Make My Trip (India) Private Limited Vs Additional Director General (CESTAT Delhi)
Conclusion: When a person, otherwise was qualified as a tour operator but provide only booking of accommodation service, then such a tour operator would be entitled to claim abatement under the Abatement Notifications as assessee-Make My Trip acted as a facilitator between hotel and customer for short-term accommodation service.
Held: Assessee was an Indian online travel company that owns an online platform named “makemytrip.com, which allowed customers to book hotel rooms, flight bookings, train bookings, and bus tickets through its website application. It registered itself with the Service Tax Department for the provision of air travel agent services and tour operator services. In the “User Agreement entered between assessee and the customer, it had been mentioned that assessee always acted as a facilitator between the customer (user) and the hotels, and the liability of assessee was restricted to providing confirmed bookings through its online portal. During the relevant period, assessee discharged the service tax liability on the entire amount received from the customers (which was inclusive of taxes) under the category of “tour operator services” by availing the benefit of abatement of 90 per cent under notification dated 01.03.2006 (till 30.06.2012) and under notification dated 20.06.2012 (w.e.f. 01.07.2012). Department contended that assessee was providing short-term accommodation service and not tour operator service, and, therefore, the demand under Section 73 of the Finance Act had been confirmed under this head. It had, therefore, to be determined whether assessee was providing short-term accommodation or not. The show cause notice and the Statement of Demands were issued to assessee primarily containing the following allegations against assessee as assessee was engaged in the provision of service of short term hotel accommodation and thus liable to pay service tax under the category of short-term accommodation service taxable under section 65(105)(zzzzw) of the Finance Act (pre-1.7.2012) and under section 66B of the Finance Act (post-7.2012). It was held that a tour operator could provide for a host of services, including booking of accommodation, transportation and food facility. However, when a person, otherwise was qualified as a tour operator but provide only booking of accommodation service, then such a tour operator would be entitled to ninety percent. What was required was the qualification of a tour operator itself (qua the person), and not as the services rendered (qua transaction). It was, therefore, not possible to accept the contention of the department that each transaction relating to the service that was provided had to be examined. Thus, as assessee was a tour operator it would be entitled to claim abatement under the Abatement Notifications.
FULL TEXT OF THE CESTAT DELHI ORDER
Service Tax Appeal No. 51844 of 2021 has been filed by M/s Make My Trip (India) Private Limited1 to assail the order dated 29.07.2021 passed by the Additional Director General2 confirming a portion of the demand proposed in the show cause notice dated 17.10.2016 and the two Statement of Demands dated 22.10.2018 and 12.04.2019 issued under sections 73 and 73A of the Finance Act 19943 with interest and penalty.
2. Service Tax Appeal No. 51845 of 2021 and Service Tax Appeal No. 51846 of 2021 have been filed by the Vice President (Finance) and Groups CFO, and the Director of the appellant to assail that part of the order dated 29.07.2021 that imposes penalties upon
3. The appellant, which is an Indian online travel company, owns an online platform named „com‟ which allows the customers to book hotel rooms, flight bookings, train bookings and bus tickets through its website application. It registered itself with the Service Tax Department for provision of air travel agents services and tour operator services.
4. The online website/ mobile application of the appellant lists various hotels which provide hotel accommodation services. Rooms in these hotels can be booked by the customers on the website of the appellant. The booking process has been explained by the appellant in the following manner:
(a) The customers access the appellant‘s website/mobile application4 and fill the requisite details such as the travel dates, place of visit, star ranking of the required hotels;
(b) Basis this information, the search engine of the appellant shortlists the hotels in a particular area, along with the rates of the rooms which are available on the chosen dates. These details are shown on the website/mobile-app.
(c) The customer can select the hotel accommodation depending upon the ranking, facilities, reviews and other information given on the website/mobile-app;
(d) Once a hotel has been selected, a booking form is generated wherein the customer fills his/her personal details and confirms the booking. In some cases, the customer is required to pay on the website itself for its bookings;
(e) Upon receiving the payment, a service tax invoice is generated by the appellant;
(f) After confirmation of the booking of hotel, a „hotel confirmation voucher‟ is issued by the appellant to the customer carrying the booking details along with the charges;
(g) Simultaneously, a ‘hotelier‘s voucher‟ is issued by the appellant to the hotel whose room has been booked by the customer; and
(h) In the some cases, payment for the booking is made by the customer at the hotel directly. However, the rest of the aforesaid procedure remains the same.
5. The appellant has also stated that for each booking, three documents are issued by the appellant, which are as follows:
(i) Service Tax Invoice is issued by the appellant at the time of check-in on booking of hotel rooms done by the customer. The appellant discharges its service tax liability on the basis of this invoice;
(ii) Hotel Confirmation Voucher is issued to the customer when the booking is confirmed by the The voucher contains details like check-in and check-out dates, room type, number of guests, base amount, discount, hotel taxes, amount paid, other packages and cancellation policy; and
(iii) Hotelier‘s Voucher is issued to the hotel. The voucher contains details of the customer, check-in and check-out dates, room type, number of guests, base amount, discount, hotel taxes and other packages.
6. The appellant has also stated that it entered into three types of agreements with hotels:
(i) The appellant provides an interest-free deposit to the hotel, which is used by the appellant against each room booking made in the said hotel;
(ii) A specific number of hotel rooms are allocated to appellant for booking through website; and
(iii) Booking of hotel rooms on commission basis.
7. During the relevant period, the appellant discharged the service tax liability on the entire amount received from the customers (which is inclusive of taxes) under the category of „tour operator services‟ by availing the benefit of abatement of 90 percent under notification dated 01.03.2006 (till 30.06.2012) and under notification dated 20.06.2012 (w.e.f. 01.07.2012)5.
