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TMI Blog2017 (4) TMI 852X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by the Commissioner. Penalties were also imposed under Section 76, 77 and 78 in one case under Section 76 and under Section 76 only in the 2nd case. The demand of interest was also confirmed in both the cases. Aggrieved by the said order, the appellants are before the Tribunal. 3. Learned Counsel for the appellants argued that the service tax is destination based consumption tax and should be levied at the location where the services are consumed or in other words where the services are used. Learned Counsel relied on the decision of the Hon'ble Apex Court in the case of All India Federation of Tax Practitioner's V. UOI 2007 (7) STR 625 (S.C.). He argued that in the light of what is stated above, it is clear that service tax is a VAT which in turn is destination based consumption tax. He argued that it is a tax on commercial activities, it is not a charge on the business but on the consumer and it would logically be leviable only on services provided within the country. Learned Counsel argued that these services are consumed outside the territory of India. Thus even if services are rendered in India they had to be considered as export of service. Learned Counsel argued that pla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f. of 'Tour Operator' w.e.f. 10/09/2004 reads as follows: - "Tour operator mean any person engaged in the business of planning, scheduling, organizing or arranging tours (which may include arrangements for accommodation, sightseeing or other similar services) by any mode of transport, and includes any person engaged in the business of operating tours in a tourist vehicle covered by a permit granted under the Motor Vehicles Act, 1988 (59 of 1988) or the rules made thereunder." 3.3 Learned Counsel argued that after 10th September 2004, the words planning, scheduling, organizing or arranging the tours by any mode of transport have been incorporated in the definition. Prior to this, the definition did not specifically contain the terms planning, scheduling and organizing and the tour services were taxable only when the tour was undertaken in a tourist vehicle. The appellant submits that no tour can be conducted without planning, scheduling and organizing. Every tour operator has to perform the following basic functions before any tour is undertaken: (i) The tour operator identifies the place of interest to the tourist. The place depends upon the nature of tourist to be targeted. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble under Rule 3(ii). In the said category in order to consider the said service of export if such service is performed outside India. Thus the learned Counsel argued that the performance of the service outside India is a mandatory condition for considering the service of tour operator as export of service. The learned Counsel relied on the Board's Circular No. III/05/2009-ST dated 24.02.2009 which reads as follows:- "2. The matter has been examined. Sub-rule (1) of rule 3 of the Export of Services Rule, 2005 categorizes the services into three categories: (i) ----------- (ii) Category (II) [Rule 3(1)(ii)] : For services (such as Rent-a-Cab operator, Market Research Agency service, Survey and Exploration of Minerals service, Convention service, Security Agency service, Storage and Warehousing service) where the place of performance of service can be established, it is provided that provision of such services would be 'export' if they are performed (or even partly performed) outside India (iii) ------------ 3. Similarly, if an Indian event manager (a Category II service [Rule 3(1)(ii)]) arranges a seminar for an Indian company in U.K. the service has to be treated to have be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ovided the various conditions for treating any service as Export of Service. Rule 3(2) & rule 3(1) were completely independent & hence the provisions of rule 3(2) did not apply to rule 3(1). 3.8 Learned Counsel further argued that the amount received for the services should be considered cum-duty price and service tax should be calculated accordingly by extending duty benefit. Learned Counsel further argued that service tax has been paid on the airfare portion of the Outbound Tours and therefore the demand if confirmed is required to be reduced to that extent. 3.9 Learned Counsel further raised the issue of jurisdiction. Learned Counsel argued that their branches have been located at 13 different places and each one is registered with the respective jurisdictional Central Excise Commissionerate. They obtained the centralized registration only on 17th November 2009. Learned Counsel argued that for the period before 17th November 2009 in the respective jurisdictional Commissioner to make assessment of tax paid or to issue demand notice. 3.10 Learned Counsel further argued that they are entitled to abatement in terms of notification 12/2004, 1/2006 and 38/2007. 