Case Law Details
Hi Tours Mamallapuram Private Limited Vs Commissioner of Service Tax (CESTAT Chennai)
Introduction: The case of “Hi Tours Mamallapuram Private Limited vs. Commissioner of Service Tax” heard by the Central Excise and Service Tax Appellate Tribunal (CESTAT) Chennai revolves around the liability of the assessee to pay Service Tax on the mark-up or margin earned for booking tickets for domestic travel. This article provides a comprehensive analysis of the case, including the key facts, arguments, CESTAT’s findings, and the ultimate conclusion.
Detailed Analysis:
1. Background of the Case: The appellant, Hi Tours Mamallapuram Private Limited, operates as a tour operator, providing various services to customers, including organizing tours. The issue at hand relates to the Service Tax liability on the mark-up or margin earned by the appellant for booking air tickets for domestic travel.
2. Key Arguments: The appellant had raised separate bills for air ticketing and other services in their tour packages. In the case of inbound tours within India, they had paid Service Tax on services such as accommodation and sightseeing but had excluded the air ticketing charges from the value of tour operator services, claiming it was not subject to Service Tax.
3. CESTAT Chennai’s Decision: The primary question before CESTAT Chennai was whether the mark-up or margin earned on domestic air ticket bookings was liable for Service Tax under the category of tour operator services. The definition of tour operator service involves activities related to planning, scheduling, organizing, or arranging tours by any mode of transport.
4. Conclusion: CESTAT Chennai examined the case and concluded that the demand for Service Tax on the consideration and booking of tickets for domestic travel was not a taxable event. The tribunal found that the appellant’s activities were limited to trading in air tickets, and there was no evidence to suggest that they engaged in the broader activities encompassed by the definition of tour operator service.
Consequently, CESTAT Chennai ruled in favor of the appellant, stating that they were not liable to pay Service Tax on the mark-up or margin earned for booking tickets related to domestic travels. The appeal was allowed with consequential benefits, if any, as per the law.
The ruling clarified that the mark-up or margin earned for booking domestic travel tickets was not subject to Service Tax, as the appellant’s activities did not fall within the definition of tour operator service.
FULL TEXT OF THE CESTAT CHENNAI ORDER
1. Brief facts, as could be gathered from the Show Cause Notice and the impugned order, are that the appellant is organizing tour to their customers under ‘tour operator’ service as defined under Section 65(115) of the Finance Act, 1994 which defines tour operator service as: “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 (59 of 1988) or the rules made thereunder.” The appellant is registered as tour operator and providing services to general customers and general companies and organizing tour package for both inbound and outbound tours.
1.2 It appears that in respect of tours wherever they had booked air tickets, the appellant had raised two separate bills, one for air ticketing and another for ‘other services’. In respect of the tours within India i.e., inbound tours, for services such as accommodation/sightseeing, etc., the appellant had paid Service Tax at applicable rates under Notification No. 01/2006-S.T. dated 01.03.2006, as amended. It appeared that they had not included the air ticketing charges and other expenses, namely conference expenses, in the value of tour operator services, which according to them was not amenable to Service Tax, in their S.T.-3 returns.
2.1 The appellant was paying Service Tax on 40% of the amount charged for transportation by air and other expenses and in respect of outbound tours, the appellant was raising separate invoices for their services rendered towards accommodation, local transportation, sightseeing trips, visa charges and air ticket charges booked by them. However, they had not paid the Service Tax on the services rendered by them as ‘tour operator’ in respect of outbound tours, which was shown as exempted service. (paragraph 6.6 of the Order-in-Original).
2.2 Show Cause Notice dated 11.04.2012 was issued to the appellant demanding Service Tax on the amount charged for the onward/return journey which was not included in the value of tour operator service towards inbound tour for the period October 2010 to March 2011, further demanding Service Tax on the value of outbound tour services rendered by them for the same period, along with appropriate rate of interest under Section 75 and penalty under Section 76 of the Finance Act, 1994.
