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2022 (7) TMI 1233 - SC - GSTLiability of service tax / GST - service rendered to Haj pilgrims - Place of supply of services - Discrimination between HGOs and the Haj Committees - liability of Haj Group Organizers (HGOs) or Private Tour Operators (PTOs) to pay service tax - Nature of services provided by HGOs/ PTOs - Applicability of Mega Exemption Notification no.25 of 2012 ST - religious ceremony versus religious pilgrimage Nature of services provided by HGOs/ PTOs - HELD THAT - Haj pilgrimage is a five-day religious pilgrimage to Mecca and nearby Holy places in Saudi Arabia. As per the Holy Quran, all Muslims who are physically and financially sound must perform the Haj pilgrimage at least once in their lives. As provided in Holy Quran, the Haj pilgrimage is one of the five pillars or duties of Islam. Haj takes place only once a year in the twelfth and final month of Islamic lunar calendar. Pilgrimage undertaken to Mecca at other times is known as Umrah. During the five days of Haj, the pilgrims are required to perform a series of rituals, the details of which are not relevant for deciding the issues involved in these petitions - To enable Haj pilgrims of India to undertake Haj pilgrimage, there is a bilateral agreement executed every year between the Kingdom of Saudi Arabia and the Government of India. As per the bilateral agreement, a quota of number of pilgrims is assigned to India. Out of the said quota, normally only 30% is allocated to HGOs. The rest of the quota is made available to the Haj Committee. Place of provision of services - HELD THAT - The provisions of the 2012 Rules and the relevant provisions of IGST Act are to a great extent pari materia. As far as the location of service provider in this case (HGOs) is concerned, there is no dispute that all of them have to be registered under Rule 4 of the Service Tax Rules, 1994 and therefore, as per sub-clause (a) of clause (h) of Rule 2, the location of HGO will be the premises for which registration has been granted to HGO. Such premises are necessarily in India. Even assuming that any other sub-clauses of clause (h) are applicable, the location of the service provider, in this case, will be in India. As far as the location of service receiver under clause (i) of Rule 2 is concerned, in this case, the service receiver is the Haj pilgrim who is obviously not registered. As provided in Rule 3, the place of provision of service is the location of the recipient of service. In this case, the recipients of service from HGOs are Indian residents and accordingly, their place of residence in India will be the place of provision of service. Rule 8 provides that where the location of the provider of service as well as that of the recipient of service is in the taxable territory, the place of provision of service is the location of the recipient of service. Hence, in this case, the place of provision of service is the location of the service receiver in accordance with clause (i) of Rule 2 which will be in taxable territory. As per Item (iv) of sub-clause (b) of Clause (i) of Rule 2 of the said Rules of 2012, the location of the service receiver will be the usual place of residence of the Haj pilgrim in India. Therefore, the service rendered by the HGOs to Haj Pilgrims is taxable for service tax as the service to Haj pilgrims is provided or agreed to be provided in taxable territory. The service is rendered by providing or agreeing to provide Haj pilgrimage tour package. Applicability of Mega Exemption Notification - HELD THAT - The Exemption Notifications under the IGST and the GST Acts so far as the Haj pilgrimage is concerned, are pari materia with the Mega Exemption Notification. It is, therefore, necessary to advert to the Mega Exemption Notification. The Mega Exemption Notification contains a list of services which are exempted from service tax leviable under Section 66B. Ex facie, Clause 5A will have no application as it is applicable to services by specified organisations in respect of a religious pilgrimage facilitated by the Ministry of External affairs of the Government of India under bilateral arrangement. The specified organisations have been defined in paragraph 1(1)(a)(zfa) of the Mega Exemption Notification. Specified organisations, as stated therein, are only two categories of organisations. The first one is Kumaon Mandal Vikas Nigam Limited, a Government of Uttarakhand Undertaking and Haj Committee or State Committee under the said Act of 2002. The Haj Committee renders services in relation to the Haj pilgrimage which is facilitated by the Ministry of External Affairs of the Government of India under the bilateral arrangement with the Kingdom of Saudi Arabia. It must be noted here that Clause 5A of the same Mega Exemption Notification grants exemption to the service rendered by Haj Committees in respect of a religious pilgrimage. Thus, the same Mega Exemption Notification makes a clear distinction between religious ceremony and religious pilgrimage . As Haj Committees render services only in respect of Haj pilgrimage, the religious pilgrimage referred to in Clause 5A as regards the Haj Committee, is Haj pilgrimage. Thus, the Mega Exemption Notification exempts the two specified organisations that render services in respect of a religious pilgrimage - The service rendered by HGOs to Haj pilgrims is to facilitate them to reach at the destination to perform rituals/religious ceremonies. No religious ceremony is performed or conducted by the HGOs. The religious ceremony is conducted