4 Learned A.R argue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ators. It was argued that the Tribunal has wrongly held that the specific component of the definition would have been surplusage in legislative drafting if the generic facet of the definition was considered to include operating tours. He argued that this specific component of the definition from 01.04.2000 and the definition after 09.09.2004 are included in the earlier definition. He pointed out that the generic facet and the specific facet are joined by conjoined law. 4.2 Learned A.R. relied on the decision of the Hon'ble Apex Court in the case of Doypack Systems Pvt. Ltd. - 1988 (36) ELT 201 (SC) wherein it has been held that the purpose of interpretation of statute is to discover the intention of the legislature as expressed in the Statute. He argued that where the grammatical construction is clear and manifest and without doubt, that construction ought to prevail unless there are some strong and obvious reasons to the contrary. He pointed out that in the same judgement it has been held that the word "includes" is inclusive and expands the meaning. 4.3 He further argued that in the case of Oswal Agro Mills - 1993 (66) ELT 37 (SC) the Hon'ble Apex Court held that the interpreta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the appropriate legislature or by judge made law, and there is no settled principles for determining the situs of sale". He argued that the legislature has vide Export of services rules prescribed that service provided by a tour operator would be deemed to have been provided in India unless the conditions of the said rules are satisfied. 4.6 Learned A.R. further relied on the fact that the services of "Tour Operator" was placed in Rule 3(1) (ii) of Export of Service Rules, 2005. As such, till the time the tour operator is located within India service would be deemed who have been provided within India. He argued that the said rule was approved by the Parliament, it is law of the land in view of the decision of the Apex Court in the case of Bengal Immunity Company Ltd. (supra). He argued that the Hon'ble Apex Court in the case of All India Federation of Tax Practitioners has held that "service tax is a VAT which in turn is a destination based consumption tax in the sense that it is commercial activity and is not a charge on the business, but on the consumer and it would legally be leviable only on services provided within the country. 4.7 Learned A.R. also relied on the impugne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d amount to an incidental activity undertaken as a prelude to providing tours and thus the service if at all provided is to the service provider itself. Nevertheless, since organizing and/or arranging of outbound tours are components of the service provided to tourists and these are the primary and substantive purposes of the service provided and consumed, the composite activity of planning, scheduling, organizing or arranging tours falls within the scope of the taxable service defined in Section 65(115) of the Act; (ii) Whether an outbound tour amounts to export of service and is thus immune to levy of Service Tax, under the Export of Service Rules, 2005 is not decided and is left open, as not necessary in view of our ruling on other issues? (iii) The assessees would be entitled to abatement benefits in terms of any exemption/abatement benefits provided qua Notifications issued by the Central Government under Section 93(1) of the Act, but subject to fulfilment of the conditions enjoined in such Notifications; (iv) Invocation of the extended period of limitation, for assessment and levy of Service Tax, interest and penalties is unjustified. Levy and collection of Service Tax, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 05)(h) of the Act? 6.1 The scope of expression of "Tour Operator" as defined under Section 65(115) of the Act post amendment of the definition of the Finance Act, 2004 with effect from 10.09.2004 has been examined. This issue has been examined in sub-para (c) of para 17 of the said order which reads as follows:- (c) W.e.f. 10-9-2004 "tour operator" was amended again. We are concerned with the scope of the expression, post-10-9-2004. As amended, a person engaged in the business of planning, scheduling, organising or arranging tours (which may include arrangement for accommodation, sightseeing, or other similar services) by any mode of transport is the taxable service. This amendment incorporates an inclusionary clause, whereby any person engaged in the business of operating tours in a vehicle covered by a permit granted under the Motor Vehicles Act, 1988 or the rules made thereunder, would come within the fold of "tour operator". In our considered view the definition (post the amendment), has two facets; (i) the generic facet, of engagement in the business of planning, scheduling, organising or arranging tours (which may include arrangements for accommodation, sightseeing or oth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erved in Aswini Kumar Ghose v. Arabinda Bose - AIR 1952 SC 369: It is not a sound principle of construction to brush aside words in a statute as being inapposite surplusage, if they can have appropriate application in circumstances conceivably within the contemplation of the statute. Jagannadhadas, J. pointed out in Rao Shiv Bahadur Singh v. State of U.P. - AIR 1953 SC 394 that : It is incumbent on a Court to avoid a construction, if reasonably