Jai Somnath Transport vs Commissioner Of Service Tax, Mumbai-Ii

Appeal No. ST/58/2010-Mum. (Arising out of Order-in-Original No. 41/BR-37/ST/Th-I/2009 dt. 11.11.2009 passed by the Commissioner of Central Excise, Thane-I )

Jai Somnath Transport Appellant Vs. Commissioner of Service Tax, Mumbai-II Respondent

Appeal No. ST/61/2010-Mum, (Arising out of Order-in-Original No. 43/BR-39/ST/Th-I/2009 dt. 13.11.2009 passed by the Commissioner of Central Excise, Thane-I )

D.C. Gupta & Sons Appellant Vs. Commissioner of Service Tax, Mumbai-II Respondent

Appeal No. ST/201/2010-Mum.

(Arising out of Order-in-Appeal No. 05/ST/2010 dt. 23.03.2010 passed by the Commissioner of Central Excise, Nashik)

Lawrence Travels Appellant Vs. Commissioner of Service Tax, Mumbai-II Respondent

Appeal No. ST/204/2010-Mum. (Arising out of Order-in-Appeal No. 04/ST/2010 dt. 23.03.2010 passed by the Commissioner of Central Excise, Nashik)

Moharir Travels Appellant Vs. Commissioner of Service Tax, Mumbai-II Respondent

Appeal No. ST/652/2011-Mum

(Arising out of Order-in-Original No. 45/BR-45/Th-I/2011 dt. 28.09.2011 passed by the Commissioner of Central Excise, Thane-I)

M/s. S.K. Travels Appellant Vs. Commissioner of Service Tax, Thane-I Respondent

Appeal No. ST/351/2011-Mum

(Arising out of Order-in-Appeal No. MI/AV/72/2011 dt. 21.02.2011 passed by the Commissioner of Central Excise, Mumbai-I)

M/s. General Travels Appellant Vs. Commissioner of Service Tax, Thane-I Respondent

AND

Appeal No. ST/205/2010-Mum. (Arising out of Order-in-Original No. 02/ST/SJS/2010 dt. 11.2.2010 passed by the Commissioner of Service Tax, Mumbai )

Commissioner of Service Tax, Mumbai-II Appellant Vs. Buthello & Sons Respondent

Appeal No. ST/221/2010-Mum. (Arising out of Order-in-Original No. 01/ST/SJS/2010 dt. 12.2.2010 passed by the Commissioner of Service Tax, Mumbai )

Commissioner of Service Tax, Mumbai-II Appellant Vs. Buthello & Travels Respondent

Appeal No. ST/304/2010-Mum. (Arising out of Order-in-Original No. 03/ST/SJS/2010 dt. 16.2.2010 passed by the Commissioner of Service Tax, Mumbai.)

Commissioner of Service Tax, Mumbai-II Appellant Vs. Ideal Travels Respondent

For approval and signature: Honble Mr. P.S.Pruthi, Member (Technical) Honble Mr. Ramesh Nair, Member (Judicial)

============================================================

1. Whether Press Reporters may be allowed to see : No the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982?

2. Whether it should be released under Rule 27 of the : No CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?

3. Whether Their Lordships wish to see the fair copy : Seen of the Order?

4. Whether Order is to be circulated to the Departmental : Yes authorities?

=============================================================

Appearance

Shri Prakash Shah, Advocate for Appellant/Respondent

Shri R.K. Das, DC,(A.R.) Shri V.K. Kaushik AC (A.R.) Shri D. Nagvenkar, Addl.Commr. (A.R.) Shri A.B. Kulgod, AC (A.R.) Shri S.L. Karolia AC (A.R) for respondent

CORAM:

Mr. P.S.Pruthi, Member (Technical) Mr. Ramesh Nair, Member (Judicial)

Date of hearing : 6/10/2015 Date of pronouncement : 28/10/2015

ORDER NO.

Per : P.S. Pruthi

The issue involved in all the appeals is common, therefore we are deciding them by a common order. In some cases the parties are in appeal against Orders confirming demands of service tax while in other cases the Revenue is in appeal against Orders under which the demands have been dropped.