3. After due process, it appears that vide Order-inOriginal No. 74/2013 dated 30.05.2013, the demands proposed in the Show Cause Notice came to be confirmed, against which it appears that the appellant preferred an appeal before the Commissioner (Appeals).
4.1 During the appellate proceedings, it appears that the appellant filed its written submission stating that insofar as domestic travel was concerned, they had paid the Service Tax on the margin earned by them on sale of air tickets. On merits, they appear to have contended that they were trading air tickets bought from travel agents who were authorised to sell tickets of airlines and such travel agents were the members of IATA; but the appellant was not a member of IATA and neither was it rendering services as agent of any airlines. Further, that the air tickets bought from agents were traded sometimes with profit and sometimes they were forced to sell at loss; trading in any case was not a taxable event and hence, no Service Tax could be demanded on the trading profit; that if at all they had earned, they had registered as tour operator and Service Tax, wherever applicable, on the gross receipts are being discharged by them, including the value of air ticket less applicable abatement, in terms of Notification No. 01/2006 (supra), but the subject demand pertains to independent trading activity i.e., cases where the tickets were merely traded without involving any other activities like planning, arranging the tour schedules, etc., which is an independent activity and therefore, the same was not exigible to Service Tax. In this regard, they had relied on the order of the CESTAT in the case of Commissioner of Central Excise, Jaipur v. Kalpana Travels Pvt. Ltd. [2009 (16) S. T. R. 444 (Tri. – Del.)].
4.2 The first appellate authority, having considered the arguments of the appellant as also having gone through the materials on record, has acknowledged that there was no dispute to the extent of the appellant’s liability on the margin earned on the sale of air tickets. He then considers the issue whether the margin earned on the cost of air/rail tickets booked for the clients was taxable under tour operator service with regard to domestic as well as outbound tours. After considering the definition of tour operator service, the first appellate authority vide impugned Order-in-Appeal No. 361/2013 (M-ST) dated 20.11.20 13 has allowed the appeal partly, thereby holding that the booking of tickets for outbound tours which was used outside India was exempt from the payment of Service Tax as the same amounted to export of service, has, however, partly confirmed the demand insofar as the booking of tickets in respect of domestic travel was concerned, but restricted the liability only to the extent of mark-up or the margin earned. It is against this part of the impugned order that the present appeal has been filed before this forum.
5. We have heard Shri A.S. Harihara Kumar, Ld. Chartered Accountant and Shri N. Satyanarayanan, Ld. Assistant Commissioner. We have carefully considered the orders of lower authorities.
6.1 The definition of tour operator service under Section 65(115) of the Finance Act, 1994, as amended with effect from 10.09.2004, reads as under: –
“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 (59 of 1988) or the rules made thereunder.
6.2 From the above, it emerges that any person who is engaged in the cumulative activities like planning, scheduling, organising or arranging tours by any mode of transport, is considered to be covered under tour operator service. Apparently, there is nothing in the definition to include a person whose activity is nothing other than mere trading in air tickets.
7. It is the case of the appellant that the dispute pertains to the trading air tickets as bought from travel agents and sold to the customers, with or without profit, and same did not include any other activities other than mere selling of or trading in such air tickets. It is an admitted fact on record that insofar as the other activities are concerned, the appellant has admitted and paid applicable Service Tax. It is also an undisputed fact that the appellant is not a member of or agent of IATA and that it is not the case of the Revenue that the appellant had earned any commission from IATA or any other airlines when it sold or traded in air tickets. Moreover, from the definition of tour operator service, we find that the same involves a gamut of activities and there is nothing to suggest that trading in air tickets per se invited Service Tax.
8. In view of the above, we hold that the demand of Service Tax on the consideration and for booking of tickets in respect of domestic travel is not a taxable event and hence, to this extent, the direction of the Commissioner (Appeals) cannot sustain. Consequently, we set aside this part of the impugned order, by holding that the appellant is not liable to pay Service Tax on the mark-up or margin earned for booking tickets with regard to domestic travels.
9. The appeal, therefore, is allowed with consequential benefits, if any, as per law.
(Order pronounced in the open court on 31.08.2023)