permissible on the language, which would render a part of the statute devoid of any meaning or application. In J.K. Cotton Spinning & Weaving Mills Co. Ltd. v. State of U.P. - AIR 1961 SC 1170 Das Gupta J. observed that: In the interpretation of a statute, the Court always presumes that the Legislature inserted every part thereof for a purpose and the legislative intention is that every part of the statute should have effect. The Privy Council in Quebec Railway, Light, Heat & Power Co. v. Vandry - AIR 1920 PC 181, 186 observed that the Legislature is deemed not to waste its words or to say anything in vain and a construction which attributes redundancy to the Legislature will not be accepted except for compelling reasons - see also Union of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mit granted under the 1988 Act or the rules made thereunder, falls within the ambit of "tour operator", as a consequence of the second inclusionary clause. 6.2 Thus it has been held in the said order that the term "Tour Operator" does not include the persons operating tours on any mode other that specific motor vehicles operated by operators having permit under Motor Vehicle Act, 1988 or rules made thereunder. The conclusion in the said order can be summarized in simple terms as follows: i) The appellants are operating tours and not merely planning, scheduling, organising or arranging tours. ii) There are two facets of the definition of the term "Tour operator", one generic and one specific (inclusive part of definition). Since appellants are operating tours they do not fall in the generic facet of the definition of the term tour operator as it covers only the activity of planning, scheduling, organising or arranging tours. iii) The generic facet of the term "tour operator" only expands the scope of specific facet (inclusive part of definition) to cover in it's ambit the people involved in the activity of planning, scheduling, organising or arranging tours operated in any mode ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a 'tour operator' in relation to tour' are taxable, irrespective of the fact if the same services qualify him to be a 'tour operator' or not. In our considered view the changes made in the definition of the term 'Tour Operator' only makes changes in the definition of the person providing the service, and the nature of taxable service has to be construed accordingly. The only conclusion that needs to be made on the basis of the definition of the term 'Tour Operator' is if the appellant falls within the definition of term 'Tour Operator' or not. 6.4 As discussed in para above, the said order acknowledges that the appellant has at least provided the service of organising and arranging the tours. In such circumstances they clearly fall under the category of 'Tour Operator'. In our considered view the taxable service is not limited to 'planning, scheduling, organising or arranging tours', but it is 'Any service' in relation to a tour, provided by a tour operator' Thus 'any service' in relation to a tour (which would include the service of operating tours), provided by a person who may be 'planning, scheduling, organising or arranging tours', apart from operating tours, would be taxa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ting business of tour could involve any one or more of the activities like planning, scheduling, organizing or arranging tours (which may include arrangement for accommodation, sightseeing or other similar services). Thus any person involved in any one or more of the activities of these activities in relation to a tour would be a tour operator. 6.6 Following had been argued in the said order 19 (a) The planning, scheduling, organising or arranging outbound tours is merely incidental to the operating and conducting of outbound tours The said contention of the appellant was rejected in the said decision with following observation 19 (a) (vi) We therefore hold that this contention is without merit or force. The assessees had clearly organised and arranged the tours for the benefits of tourists and have received consideration for this service provided; and this is the substantive purpose and basis of the service. We reject this contention. On the other hand the said order holds that the appellant have not provided the service of planning and scheduling. In para 21 (d) (i) it observes as follows 'Planning and scheduling of outbound tours may not be components of services provided ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assport, visa and also arrange accommodation, tours, entertainment and other tourism related services) and to a tour operator (engaged in transport, accommodation, sight-seeing, entertainment and other tourist related services for tourist). It is obvious that the term operator applies to persons engaged in any of these activities. It is not necessary that a person should be providing all the services to become an 'operator'. By just providing one or more of these services a person can become an 'operator'. In fact the list is not exhaustive and includes in its ambit 'other tourist related services'. Use of expression 'other tourist related services' in the definition means that it is not necessary to provide all the