The Chennai bench of the Customs Excise & service tax appellate tribunal(CESTAT) has held that service Tax is not leviable on consideration and booking of tickets for domestic travel.
M/s. Hi Tours Mamallapuram Private Limited, 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. 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 and 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.
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.
A Show Cause Notice 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.
After due process, the demands was confirmed, against which the appellant preferred an appeal before the Commissioner (Appeals).
A two member bench comprising Mr. P. Dinesha, Member (judicial) and Mr. M.Ajit Kumar,(Technical) observed 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.
Further held 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 the direction of the Commissioner (Appeals) cannot sustain.”
The CESTAT 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.
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