Dept Fails to Specify Clause in SCN: CESTAT Sets Aside Service Tax Demand on Tour Operator [Read Order]

The Kolkata Bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) held that service tax demand under Business Auxiliary Service cannot be sustained when the show cause notice does not clearly specify the clause and goes beyond its scope.

Blue Hills Travels (India) Limited is a tour operator and was registered under service tax. They were paying tax under Tour Operator Services and filing returns. The department issued a show cause notice saying they also provided Business Auxiliary Services for bus booking and goods booking during 2008-09 to 2012-13.

The adjudicating authority dropped the case, but Commissioner (Appeals) later confirmed demand of Rs. 18,14,889 with interest and penalty. The appellant then went to CESTAT.

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The appellant argued that they were already paying tax under Tour Operator Services. They said passengers are not their clients and there was no agreement showing they provided service on behalf of bus operators. They also argued that no proof of commission was shown by department. They said Commissioner (Appeals) went outside the show cause notice by using new legal provisions. They also argued the demand is time barred since they filed returns and nothing was hidden.

The department argued that the appellant was getting commission and so activity falls under Business Auxiliary Services.

The two-member bench comprising R. Muralidhar (Judicial Member) and Rajeev Tandon (Technical Member) observed that the appellant was registered and paying tax properly. The tribunal observed that Business Auxiliary Service has many clauses but department did not mention which one applies. The tribunal also observed that no evidence was given to show bus operators were clients.

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The tribunal observed that Commissioner (Appeals) went beyond the show cause notice and used provisions which were not even part of the notice. The tribunal explained that such action is not correct in law.

The tribunal also observed that the appellant was filing returns and department already had the data. There was no suppression. The tribunal pointed out that department did not even do proper scrutiny of returns. The tribunal set aside the demand and allowed the appeal. It also held that extended time demand is not valid. The appellant got relief as per law.

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