By TIOL News Service

MUMBAI, NOV 18, 2015: THE appellants are engaged in providing buses/vehicles on hire on contractual basis to various customers like companies, factories, commercial establishments, schools etc. The vehicles operated between specified points for which they have contract carriage permits issued by the RTO. The service is provided as per the rates agreed to on the agreed routes and on the basis of associate distance in kilometer, to employees of companies etc.

The Department was of the view that the services provided fall under Section 65 (115) as 'Tour Operator Service' and is chargeable to service tax. The periods covered are both prior to 10.9.2004 as well as post 10.9.2004.

Prior to 10.09.2004:

The definition of ‘Tour Operator' was as under:

"Tour Operator means "any person engaged in the business of operating Tourist Vehicles covered by a permit granted under the Motor Vehicles Act, 1988 or the rules made thereunder".

To be covered under this definition the vehicle must be a tourist vehicle under the Motor Vehicles Act, 1988. The definition of tourist vehicle contained in Section 2(43) of the Motor Vehicles Act and Rules made thereunder is as below:

"Tourist vehicle" means a contract carriage constructed or adapted and equipped or maintained in accordance with such specifications as may be prescribed in this behalf."

The specifications are prescribed in Rule 128 of the Central Motor Vehicles Rules, 1989 which states that the Tourist Vehicles shall conform to certain specifications. These specifications relate to dimensions, structures, passenger entrance and exit, emergency exit, driver entry and exit, wind screen, windows, ventilation, lighting, fitting and accessories etc. Thus for a vehicle to be given the permit of a Tourist vehicle there are elaborate specifications to be observed. It goes without saying that the proper authority to decide whether a vehicle is a contract marriage equipped with certain specifications as per Rule 128 of Central Motor Vehicle Rules, is the Regional Transport Office (RTO), who govern the administration of the Motor Vehicles Act.

In the case of the following parties -

++ M/s. Jai Somnath Transport - Dy. RTO, Thane vide his letter dt. 14.2.2006 has categorically stated that the vehicles operated by the appellant cannot be considered as Tourist vehicles in terms of Section 2(43) of Motor Vehicles Act.

++ Ditto in the case of S K Travels.

++ In the case of other appellants namely, D.C.Gupta& Sons, Lawrence Travels, Moharir Travels, General Travels, Revenue has not challenged that the vehicles are not Tourist vehicles in terms of Rule 128 of the Motor Vehicles Rules.

++ In the case of respondents Lawrence Travels, Ideal Travels and Buthello Travels, the Commissioner of Service Tax, Mumbai-II has specifically recorded that there is nothing on record to show that the vehicles are tourist vehicles in terms of rule 128 .

The AR submitted that the definition of Tourist vehicle refers to a contract carriage and contract carriage will fall in the ambit of service tax.

CESTAT held : We are not able to appreciate this stand because the definition is very clear. It states that the vehicle must be a contract carriage which conforms to the specifications under the Rules to be termed as a ‘Tourist Vehicle'. [Bharat Travels 2010-TIOL-1230-CESTAT-AHM, Ramsons Travels & Tours 2009-TIOL-618-CESTAT-DEL, Gandhi Travels 2007-TIOL-430-CESTAT-AHM, 2008-TIOL-774-HC-AHM-ST cited by appellant relied upon - the basic observation in all the judgments is that the vehicle should meet the specifications of Tourist vehicles as specified under Rule 128 of the Central Motor Vehicles Rules.]

The definition of Tour Operator was changed with effect from 16.05.2008 to include all contract carriages in the definition.

Revenue, it appears, is confusing the words "Tourist permit" and "Tourist vehicle" and reading the word ‘permit' to mean the same as Tourist permit.

In view of the above, we unhesitatingly hold that pre 10.09.2004 the activity undertaken by the appellants is not leviableto tax under the "Tour Operator Service".

Post 10.9.2004:

The definition of Tour Operator read:

"Tour Operator" means any person engaged in business of planning, scheduling, organizing or arranging tours (which may include arrangements for accommodation, sight 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 covered by a permit granted under the Motor Vehicles Act, 1977 or the Rules made there under".

Held:

As per the first part of this definition, any person who is engaged in the business of planning, scheduling, organizing or arranging tours is a Tourist Operator. We have already noted that the second part of the definition, which requires the vehicle to be a tourist vehicle, does not cover the services rendered by the parties in the category of ‘Tour Operator'. We find in some cases such as SK Travels and Buthello Travels the SCN only referred to the second part of the definition even for the period post 10.09.2004. The findings by the Commissioner in the Orders in respect of these parties and in the case of Jai Somnath do not explain at all how and whether the activity is covered by the first part of the definition.

We have seen the Agreements between appellants and their clients. We find that the appellants have only planned for providing vehicles of a specific capacity with a particular schedule. We also note that at the time of expansion of the definition of Tour Operator on 10/09/2004, CBEC Circular No. 80/10/2004-ST dated 17/09/2004 clarified that while the existing levy on tour operators engaged in operating tours in tourist vehicles remain as such, in case of a package tour (which are planned, scheduled, organized or arranged by tour operators), the scope of the levy is being extended by removing the limitations regarding transportation by tourist vehicle only which means it will include air-rail-cab travel also. From the above clarification, the intent of the legislature was to expand the levy of service tax for planning/scheduling /organizing/arranging the package tours for all modes of travel. It was not intended to expand the scope to cases such as the present one. In the present case, the appellants provide/supply the contract carriage business (not tourist vehicles) to their customers on their demand only. Therefore the activity of the appellant is not covered by the definition of 'Tour Operator' for the period post 10.09.2004.

Respondent assessees & other appellants:

Ideal Travels:

M/s. Ideal were providing vehicles/buses to their customers, under an agreed written contract during the period specified therein for an agreed commercial consideration for transportation of the company/factory employees, at specified places through specified routes and timings. As per the said contract, M/s. Ideal had no authority to pick-up or drop the said persons covered by the contract at any place / route of their choice nor did they have flexibility to alter the route or timings according to their own choice or whims and fancies. Therefore the employees of only those companies/factories etc. who had entered into a contract with M/s. Ideal had the authority to board the buses at pre-determined pick-up points at fixed timings agreed upon and M/s. Ideal had no authority to pick-up or drop any other passenger en-route. Thus, I find from the above that M/s. Ideal were not engaged in the business of planning, scheduling, organizing or arranging package tour of their own as provided under the new definition of ‘tour operator' service but were adhering to the conditions laid down in the agreements entered into with various customers. Thus it cannot be said that they were covered under the first part of the amended definition of ‘tour operator' also".

Moharir Travels & Lawrence Travels : The adjudicating authority observed that the appellant had no liberty under the contract to plan, schedule, organize or arrange trips at his own whims or convenience. The same reasoning applies in the case of Lawrence Travels.

In our considered view, the activity does not get covered under the ‘Tour Operator' Service post 10.09.2004.

Appeal of General Travels:

In the case of General Travels the demand is confirmed on the ground that the tours were organized for picnics etc. Therefore, this activity (post 10.09.2004) will fall under the ambit of planning, scheduling etc. in terms of the first part of the definition irrespective of the fact that the vehicle is not a tourist vehicle. This is because the two parts of the definition are independent and for the activity to be taxable, either part may be satisfied. Hence the demand of service tax against M/s. General Travels is upheld. However as the confusion on taxability remained for a long period as evident from various judicial pronouncements, there is reasonable cause to waive the penalties in this case in terms of Section 80.

Conclusion:

Appeals of all parties except General Travels are allowed. Appeals of Revenue are dismissed.

(See 2015-TIOL-2445-CESTAT-MUM)