by Haj pilgrims or by someone else in the Kingdom of Saudi Arabia. Discrimination made under the Mega Exemption Notification between the services rendered by specified organisations and the services rendered by other service providers in respect of religious pilgrimage - HELD THAT - The Haj Committee is under an obligation to publish proceedings of the Committee. Under Section 30, it is the duty of the Committee to create Central Haj Fund. Similarly, under Section 32, the State Committees are under an obligation to create State Haj Funds. The Central Government has the power to reconstitute the Haj Committee and to remove the Chairperson, the Vice-Chairperson and the Members of the Committee. There is a similar power vesting in the State Government in respect of the State Committees. Thus, the Haj Committees are statutory bodies working under the control and supervision of the Government. The Haj Committees are the agencies and instrumentalities of the State. Apart from arranging visits of Haj pilgrims for the purposes of Haj pilgrimage, there are important statutory duties assigned to the Haj Committee - the Central Government has all pervasive control over the Haj Committee. The State Governments have the same control over the State Committee. On the other hand, there are no onerous duties attached to HGOs. They earn profit by rendering service to Haj pilgrims. Except for the stringent conditions for the registration, the Government has no control over HGOs. The arguments based on discrimination have no substance at all, as HGOs and the Haj Committees do not stand on par and in fact, the Haj Committees constitute a separate class by themselves, which is based on a rational classification which has a nexus with the object sought to be achieved. There is no merit in the challenge in the petitions - Petition dismissed.
Issues Involved:
1. Liability of Haj Group Organizers (HGOs) or Private Tour Operators (PTOs) to pay service tax on services rendered to Haj pilgrims. 2. Applicability of the Mega Exemption Notification to HGOs/PTOs. 3. Alleged discrimination under Article 14 of the Constitution of India between services rendered by HGOs/PTOs and the Haj Committee. 4. Applicability of the 2012 Rules and the Integrated Goods and Services Tax Act, 2017 (IGST Act). Detailed Analysis: 1. Liability of HGOs/PTOs to Pay Service Tax: The court examined whether HGOs/PTOs are liable to pay service tax on services rendered to Haj pilgrims. Under the Finance Act, 1994, and the subsequent negative list regime introduced by Act No.23 of 2012, service tax is levied on all services except those specified in the negative list. The court noted that the services provided by HGOs/PTOs, such as arranging flights, accommodation, food, and foreign exchange, fall within the taxable territory as defined under the Finance Act. Therefore, HGOs/PTOs are liable to pay service tax on the comprehensive package offered to Haj pilgrims. 2. Applicability of the Mega Exemption Notification: The petitioners argued that the services provided by HGOs/PTOs should be exempt under Paragraph 5(b) of the Mega Exemption Notification, which exempts services by a person by way of conduct of any religious ceremony. The court held that the term "conduct of any religious ceremony" refers to services directly involved in performing the ceremony, not facilitating it. HGOs/PTOs do not conduct religious ceremonies but facilitate the pilgrimage. Therefore, they do not qualify for the exemption under Paragraph 5(b). The court also noted that Paragraph 5A of the Mega Exemption Notification, which exempts services by specified organizations in respect of religious pilgrimages facilitated by the Ministry of External Affairs, does not apply to HGOs/PTOs as they are not specified organizations. 3. Alleged Discrimination under Article 14: The petitioners contended that the exemption granted to the Haj Committee under Paragraph 5A of the Mega Exemption Notification, while denying the same to HGOs/PTOs, is discriminatory and violates Article 14 of the Constitution. The court held that the Haj Committee constitutes a separate class due to its statutory duties, lack of profit motive, and government control. The classification is based on intelligible differentia and has a rational nexus with the objective of promoting religious pilgrimage through specified organizations. Therefore, the differential treatment does not violate Article 14. 4. Applicability of the 2012 Rules and IGST Act: The court examined the Place of Provision of Services Rules, 2012, and the relevant provisions of the IGST Act. It held that the location of the service provider (HGOs) and the service recipient (Haj pilgrims) is within the taxable territory (India). Therefore, the services rendered by HGOs/PTOs are taxable under the 2012 Rules and the IGST Act. The court rejected the argument that the Haj pilgrimage is an event under Rule 6 of the 2012 Rules, stating that religious ceremonies are not covered by the term "event." Conclusion: The court dismissed the petitions, holding that HGOs/PTOs are liable to pay service tax on services rendered to Haj pilgrims, and the Mega Exemption Notification does not apply to them. The court also upheld the classification under Article 14, stating that the Haj Committee constitutes a separate class with a rational basis for differential treatment. The applicability of the 2012 Rules and the IGST Act was affirmed, confirming the taxability of services provided by HGOs/PTOs within the taxable territory.
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