2. The parties 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 basis of associate distance in kilometers, to employees of companies etc. Department contended that the services provided fall under Section 65 (115) as Tour Operator Service and chargeable to service tax. The periods covered are both prior to 10.9.2004 as well as post 10.9.2004.

3. Heard both sides, who relied on the definitions of Tour Operator as well as various judgments on the issue.

4. We have carefully considered the facts and submissions made by both sides. We find that prior to 10.9.2004, 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.

It is apparent that 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 Rules1989 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 carriage 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.

4.1 We find that in the case of M/s. Jai Somnath Transport, the 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. So is the case of S K Travels. We find no reason to question this authority. In the case of other appellants in the appeals, we find that 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 Lawrence Travels, Ideal Travels and Buthello Travels, the Commissioner has specifically recorded that there is nothing on record to show that the vehicles are tourist vehicles in terms of Rule 128.

4.2 The Ld. AR appearing on behalf of the Revenue stated that the definition of Tourist vehicle refers to a contract carriage and and contract carriage will fall in the ambit of service tax. 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. In the case of Commissioner of C. Ex., Rajkot Vs. Bharat Travels 2010 (20) STR 526 (Tri.-Ahmd.) this position was upheld by the Tribunal. The Tribunals decision was upheld by the Supreme Court in Civil Appeal No. 3040 of 2011 filed by the Commissioner (Commissioner Vs. Bharat Travels 2012 (27) STR J79 (S.C.)). Again, the Tribunal in the case of Commissioner of C.Ex., Indore Vs. Ramsons Travels & Tours 2009 (14) STR 372 (Tri.-Del.) while relying on the Honble Madras High Court judgement in the case of Secy. Federn. Of Bus-Operators Assn. of T.N. Vs. Union of India 2006 (2) S.T.R. 411 (Mad.) held that the vehicles in question which are covered under the definition in Section 2(43) of Motor Vehicles Act read with Rule 128 of Central Motor Vehicles Rules alone would be covered by definition of Tourist Vehicles and therefore covered under the Tour Operator service. In the case of Secy. Federn. Of Bus-Operators Assn. of T.N. the Honble High Court observed as follows:

 20 If we turn to the definition of the contract carriage, which is defined in Section 2(7) of the Motor Vehicles Act, it becomes clear that there is identical language used therein (with emphasized words). Therefore, it cannot be said that the said vehicle which is covered under Section 72(2)(xvii) can never become a tourist vehicle. We hasten to add, however, that before any such vehicle is treated as a tourist vehicle, it will have to conform to the conditions laid down for the tourist vehicle in Rule 128 of the Motor Vehicles Rules. That would by far be the only condition..

36 At this stage, all the learned Counsels pointed out that the petitioners spare buses may not be the tourist vehicles within the meaning of Section 2(43) of the Motor Vehicles Act and, therefore, they are not liable. Indeed, if the vehicles owned by the petitioners are not the tourist vehicles within the meanings of Section 2(43) of the Motor Vehicles Act read with Rule 128 of the rules framed thereunder then, such petitioner would not be required to be registered under the Finance Act. The learned Senior Counsel for the Department very fairly accepted this position. However, he pointed out that it would be for the petitioners to raise their objections before the concerned authorities under the Finance Act and their objections would be decided upon. Therefore, the petitioners are permitted to raise the objections before the concerned authorities issuing the notices and the authorities will decide as to whether the petitioners vehicles are the tourist vehicles as contemplated under Section 2(43) of the Motor Vehicles Act, which is sine qua non for the application of the Finance Act. Needless to mention that if they are not the tourist vehicles, the provisions of the Finance Act would not apply and more particularly the provisions of Section 65(51) and the other allied sections like Section 66(3), etc.

