicle and as such is outside the purview of the service tax. Therefore, he failed to apply for registration under the Act and in filing the appropriate return. On account of bona fide dispute as to the liability of the appellant to service tax, it cannot be said that there was any intention to evade tax on his part by concealing taxable service - penalty set aside - decided in favor of assessee. Appeal allowed - decided partly in favor of appellant.

Summary

Issues:
1. Interpretation of the definition of 'tour operator' under the Finance Act, 1994.
2. Imposition of penalties under Sections 75-A, 76, and 78 of the Act.

Interpretation of 'Tour Operator' Definition:
The appellant provided a bus to transport employees of a company, failing to register under the Act or file returns. The Adjudicating Authority held the appellant liable as a 'tour operator' for service tax. The Commissioner (Appeals) later ruled in favor of the appellant, stating no involvement of 'tourist vehicle.' However, the Tribunal reversed this decision, upholding the Adjudicating Authority's judgment. The substantial question of law was whether the appellant's services fell under the 'tour operator' category. The court analyzed if the appellant used a 'tourist vehicle,' the definition of 'tour operator,' and if the services provided were taxable. It was found that the appellant's luxury bus met the specifications of a 'tourist vehicle' under the Motor Vehicle Act. Consequently, the appellant was considered a 'tour operator' liable for service tax.

Imposition of Penalties:
Regarding penalties imposed by the Adjudicating Authority, the court noted the lack of intent to evade tax by the appellant. The Authority imposed penalties citing suppression of taxable service without proving intent to evade duty. The court found the appellant acted in good faith, believing they were not liable for service tax due to not using a 'tourist vehicle.' As there was no intention to evade tax, penalties under Sections 75-A, 76, and 78 were deemed unwarranted. The court ruled in favor of the appellant, stating the penalties were not justified. The appeal was partly allowed, with the court answering both questions in favor of the appellant and against the revenue.