In a major relief to Creative Travels Pvt Ltd, the Principal Bench of Customs, Excise and Service Tax Appellate Tribunal (CESTAT), New Delhi held that the amount expended for tour operation activities conducted outside India is not taxable while deciding on two cross appeals between the assessee and revenue.
In the impugned order passed by the Commissioner of Service Tax, New Delhi, the taxability of amounts expended for meeting operational costs of overseas offices and of the payments received for arranging and operating of ‘outbound tour’ services of the assessee was confirmed in favour of the revenue. The interest on the liabilities and penalties were excluded in the order. The revenue, aggrieved by the order excluding interests on tax and penalties and the assessee, Creative Travels Pvt Ltd, aggrieved by the taxability of the outward remittances, approached the Tribunal for adjudication on the same.
The claim by the revenue was put on hold for adjudication as the decision on the taxability might invalidate the issue raised. To decide on the taxability of the amount remitted by the assessee, the tribunal relied on the Section 65 (105) of the Finance Act and the test to determine if the services have been received in India.
Referring to the decisions of the Tribunal in Cox & Kings India Ltd vs. Commissioner of Service Tax, Delhi and of the honourable Supreme Court in Indian Association of Tours Operators vs. Union of India, the counsel on behalf the assessee, J K Mittal argued that the act of the assessee has already been held to be beyond the scope of taxability in India.
Observing that the working of the head office and the branch are inseparable and that the employees of the branch are employees of the organisation itself, the tribunal held that even though the services were not provided in India, the conduct of tours is the sole nature of the business of Creative Travels Pvt Ltd. The assessee claimed exemption from taxation by showing substantial performance of the services abroad.
The Tribunal comprising Justice Dilip Gupta and technical member C J Mathew held that the entirety of performance in India is the criterion for subjecting the consideration to tax. It was also observed that, the scheme of taxation of exports in terms of the enumeration of ‘taxable service’ is given in the Section 65(105) of Finance Act, 1994 and that the adjudicating authority has, instead, dilated Section 65(115) which was held to be erroneous. Deciding the issue of taxability in favour of the assessee, the appeal of the assessee was allowed, simultaneously rejecting the appeal of the revenue as the issue of liability of interest no longer remained.
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