4.3 The Ld. AR tried to distinguish the above finding from the conclusion of the High Court judgment. We may therefore see the concluding para of the judgement. It reads as 85.?We have already found that the argument regarding the non-applicability of the provisions of the Finance Act to the stage carriage operators, contract carriage operators, cab/maxi cab operators, is absolutely incorrect. We have already indicated in the judgment earlier that all those petitions, which were argued only on the applicability of the Finance Act, would have to be dismissed. However, since later on during the course of arguments, the question of legislative competence was also raised, we did not dismiss the matters then at the conclusion since all these petitions were argued as a group matter. We now make it clear that all the writ petitions filed by the stage carriage operators, contract carriage operators, cab/ maxi cab operators and rent-a-cab scheme-operators would be liable to be dismissed and are accordingly dismissed subject to the rider which we have spoken of in paragraph 36. We find that the conclusions reached in the judgment are very clear. The rider in para 36 is that, to be a Tourist Vehicle the requirements of Rule 128 have to be satisfied. The same position has been upheld in the Tribunal judgment in the case of J.K. Travels Vs. Commission of Central Excise vide Order No. A/2293-2302/13/CSTB/C-I. 4.4 At this stage we do not find it necessary to refer to all the other judgments cited by the Ld counsel except the case of Commissioner of Central Excise Vs. M/s. Gandhi Travels 2007 (6) STR 430 (Tri.-Ahmd.) in which the same conclusion was arrived at. The appeal to the High Court was not admitted as the High Court did not any find any question of law arising in the matter- 2009(13) STR 597(Guj). However, in the Civil Appeal filed before it against the High Court Order, the Honble Supreme Court remanded the case to the High Court to address the substantial question of law- [2010(17)S.T.R. 513 (SC). We note that 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.

4.5 Ld AR interpreted the judgement in Secy. Federn. Of Bus-Operators Assn. of T.N. to mean that all contract carriages will be covered under the definition of tourist vehicles. This is clearly a fallacious reading of the judgement. We see on reading the whole judgement that the underlying view being expressed throughout is that for a vehicle to be called a Tourist Vehicle, it should be a Contract carriage constructed or adapted and equipped in accordance with the such specifications prescribed under Rule 128 of the Motor Vehicle Rules. It was held that However, it must be remembered that in the present case, we are not concerned with the two kind of permits. The question posed before us is whether a vehicle covered under Section 72(2)(xvii) of the Motor Vehicles Act can be viewed as a tourist vehicle. The question is not as to whether a permit under Section 88(8) would ipso facto become a permit covering a contract carriage. It has to be borne in mind that a tourist vehicle as defined under Section 2(43) of the Motor Vehicles Act which definition has been picked up as it is by the Finance Act, means a contract carriage constructed or adapted and equipped or maintained in accordance with such specifications as may be prescribed more particularly the specifications prescribed under Rule 128 of the Motor Vehicles Rules. Therefore, this ruling will not help the petitioners to suggest that a vehicle covered under Section 72(2)(xvii) merely for that reason or merely because it is having permit under Section 88(8) of the Motor Vehicles Act for its occasional use can never become a tourist vehicle. A plain reading of the provisions of the Motor Vehicles Act says that any such vehicle which answers the description of the tourist vehicle under Rule 128 and which would run under a contract would become a tourist vehicle and once it becomes a tourist vehicle so long as it is being used under any permit under the Motor Vehicles Act, by a person who is engaged in the business of operating the tours then, the requirement of the Finance Act would be complete. Therefore the contention of Ld AR is rejected.

4.6 Revenue has also tried to rely on the judgment in the case of Sri Pandyan Travels Vs. Commissioner of C.Ex. Chennai-II 2006 (3) STR 151 (Mad.) to their favour. However, on going through the said judgment we find that it only supports the views expressed in paras above. The judgment refers to the Secy. Federn. Of Bus Operators Association of T.N.(supra) as follows:

We have, therefore, no hesitation first to hold that the first and foremost condition for a person to be held as a tour operator within the meaning of Section 65(52) of the Finance Act is that he must be engaged in the business of operating tours in a tourist vehicle in terms of Section 2(43) of the Motor Vehicles Act and in no other type of vehicle and, therefore, necessarily such vehicle must conform to the conditions prescribed under Rule 128 of the Central Motor Vehicles Rules.

The views expressed above find confirmation from the fact that the definition of Tour Operator was changed with effect from 16-05-2008 to read as-

tour operator means any person engaged in the business of planning scheduling, organizing 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.

