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2017 (9) TMI 98 - DELHI HIGH COURTServices provided by Indian tour operators to foreign tourists - place of provision of services - Vires of Rule 6A of the Service Tax Rules, 1994 - validity of Section 94 2 (f) of the FA - the present petition is concerned with the question of payment of service tax by the Indian tour operators in respect of the services provided by them to foreign tourists during the period between 1st July 2012 and 1st July 2017 - Held that: - Turning to Section 94 (2), it basically lists out the topics on which rules can be made. It talks of laying down the procedure for carrying out various tasks set out in the FA or to provide the form in which returns are to be filed, appeals preferred. Specific to the case on hand, Section 94 (2) (f) empowers central government to make rules for 'determining' when export of 'taxable services' can be said to take place. It does not empower the central government to determine whether there can be an export of non-taxable services viz., services provided outside the taxable territory. Secondly, it does not empower the central government to make rules levying or making amenable the provision of certain services to service tax. Section 94 (2) (hhh) also permits making rules regarding the 'date for determination of rate of service tax' and 'place of provision of taxable service'. It does not provide for making rules on determination of taxability of a service. 'Subjecting certain types of services to tax is an essential legislative function. In this case, since the FA envisages Chapter V applying only to taxable services, bringing non-taxable services within the ambit of service tax, is impermissible. Since tour operator services are intermediary services and under Rule 9 of the PPSR 2012 the place of provision of service is the location of the service provider, the package tours service provided by an Indian tour operator to a foreign tourist will, notwithstanding that some part of it is provided outside India, be treated as service provided in India. As a result no Indian tour operator can expect the service rendered by him to a foreign tourist to be considered as an 'export of service' under Rule 6A as he will never be able to meet the requirement of Rule 6A (1) (d) of the ST Rules. Thus under a combination of Rule 6A of the ST Rules and Rule 9 of the PPSR 2012 something which is non-taxable under the FA is sought to be brought to tax. While it is one thing to say that tour operator service provided in India is not in the negative list under Section 66 D of the FA and is, therefore, amenable to service tax, it is another to contend that notwithstanding that Chapter V of the FA applies only to taxable services by virtue of Section 64 (3) FA, a non-taxable service that is provided outside the taxable territory can also be included by Rule 6A of the ST Rules in determining what constitutes export of services. Thus not only Rule 6A but even Section 94 (2) (f) of the FA would also be unconstitutional if it were to be interpreted to permit determination of even export of non-taxable services not to talk of bringing to tax what is non-taxable under the FA. Section 6A (1) of the ST Rules, insofar as it applies to export of tour operator services, suffers from the vice of excessive delegation inasmuch as the central government has been permitted to determine what shall constitute export of services, both taxable and non-taxable. Such an essential legislative function could not have been delegated to the central government. Once the Parliament determines by law what is amendable and not amenable to service tax, the modalities for working out the procedure for levy and collection of such tax can be left to the Rules. However, the question of whether certain services should be amenable to tax cannot be left to be determined by rules made by the central government. The services provided by Indian tour operators to foreign tourists during the period 1st July 2012 to 1st July 2017, which has been paid for in convertible foreign exchange would not be amenable to service tax. Rule 6A (1) read with Section 6A (2) of the ST Rules, insofar as it seeks to describe export of tour operator services to include non-taxable services provided by tour operators, is ultra vires the FA and in particular Section 94(2) (f) of the FA and is, therefore, invalid. Section 94 (2) (f) or (hhh) of the FA does not empower the central government to decide taxability of the tour operator services provided outside the taxable territory. They only enable the central government to determine what constitutes export of service, the date for determination of the rate of service or the place of provision of taxable service - Section 66 C of the FA enables the central government only to make rules to determine the place of provision of taxable service but not nontaxable service. Petition allowed - decided in favor of petitioner.
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