Case Law Details
CESTAT, NEW DELHI BENCH (THIRD MEMBER)
Shail Shikhar Associates
versus
Commissioner of Central Excise, Meerut-I
D.N. PANDA, JUDICIAL MEMBER (AS A THIRD MEMBER)
MS. ARCHANA WADHWA, JUDICIAL MEMBER
AND MATHEW JOHN, TECHNICAL MEMBER
FINAL ORDER NO. ST/A/55504 OF 2013
MISC. ORDER NO. ST/M/73 OF 2012-CUS
APPEAL NO. ST/432 OF 2008
JANUARY 11, 2013
ORDER
Mathew John, Technical Member
The Appellants have leased a ropeway installed by Municipal Board, Mussorie at Mall Road, Mussorie and are engaged in operating it to entertain tourists by carrying tourists from Mall Road to Gun Hill and back to Mall Road. After amendment of section 65(115) of Finance Act, 1994 to include any means of transport in the definition for tour operator, the Superintendent of Central Excise, Dehradun asked them to deposit service tax on the charges collected by them from the tourists and they paid such tax under protest for the period Oct 2004 to September 2005. Later they claimed refund of the said tax paid because they were of the view that they will not be covered by the definition of tour. The Assistant Commissioner rejected the refund. Aggrieved by the order the Appellants filed an appeal with Commissioner (Appeal) who rejected their appeal. Aggrieved by the order of the Commissioner (Appeal) this appeal is filed before the Tribunal.
2. First it is necessary to record the relevant entries in Finance Act, 1994. Sub-sections 105(n), 113, 114 and 115 of section 65 of Finance Act, 1994 are as under:
(105)(n) “taxable service” means any service provided to any person by a tour operator in relation to tour;
(113) “tour” means a journey from one place to another irrespective of the distance between such places;
114. “tourist vehicle” has the meaning assigned to it in clause (43) of section 2 of the Motor Vehicles Act, 1988 (59 of 1988);
115. “tour operator” means any person engaged in the business of planning, scheduling, organising 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 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 or the rules made thereunder.
3. The argument on behalf of the Appellants is that they are not planning, scheduling, organizing or arranging tours. They are only operating a ropeway taken on lease by them from the Municipality. They contest that such operators will not be covered by definition at 65(115). They rely on the decisions of the Tribunal in Usha Breco Ltd. v. CCE [2007] 8 STT 191 (New Delhi – CESTAT).
4. They also submit that ropeways is an item covered by entry 13 of List-II of Seventh Schedule of the Constitution of India and only the states can pass any law dealing with the subject. They submit that the state is already charging entertainment tax on this activity.
5. They also point out that no Show Cause Notice has been issued for appropriating the tax paid by them under protest. So they should be granted the refund claimed by them.
6. They further submit that they have stopped paying service tax from Sep. 2005 and no demands have been issued for the subsequent period. So also service tax is not being collected from other operators of ropeways at Haridwar in the State of UP.
7. The Ld SDR on the other hand submitted that the decision in the case of Usha Breco Ltd. (supra) was with reference to the definition prevailing prior to 10-09-2004. Further the issue dealt with in the said decision was about the road journey from one ropeway boarding point to boarding point to the boarding point of another ropeway. The Tribunal held that if there is a tour, it is between Haridwar to the temples at the other end of the ropeways and not the transit between the boarding points of the two ropeways.
8. The Ld SDR further argues that as the operator of the ropeways the Appellants are planning scheduling, organizing and arranging tours. He also submits that the fact that the State Government is levying entertainment tax for the services provided cannot be reason to hold that service tax is not leviable on the service provided to the tourists. He did not give any explanation why there is no demand for the period after Sep 2005.
9. We have considered arguments on both sides. We agree with the argument of the Ld. SDR that the decision in Usha Breco Ltd. (supra) was not with reference to the legal position as applicable to this case and not on the activity impugned in this case.
10. We are also not in agreement with the argument of the Appellant with reference to entry No. 13 in List-II of the Schedule to the Constitution of India. This entry implies only that the control supervision, licensing etc. of ropeways will be with the state governments. The powers of the state to levy taxes are specified at entries 45 to 63 of the said list. None of these items list taxes on ropeways, though taxes on entertainment is listed at s. no. 62 of the list. So also “taxes on goods and passengers carried by road or on inland waterways” is specified at S. No 56 of the list. Still there is service tax on services of “goods transport agencies” and the validity of such levy has been upheld by Courts.