8. An investigation was carried out by the Directorate General of Central Excise Intelligence at the premises of the appellant and it was noticed that the appellant had wrongly claimed that it was rendering tour operator services to customers as it was providing short-term hotel accommodation services and was not discharging service tax liability under this category.
9. The show cause notice and the Statement of Demands were issued to the appellant primarily containing the following allegations against the appellant:
(i) The appellant is engaged in the provision of service of short term hotel accommodation and thus liable to pay service tax under the category of short-term accommodation service taxable under section 65(105)(zzzzw) of the Finance Act (pre-1.7.2012) and under section 66B of the Finance Act (post-7.2012);
(ii) The appellant is not a tour operator as it does not plan any tour for the standalone hotel room bookings and thus, not entitled to abatement of 90% under the Abatement Notifications;
(iii) The relationship between the hotel and the appellant is not a principal-agent relationship; and
(iv) The appellant has collected amount representing as service tax in excess of the service tax assessed and paid by it, but it has not paid the amount so collected to the credit of the Government. The appellant should have paid such amount to Government instead of passing the same to the Hotels. Accordingly, the appellant is liable to pay the said collected amount under section 73A of the Finance Act. Further, in case of hotels having tariff less than Rs 1000/- per day and hotels in Jammu and Kashmir, the appellant collected the amount as service tax but same was not required to be collected. Thus, the appellant is liable to pay the said amount.
10. The appellant filed a detailed reply to the show cause notices primarily contending that:
(i) The appellant is not providing short term accommodation services but in fact was a booking agent of the hotel;
(ii) The appellant, being a tour operator, was entitled to 90% abatement under the Abatement Notifications. The tour operator is qua the person and not qua the transaction;
(iii) Section 73A of the Finance Act was incorrectly invoked by the department as the ingredients of section 73A of the Finance Act are not fulfilled; and
(iv) The demand, both under sections 73 and 73A of the Finance Act, was not sustainable.
11. The Adjudicating Authority did not accept the contentions of the appellant and recorded the following findings in the impugned order:
(i) Services provided by the appellant to the customers are in the nature of short-term accommodation service as the appellant has booked the entire amount received from the customers as ‘sales‟ and the amount paid to the hotel as „purchases‟ in its books of account;
(ii) The appellant is not an intermediary since the hotels are not aware of the exact value of services. The appellant is not acting as an agent of the hotel and is not facilitating the provision of any service. The appellant has absolute control over charging of gross amount from the customers for hotel Thus, the price at which the hotel room is sold to the customer by the appellant is fixed and decided by appellant on its own and not as per the express authorization of the hotels;
(iii) The appellant is not entitled to avail the abatement of 90% under the Abatement Notifications as tour operator as it does not plan or conduct any tours in respect of its standalone hotel bookings and has failed to submit any defense against paragraph 4.8 of the show cause notice, which specifies three conditions to be fulfilled for service to qualify as ‘tour operator‟ service; and
(iv) The appellant has collected amount from the customers as representing service tax on hotel accommodation service and service tax assessment was done under tour operator service. Thus, the amount collected by the appellant is in excess of the service tax paid by it and thus, both the conditions stipulated under section 73A of the Finance Act have been satisfied.
12. To appreciate how the demands have been proposed under sections 73 and 73A of the Finance Act, it would be useful to reproduce the conclusions drawn in the show cause notice dated 17.10.2016. It is as follows:
“CONCLUSIONS
14. From the foregoing, it appears that-
(i) during the period May, 2011 to June, 2012, MMT have been providing taxable services of renting of hotel rooms accommodation as defined under Section 65(105) (zzzzw) of the Finance Act, 1994 and appears to have evaded payment of appropriate amount of Service Tax by fraudulently claiming Service Tax exemption under Notification No.01/2006-ST dated 03.2006, as amended, as tour operators in the taxable services category of tour operators services as defined under Section 65(105) (n) of the Finance Act, 1994;
(ii) during the period July, 2012 to September, 2015, the services provided by MMT are liable to Service Tax under Section 66B of the Finance Act, 1994 and they appear to have evaded payment of appropriate amount of Service Tax by fraudulently claiming Service Tax exemption under Notification No.26/2012-ST dated 20.06.2012, as amended, as tour operators;
(iii) MMT have collected amount, totaling 82,44,25,109/-, representing as Service Tax from their customers, in excess of the Service Tax assessed and paid by them, but has not paid the amount so collected to the credit of the Central Government;
(iv) MMT have collected amount, totaling 73,94,424/-, representing as Service Tax from their customers, in excess of the Service Tax assessed and paid by them, though the hotels in which the customers were lodged were having declared tariff below Rs.1,000/- per day per unit and the amount so collected by MMT has not been paid to the credit of the Central Government;
(v) MMT have collected an amount of Rs.1,55,89,142/- representing as Service Tax from the customers for providing taxable services in the State of Jammu & Kashmir (J&K) even though the same was not required to be collected in as much as the Finance Act, 1994 [Section 64(1)] is not applicable to the State of J&K, and the amount so collected has not been paid to the credit of the Central Government;
(vi) MMT’s claim that they are in an agency relationship with the hotels does not appear to be acceptable in view of discussions made in para 8 to 13 above.”
13. Clauses (i) and (ii) of the aforesaid paragraph 14 relate to the demand proposed under section 73 of the Finance Act and clauses (iii), (iv) and (v) relate to the demand proposed under section 73A of the Finance Act.
14. The following chart would demonstrate the demand confirmed under sections 73 and 73A of the Finance Act, and the demand dropped:
