Heena Tours & Travels Vs Commissioner of CGST & Central Excise (CESTAT Mumbai)
Conclusion: Package tours commencing, operating and concluding entirely within the State of Jammu & Kashmir during the period October 2005 to September 2010 were outside the scope of levy under Chapter V of the Finance Act, 1994. Accordingly, the service tax demand confirmed for the normal period was set aside.
Held: Assessee was registered tour operator, organized and marketed package tours, including tours conducted exclusively within the State of Jammu & Kashmir (J&K). During departmental audit, it was noticed that for the period October 2005 to September 2010, assessee had not discharged service tax on receipts of Rs. 11.61 crore earned from J&K package tours. A show cause notice was issued demanding service tax of Rs. 1.28 crore with interest and penalties. Adjudicating authority confirmed the demand only for the normal period while dropping the extended period demand and penalties. Assessee contended that although package tours were planned and marketed from Mumbai, the actual tour commenced, was wholly performed and concluded within the State of Jammu & Kashmir, to which Chapter V of the Finance Act, 1994 did not extend during the relevant period. It was argued that service tax, being a destination-based consumption tax, could be levied only where the service was performed and consumed. Since the entire tour was operated within J&K, the services fell outside the territorial ambit of the Finance Act, 1994. Assessee further submitted that planning, scheduling and booking activities undertaken outside J&K were merely incidental and could not independently attract service tax. Revenue contended that the appellant was admittedly a ‘tour operator’ within the meaning of Section 65(115) of the Finance Act, 1994 and that the essential activities of planning, organizing and arranging the tours were carried out within the taxable territory. It was therefore argued that service tax was payable on the entire consideration and that the adjudicating authority ought to have confirmed the demand for the extended period and imposed penalties. Tribunal held that the taxable service of a tour operator necessarily had to be examined in conjunction with the actual “tour”, which means a journey from one place to another. Unless the service relates to a tour performed within the territorial ambit of Chapter V of the Finance Act, 1994, no service tax liability can arise. In the present case, although the package tours were marketed and bookings were accepted outside J&K, the actual journey commenced, was wholly undertaken and terminated within the State of Jammu & Kashmir, where Chapter V of the Finance Act, 1994 was inapplicable during the relevant period.Tribunal observed that planning, scheduling, organizing and arranging the package tour merely facilitated the tour and could not be divorced from the actual journey undertaken by the tourist. Since both the provision and consumption of the tour operator service occurred entirely within Jammu & Kashmir, the service fell outside the charging provisions contained in Sections 64 and 66 of the Finance Act, 1994. Tribunal further held that the 2004 amendment expanding the definition of “tour operator” by removing the restriction relating to tourist vehicles merely widened the modes of transportation covered by the levy and did not extend the territorial operation of the Finance Act to Jammu & Kashmir. Relying upon the settled principle that courts cannot judicially extend the territorial application of a statute where Parliament itself has not done so, the Tribunal held that package tours wholly conducted within Jammu & Kashmir could not be subjected to service tax. Tribunal distinguished the earlier coordinate Bench decision in Heena Tours & Travels & Heena Enterprises, observing that it had not considered whether the taxable service itself was performed and consumed outside the territorial operation of the Finance Act.