11. So the main contention to be examined is whether the appellant is a tour operator. That is to say whether the activity of the Appellant is covered by the definition under sub-section (115) of section 65 – whether the Appellant is doing any of the activities of planning, scheduling, organising or arranging tours. It is to be noted that the later part of the definition includes “any person engaged in the business of operating tours in a tourist vehicle”. Thus the words “organising” and “arranging” is used to cover the activity of “operation” also. Further the entries at 65(105)(n) and 65(115) use the word “operator”. So there cannot be any doubt that operation of tour by itself will be covered by the definitions, even without planning”, scheduling etc.
12. We have also examined the contention that the ropeways belong to the Municipality and it is just taken on lease. When ropeways are on lease to the Appellant, the Appellants are in possession of the ropeway. For deciding tax liability, the title to the property is not relevant. It would have been relevant if the contract with the Municipality was for operation and maintenance and the Municipality itself was issuing tickets and handling the tourists. In that situation also the issue can be as to who is rendering the service of tour operator and not the matter as to whether there is a tour.
13. Now the issue is what is the effect of the department not issuing notice for finalization of tax paid under protest. When the assessee asks for refund of the tax paid under protest and an order rejecting such refund is passed following due procedure, that itself is finalization of the protest made and there is no need for a separate SCN and Order in this regard.
14. Now the only issue that remains is whether, the issue that the department has not issued demands for the subsequent period and to other operators is relevant for deciding the case at hand. In the first place these submissions of the Appellant are not verified submissions. Secondly in this proceeding we are only deciding the legality and propriety of the impugned order and for the issue to be decided these facts are not relevant.
15. In view of our findings above, we reject the Appeal.
Ms. Archana Wadhwa, Judicial Member – After going through the order proposed by my learned brother, I proceed to record a separate order as I do not find myself in agreement with the findings arrived at by learned Member (Technical).
17. As detailed facts along with the issue involved already stands enumerated in the order proposed by my learned brother, the same are not being repeated to avoid redundancy. The short issue involved in the present appeal is as to whether the running of trolley between two fixed points amounts to tour operator services so as to levy Service Tax on the same.
18. The appellants have reiterated the same grounds which were placed before the Commissioner (Appeals) and stand tabulated by him. For better appreciation, the same are reproduced below:-
“2. The Adjudicating Authority has emphasized on the phrase “by any mode of Transport”. Respectfully, the appellant would like to place that if the basic ingredient is missing i.e. planning, scheduling, organizing or arranging tours and only the phrase “by any mode of transport” is considered, in such a circumstance, activities of Cycle Rickshaw /Auto Rickshaw/ Lift operators etc. would also become eligible to service tax in this category of service which is not the intention of legislature. Therefore, in absence of the basic ingredients of planning, scheduling, organizing or arranging tours, the activities cannot be held to be liable to service tax.
3. The appellant had operated a rope way which is a machine in itself, wherein Iron Rope is connected with Pillars at two ends and trolley operates upwards and downwards with the aid of power. That the said machine by no stretch of imagination be considered as a mode of transport. That for a specific mode of transport, at least registration with transport Authority is must, which is not at all applicable in case of a ropeway and as such the main ingredient of levy of Service Tax i.e., mode of transport is absent.
4. Further it well settled that transport can be conducted with the aid of movable mode of transport. That so far as ropeway is concerned, the same is an immovable asset and as such cannot be covered in the category of mode of transport.
5. Further there is no carriage and no ferry of passengers as the trolley starts from Mall Road and ends at Mall Road itself with the same people. That it is purely means of entertainment of tourist to have thrill of travelling in air over a deep valley and enjoy the scenic beauty of the surroundings from the height. Thus it is only a means of entertainment and not only any kind of means of transport. Further the Govt. of Uttarakhand had charged Entertainment tax on charges collected from customers towards such entertainment.”
19. Admittedly trolley operates between two points at mall and uphill point, with the aid of power and iron rope connected with pillars at two ends. The various definitions already stand reproduced in the order of my learned brother. The tour operators require planning, scheduling, organising or arranging tours by any mode of transport. As such, two criteria are required to be specified for holding a person as a tour operator. First that the said tour operator should be engaged in planning, scheduling, organising or arranging tours and such tours have be by any mode of transport. The movement of the trolley between the two fixed ends, where no planning, scheduling, organising or arranging tours is required inasmuch as anybody present at site can get into the trolley ride to the other end of the top hill and can come back not by a specific run of the trolley but can spend any number of hours on the other end and come back by any run of the trolley back to the same spot from where they started. Admittedly, there is no planning, no scheduling, no organising or no arrangement for a specific tours when the trolley operates upward and downwards and anybody is free to get into the trolley and spend whatever time they like at the other end and come back to the same point from where they boarded the trolley.
20. The second question required to be addressed is whether trolley can be considered as a mode of transport. No doubt meaning of transport is movement from one place to another. But applying the above definition for a simplicitor movement of trolley with the aid of power from one fixed point to another fixed point cannot be held to be a mode of transport. The appellants have rightly contended that in that case any activity of any type of movement would amount to tour operator services. It is well settled that the entries have to be understood and interpreted in the manner in which legislature intended it to be and in the manner in which they are understood in the common parlance. Movement of trolley between two fixed points can never be held to be understood by a common person as a tour. It is also seen that such joy rides are never pre-organised or pre-scheduled and any person makes up his mind to take such a ride, on the spur of a moment. As such, I am of the view that both the above ingredients are missing in the said activity so as to bring it under the definition of tour operators.
21. At this stage, I may draw support from the Tribunal’s decision in the case of Usha Breco Ltd. (supra). In that case, ropeway journey was being operated to visit the temples of Maa Mansa Devi and Maa Chandi Devi located on the hills around Haridwar. The dispute in that case was the road journey being provided by maxicabs between two boarding points for the ropeway. The Tribunal in para 3 observed that — “It is not in dispute that the ropeway rides attract no service tax.” Though the above observation made by the Tribunal can be said to be a obiter inasmuch as the dispute before the Hon’ble Bench was not as regards the ropeway ride. However, the above observation reflects upon one fact that the Revenue never raised demands on the ropeway rides. However, we find that in para 7 of the same judgment, it was observed as under:-
“7. The levy for service tax is on service provided ‘in relation to tour’. Therefore, the question to be asked is which is the tour in question. Undisputedly, the pilgrim’s progress is from Hardwar to the temples in question. Therefore, if there is a tour, it is the pilgrimage to the two temples. There cannot be a tour between two boarding points of a transport hub. The transit is merely incidental to the tour. The absurdity of the contrary view is clear upon applying it to everyday transit links between road and rail stations, domestic and international terminals of an airport etc. We do not see the statutory definition of ‘tour’ conferring an entirely artificial meaning on the commonly understood word, tour’. The words ‘irrespective of distance’ in the definition of tour only means there could be no argument that tour should be to a distant place. If distance is taken as a criterion, an intractable situation would arise, with by each person contending as to what should be the minimum distance. The law seeks only to remove such ambiguity. It does not give such an artificial meaning to the word ‘tour’ as to make any movement in a tourist bus a tour. To attract the levy, there must be a tour. In the present case, there is no doubt that there was a tour and that tour is the visit to the temples in question. That is performed by not a tourist vehicle but in a ropeway Gondola. The appellant is right in its contention that the road link between the two boarding points is only an incidental link and cannot displace the pilgrimage as the tour.”
22. It stands observed in said paragraph that the expression irrespective of the distance appearing in the definition of tour stands utilised for the purpose of clarifying that distance even short, would not be a criteria for being included in the tour operator services. However, the Tribunal observed that such an expression cannot be given an artificial meaning so as to make any movement from one place to another as covered under the said expression. Service Tax is on the services provided in relation to tour. Tour has specific connotation and the movement of the trolley from one fixed point to another fixed point and continuous running position cannot be held to be a tour even from a common man’s point of view. The same is more in the nature of part of entertainment industry and fun industry. Even in the case of Usha Breco Ltd. (supra) the pilgrimage performed by a ropeway gondola was not the subject matter of disputed issue of leviability of Service Tax and it was only the distance covered by the vehicle between two boarding points on which the demand was raised by the Revenue. In view of the above, I hold that the appellants activities do not fall under the category of tour operator services so as to levy the Service Tax.
Difference of Opinion
1. Whether the activity of the appellant is to be held as covered by the definition of tour operator as appearing in the definition contained in Section 65(115) of the Finance Act, 1994 as held by learned Member (Technical) or the same has to be held as falling outside the purview of the said definition as held by Member (Judicial) ?
2. Whether the appeal is required to be rejected as held by learned Member (Technical) or is required to be allowed as held by Member (Judicial) ?”
The Registry is directed to place the matter before the Hon’ble President for referring the matter to the Third Member for deciding the difference.
