2024 (12) TMI 1137 - AT - Service Tax

Liability of appellant to pay tax on outbound tours and for in bound tours being provided to foreign travelers - liability of appellant to pay service tax on domestic outbound tours - liability to pay service tax on the amount received as web design charges. Whether appellant is liable to pay tax on outbound tours and for in bound tours being provided to foreign travelers? - HELD THAT - Since, arrangement of tours outside the territory of India i.e the destination being outside India for outbound tours irrespective the service recipient is located in India or is a foreign traveller, the outbound tour is not liable to service tax. There is no tax activity on outbound tours in terms of Rule 3(2) of Export of Service Rules, 2005 according to which the taxable service which is partly performed in India has also to be considered as the activity performed outside India. Notification No. 09/2005 dated 03.01.2005 also extends exemption from service to outboud tours - reliance can be placed in M/S COX KINGS LIMITED (FORMERLY KNOWN AS COX AND KINGS (INDIA) LIMITED) VERSUS COMMISSIONER (TAR) -MUMBAI 2023 (10) TMI 1388 - CESTAT MUMBAI - LB - Issue stands decided in favour of appellant. Whether the appellant is entitled to pay service tax on domestic outbound tours? - HELD THAT - The insertion of clause (q) in Section 67 of Finance Act provides that the value of tour operator service will not only include the gross amount charged for the tour but also the charges for accommodation, food or any other facility provided in relation to such tour, we hold that the amount charged by the appellant for arranging domestic tour is liable to be taxed. In terms of TRU clarification No. 43/10/1997 dated 22.08.1997 the service tax on the services rendered by tour operators is only on tour services rendered in India in respect of tour with in Indian Territory (inbound tours). The services rendered by tour operators in respect of outbound tourism i.e. tours abroad do not attract to service tax. In case of composite tour which combined tour with in India and also outside India, the service tax will be leviable only on services rendered for tours within India. Separate billing has to be done by the tour operators for services provided in respect of tours within India. The order under challenge confirming the demand on inbound tours, is therefore, upheld. Whether the service tax is to be paid by the appellant on the amount received as web design charges? - HELD THAT - It is observed that the intellectual property right service has been defined under Section 65 (55a) of Finance Act 1994 to mean any right to intangible property, namely, trademarks, design, patent or any other intangible property under any law for the time being in forced. The term trademark is defined under clause 2(b) of Section 2 of Trade Marks Act, 1990 to mean a mark capable to being represented graphically and which is capable of distinguished goods or services of one person from those of others and may include shape of goods, the packing and combination of colours. The definition makes it clear that the trademark indicates relationship between goods or services and proprietor of such trademark. The domain name is not a trade mark as neither user thereof nor the provider of the services is the proprietor of the domain name. Hence, any amount paid for using the domain name cannot be called as an amount paid for receiving the taxable service of intellectual property right. This observation are sufficient to hold that the demand on Issue No. 3 is not sustainable. The demand with respect to outbound tours and the demand with respect to web domain charges is hereby ordered to be set-aside, however, the demand with respect to domestic tours provided to Indian travellers and the demand on renting of immovable property is hereby confirmed. The order under challenge is partly set-aside and partly sustained. Consequently, the appeal also stands partly allowed.

Summary

Issues Involved:
1. Liability of appellant to pay tax on outbound tours and inbound tours for foreign travelers.
2. Entitlement of the appellant to pay service tax on domestic outbound tours.
3. Service tax liability on the amount received as web design charges.

Issue No. 1:
The issue revolves around the demand for service tax on outbound tours provided by the appellant. The definition of Tour Operator under Section 65(115) of the Finance Act, 1994 is crucial in determining the tax liability. The Tribunal clarified that outbound tours conducted outside India are not subject to service tax, as per Rule 3(2) of Export of Service Rules, 2005 and Notification No. 09/2005 dated 03.01.2005. Citing relevant legal precedents, the Tribunal ruled in favor of the appellant, setting aside the demand related to outbound tours.

Issue No. 2:
This issue concerns the liability of the appellant to pay service tax on domestic outbound tours provided to Indian travelers. The definition of a tour operator underwent changes over the years, and the value of tour operator services includes charges for accommodation and other facilities related to the tour. The Tribunal upheld the demand for service tax on domestic tours within India, as clarified by TRU clarification No. 43/10/1997. The order confirming the demand on inbound tours was sustained based on the applicable legal framework.

Issue No. 3:
The Department treated web domain charges as payments received for intellectual property services. However, the Tribunal analyzed the definition of intellectual property right services under the Finance Act, 1994 and trademark under the Trade Marks Act, 1999. It was concluded that domain names do not fall under the definition of trademarks, and payments for domain names cannot be considered payments for intellectual property rights services. Therefore, the demand related to web domain charges was set aside.

In conclusion, the Tribunal partially allowed the appeal by setting aside the demands for outbound tours and web domain charges, while confirming the demands for domestic tours provided to Indian travelers and renting of immovable property used for commercial purposes. The judgment provides a detailed analysis of each issue, applying relevant legal provisions and precedents to determine the tax liability of the appellant.