Thus the intention to include all contract carriages in the definition was given effect from this date only.

4.7 Revenue, it appears, is confusing the words Tourist permit and Tourist vehicle and reading the word permit to mean the same as Tourist permit. Here too the judgement in Secy. Federn. Of Bus Operators Association of T.N.(supra) clarifies the matter beyond doubt. It was held therein that  29. It, therefore, cannot be said that the permit contemplated under Section 65(52) of the Finance Act is a tourist permit alone contemplated under the Motor Vehicles Act or the rules framed thereunder. The argument is obviously based on the faulty logic that in Section 65(51) and (52) of the Finance Act the term tourist vehicle is used and the Motor Vehicles Act provides for the tourist permit under Section 88(9) read with Rules 82 to 85 or under 1993 Rules only for tourist vehicles and therefore, any tourist vehicle must have a tourist permit. The logic is obviously incorrect because even under the Motor Vehicles Act a tourist vehicle does not necessarily need a tourist permit. All that is contemplated under Section 2(43) of the Motor Vehicles Act while defining the tourist vehicle is that it should be a contract carriage and should have been constructed or adapted and equipped or maintained in accordance with the specifications prescribed. We have already pointed out that those specifications are provided in Rule 128 of the Motor Vehicles Rules in case of vehicles other than motor cabs. Therefore, even if the Motor Vehicles Act and the Rules framed thereunder contemplate the tourist permit, it is not necessary that every tourist vehicle must have a tourist permit. Again, it is to be seen that we would be bound by the language of Section 65(50) to (52) alone in interpreting those provisions. Merely because the Motor Vehicles Act provides for tourist permit, it would not mean that Section 65(52) of the Finance Act also contemplates only a tourist permit. We cannot do violence to the language of the provisions by holding that a  tourist vehicle contemplated under the Finance Act must be a vehicle having only tourist permit.

Some other decisions cited by the Ld AR are stay matters and not final decisions. Therefore they cannot be relied upon.

In view of the above, we unhesitatingly hold that pre 10.09.2004, the activity undertaken by the appellants is not leviable to tax under the Tour Operators Service

5. We may now consider the period post- 10.9.2004. The definition of Tour Operator read as under:

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.

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, and 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. In such cases the appeals fail as held in para 4 above.

5.1 In other cases we may examine whether the appellants are engaged in the business of planning, scheduling, organizing or arranging tours. 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 Operatorfor the period post 10-09-2004.

5.2 We see from the records that the Commissioner has given reasoning to state that the activity of the appellants post 10.9.2004 does not get covered under the first part of the definition of Tour Operator service in the case of Appeal Nos. ST/205,204,221/2010. The Commissioners has opined that while the existing levy on tour operators engaged in operating tours in tourist vehicles remained as such. In case of a package tour (which are planned, scheduled, organize or arranged by tour operators), the scope of the levy is being extended by removing the limitation regarding transportation by tourist vehicles only. Such tourist operators would be subjected to service tax irrespective of the mode of transport used during such tours. However, 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 can not be said that they were covered under the first part of the amended definition of tour operator also.

5.3 In appeal No. ST/304/2010 of Moharir Travels too, 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.

5.4 In the case of General Travels the same view was taken by the Commissioner Appeals Mumbai-1 that such trips cannot be held to be planned, scheduled, organized etc. We are not informed that Revenue has challenged this decision.

5.5 Therefore, in our considered view, the activity does not get covered under the Tour Operator Service post 10-09-2004.

5.6 In the case of General Travels the demand is confirmed on the ground that the tours were organized for picnics etc. Therefore this activity 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, we find there is reasonable cause to waive the penalties in this case in terms of Section 80 and we do so.

6. In view of the above the appeals of all parties except General Travels are allowed. Appeals of Revenue are dismissed.

The appeal of M/s General Travels is partly allowed in terms of para 5.6 above.

(Pronounced in court on 28/10/2015)

(Ramesh Nair) Member (Judicial)

(P.S.Pruthi) Member (Technical)

SM.

17 Appeal No. ST/58/2010-Mum. & Ors.