services to qualify as tour operator. In view of above it is apparent that the term 'operator' is to be construed to mean any person involved in any one or more of the activities like providing vehicles, providing tickets for travel by air, rail, ship, passport, visa and arranging accommodation, tours, entertainment, transport, sight-seeing, entertainment and other tourist related services. Thus the term 'operator' has a wide meaning and would include in its ambit any p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ral steps such as determining the probable dates and venues of tours, finalising the itinerary; booking of accommodation in hotels in foreign countries; planning and booking for travelling through bus, railways, travelling cruise liners, etc., in foreign locations, sightseeing on tours, breakfast/meals; providing service of foreign guides, providing a tour leader to accompany the touring party; Air ticketing, arranging visa and travel insurance to guests as required for foreign travel, complementary bags/snacks hampers, shopping bags, passport pouches, etc.; the business of conducting and operating package tours outside India involve several steps such as determining the probable dates and venues of tours, finalising the itinerary; booking of accommodation in hotels in foreign countries; planning and booking for travelling through bus, railways, travelling cruise liners, etc., in foreign locations, sightseeing on tours, breakfast/meals; providing service of foreign guides, providing a tour leader to accompany the touring party; Air ticketing, arranging visa and travel insurance to guests as required for foreign travel, complementary bags/snacks hampers, shopping bags, passport pouc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the scope of taxable service. 6.9 Activities of 'planning, scheduling, organising or arranging tours' each individually amounts to 'Operating tours' The interpretation of words 'Operating' vis a vis 'planning, scheduling, organising or arranging tours', is not relevant for determining the scope of the taxable service, but it is relevant only for determination of the meaning of the words 'Tour Operator'. While it is not relevant in interpreting the scope of the 'taxable service', the said order proceeds on the assumption that the appellants are providing the service of 'operating tour' which is different from 'planning, scheduling, organising or arranging tours'. We will revisit the activities conducted by the appellant tabulated in the para above. The activities conducted by the appellants are as follows ACTIVITY CONDUCTED IN RELATION TO THE TOUR planning, scheduling, organising or arranging tours (which may include arrangements for accommodation, siteseeing, or other similar services How the activity is included in the definition of the activities listed in the definition of 'tour operator' determining the probable dates and venues of tours, finalising the itinerary; pla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... till it is not disputed that the appellants are involved one or more of the activities of either planning or scheduling or organising or arranging tours. The only argument can be that they are doing something (though nothing has been identified in the said order) which goes beyond the activities of 'planning, scheduling, organising or arranging tours' and brings them in the scope of the activity of 'operating' tours. It is not in dispute that they are engaged in the activity of 'planning, scheduling, organising or arranging tours'. So long as they are involved in any one or more of these activities of 'planning, scheduling, organising or arranging tours' they remain within the definition of 'tour operator'. Therefore in terms of the definition of Taxable Service, 'ANY SERRVICE' provided by them in relation to tour, including the so called service of 'OPERATING TOURS', would be covered by the definition of Taxable Service. This aspect was apparently not brought to the notice of the bench when the matter was argued, and therefore lost sight of in the said order. 6.11 The said order incorrectly holds that the term 'Tour operator' excludes from its ambit persons operating tours in any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it granted under the Motor Vehicles Act, 1988 or the rules made thereunder, (amendments are emphasised). (iv) 16-5-2008 to 30-6-2012 : "Tour Operator" means any person engaged in the business of planning, scheduling, organizing or arranging tours (which may include arrangements for accommodation, site-seeing, or other similar services) by any mode of transport, and includes any person engaged in the business of operating tours in a tourist vehicle or a contract carriage by whatever name called, covered by a permit, other than a stage carriage permit, granted under the Motor Vehicles Act, 1988 (59 of 1988) or the rules made thereunder. The term 'operating tours' appears in the above definition in reference of the vehicles operating under permit granted under Motor Vehicles Act, 1988 (59 of 1988) or the rules made thereunder. Now let us examine the term 'operator' and its meaning as it appears from the Motor Vehicles (All India Permit for Tourist Transport Operators) Rules, 1993, issued under the Motor Vehicles Act 1988. The definition of "Tourist Transport Operator" as provided therein is as follows:- 2[(g) "Tourist Transport Operator" means- (a) A company or an individual enga ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d to include the activity of 'operating tours', would make the specific facet surplusage. In other words it holds that if the specific inclusive facet of the definition does not include anything in the definition, the words become superfluous. It can be seen that it is not correct to say that the specific inclusive part of the definition is surplusage as it covers in the definition of 'tour operator' a person 'providing tourist transport vehicles on tourist circuits' who would otherwise be not covered by the generic definition. 7. The second main issue decided by the tribunal in the said order is if the service has been provided in India or outside the territory of India. In the aforesaid case, it has observed that The consideration received for operating and arranging outbound tours (provided by the appellants and consumed by tourists beyond the territory of India) is not liable to levy and collection of Service Tax under the provisions of the Act, since the taxable event is the provision of a taxable service; and not the pursuit of the profession, of a taxable service providers. The Act authorizes the levy and collection of tax for providing a destination and consumption based ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dia. Following is the analysis of the services provided by the appellant. Service received by client Where provided Where consumed Determination of the probable dates and venues of tours, finalising the itinerary; The entire scheduling and finalising of itinerary is conducted by the appellants in India It relieves the client of determining the right dates and venues of tours, finalising the itinerary. It is received and consumed before the tour starts when the client is still in India. Consumed in India booking of accommodation in hotels in foreign countries; Booking activity is undertaken sitting in India. It relieves the client of the burden of booking of accommodation in hotels in foreign countries. It is received and consumed before the tour starts when the client is still in India. Consumed in India planning and booking for travelling through bus, railways, travelling cruise liners, etc., in foreign locations, Booking activity is undertaken sitting in India. It relieves the client of the burden of booking of travel arrangements in foreign countries. It is received and consumed before the tour starts when the client is still in India. Consumed in India The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e the purview of the taxable service enumerated in Section 65(105)(h) of the Act?" It is apparent that the said decision I) Does not define the term "Operator". It presumes that the appellant are "Tour Operator" without examining the actual activities done by the appellant. II) The said decision fails to consider/ignores the definition of the 'Taxable Service' enumerated in Section 65(105)(h) in the reasoning given in the said decision. It is seen that the discussion in the said decision (Para 16 onwards) does not deal with the said definition. 8.1 The said decision presumes that the appellants are 'Operating' tours. The said decision does not define the meaning of the term 'Operator'. It presumes that the appellant are 'Operating' tours without examining the specific activities done by the appellant and without analysing the definition of the term 'Operator'. It does not elaborate as to how it concludes that the appellant are 'Operating tours'. It does not elaborate as to how the activity of 'Operating' tours is an activity different from 'planning, scheduling, organizing or arranging' tours. 8.2 It can be seen that the said order shortlists the question in para 16(b) as foll ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s on the question of priority of the claimant's debt, and, on this argument being heard, the Court granted the order. No consideration was given to the question whether a garnishee order could properly be made on an account standing in the name of the liquidator. When, therefore, this very point was argued in a subsequent case before the Court of Appeal in Lancaster Motor Co. (London) Ltd. v. Bremith, Ltd., [1941] 1 KB 675. the Court held itself not bound by its previous decision. Sir Wilfrid Greene, M.R., said that he could not help thinking that the point now raised had been deliberately passed sub silentio by counsel in order that the point of substance might be decided. We went on to say that the point had to be decided by the earlier court before it could make the order which it did; nevertheless, since it was decided "without argument, without reference to the crucial words of the rule, and without any citation of authority", it was not binding and would not be followed. Precedents sub silentio and without argument are of no moment. This rule has ever since been followed. One of the chief reasons for the doctrine of precedent is that a matter that has once been fully argu ..... X X X X Extracts X X X X X X X X Extracts X X X X
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