THIRD MEMBER ORDER
D.N. Panda, Judicial Member (As a Third Member) – While answering the reference, judgment of Hon’ble High Court of Uttarakhand in the case of CCE v. Usha Breco Ltd. [2013] 30 taxmann.com 358 the subject has come and that is in favour of the Assessee.
24. The appellant when made refund claim of Rs. 2,75,026/-contending that service tax was not payable for the operation of ropeway not being a tour operator, such claim was rejected by Revenue holding that appellant was a “tour operator” within the meaning of Section 65(115) of Finance Act, 1994 (hereinafter referred to as “the Act”) and liable to service tax under section 65(105) of the said Act. Such decision of Adjudicating Authority was upheld by the learned Commissioner (Appeals).
25. Being aggrieved by such act of the authorities below, when appellant came before Tribunal, difference of opinion arose between the members to decide as to whether the appellant was a “tour operator” and provided taxable service under section 65(105)(n) of the Act read with section 65(115) thereof. While learned Technical Member was of the opinion that ropeway belonging to Municipality taken on lease by the appellant to operate the same was a tour operator and liable to service tax, reverse was the view of learned Judicial Member holding that running of ropeway between two fixed points by the appellant does not amount to tour operator service.
26. In view of the difference above, following question arose for opinion reference:-
“1. Whether the activity of the appellant is to be held as covered by the definition of tour operator as appearing in the definition contained in Section 65(115) of the Finance Act, 1994 as held by learned Member (Technical) or the same has to be held as falling outside the purview of the said definition as held by Member (Judicial)?
2. Whether the appeal is required to be rejected as held by learned Member (Technical) or is required to be allowed as held by Member (Judicial)?”
27. Heard Revenue and also considered written submissions of the appellant as per request made by application dated 21.11.2012. Revenue supports the adjudication and first appellate order.
28. The essential fact of the case is that the appellant was a licensee of Nagar Palika Parisad, Masoori to operate ropeway for a period of 5 years from 1.4.2002 to 31.3.2005 against public tender issued and licence deed executed on 27.4.2000. Nagar Palika Parisad as licensor and owner of ropeway had allowed the appellant as a licencee to run the same under certain restrictive covenants in terms of clauses 7, 8, 9, 10 and 11 of the licence deed. In terms of clause 7 there was restriction of number of passengers to be allowed to travel in each cabin while clause 8 restricted the fees chargeable from each passenger. Clause 9 obliged the licencee to insure the ropeway and clause 10 required passengers to be insured by the appellant licensee. Clause 11 required meeting the claim of injury of passenger by the licensee.
29. With the aforesaid modality of licence deed, the appellant was allowed to operate the ropeway of Nagar Palika and such factual aspect called for testing by the Revenue Authorities with the provision of law under which the appellant was brought to tax. Section 65(105)(n) of the Act has taxing entry and meaning of the term “Tour Operator” is given by section 65(115) of the Act. Definition of Tour Operator” under section 65(115) states that any person engaged in the business, planning, scheduling, organizing or arranging tours by any mode of transport shall be “Tour Operator”. In terms of such definition to call a person as “Tour Operator” he should be either planner of tour or organizer or arranger thereof. So also, scheduling tour brings the service provider to the category of tour operator. Meaning of the term “tour” is given by section 65(113) of the Act. “Tour” means journey from one place to another irrespective of distance from such place. According to the deed of licence the appellant was to transport the tourists who choose to use the ropeway for their journey and come on their own volition without any planning, scheduling, organizing or arranging tour by the appellant licensee. Once tourists are not governed by any planning, scheduling, organising or arranging for their journey and not dependent on the licensee appellant for such planning, scheduling, organizing or arranging for their tours but only avails the facility of ropeway provided by appellant licensee during working hours from 6 A.M. to 11 P.M. on payment of fees prescribed by clause 8 of licence deed, they were not beneficiary of any planning, scheduling or arranging of tours since tour to be taxable has to follow its preceding activities enumerated by section 65(115) of the Act. Accordingly, the appellant had not acted as “tour operator” within the meaning of Section 65(115) of the Act for which the taxing entry 65(105)(n) thereof is not attracted. Consequently, there shall not be liability to tax following the ratio laid down by Hon’ble High Court of Uttarakhand in the case of Usha Breco Ltd. (supra).
30. In view of the above, question No. 1 in difference of opinion is answered negatively stating that the appellant was not a “tour operator” within the meaning of section 65(115) of the Finance Act, 1994. For the negative answer to question No. 1, appeal is to be allowed and question No. 2 is answered accordingly.
31. Registry is directed to place the matter before appropriate Bench for majority order.
