2023 (10) TMI 1524 - AT - Service Tax

Levy of service tax - Tour Operator Services - activity of buying and selling tickets and collecting charges - HELD THAT - The issue stands covered in the appellant s own case by the decision in M/S. HI TOURS MAMALLAPURAM PRIVATE LIMITED VERSUS COMMISSIONER OF SERVICE TAX 2023 (9) TMI 78 - CESTAT CHENNAI where it was 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 hence to this extent the direction of the Commissioner (Appeals) cannot sustain. The demand cannot sustain. The impugned order is set aside - Appeal allowed.

Summary

1. ISSUES PRESENTED and CONSIDERED

The core legal question considered by the Tribunal was whether the amount collected by the appellant for booking Air and Train tickets is includable in the taxable value of Tour Operator Services for the purpose of Service Tax. Specifically, the Tribunal examined:

• Whether the activity of buying and selling Air/Train tickets constitutes a part of Tour Operator Services under the applicable Service Tax law.
• Whether the charges collected for ticket booking have a nexus with the tour packaging services rendered by the appellant.
• Whether the appellant is liable to pay Service Tax on the mark-up or margin earned from ticket booking activities.
• The applicability of prior decisions, including the appellant's own precedent decision dated 31.08.2023, on the issue of taxation of ticket booking charges.

2. ISSUE-WISE DETAILED ANALYSIS

Issue: Inclusion of Air/Train Ticket Booking Charges in Taxable Value of Tour Operator Services

Relevant legal framework and precedents:
The Service Tax regime applicable to Tour Operator Services defines the scope of taxable services, which generally include a gamut of activities related to tour packaging. The Tribunal referred to the appellant's own earlier decision (F.O. No. 40738/2023 dated 31.08.2023) which dealt with the issue of whether mere trading or booking of air tickets falls within the ambit of Tour Operator Services for Service Tax purposes.

Court's interpretation and reasoning:
The Tribunal carefully examined the nature of the appellant's ticket booking activities. It was noted that the appellant's role was limited to buying and selling Air/Train tickets, sometimes with a profit margin, without performing any additional tour packaging or related services. The appellant was not an agent or member of IATA, nor did it earn any commission from airlines. This indicated that the ticket booking was a standalone trading activity rather than an integral part of tour operator services.

The Tribunal emphasized that the definition of Tour Operator Services encompasses a range of activities related to organizing and packaging tours, but does not extend to mere trading in tickets. The absence of nexus between ticket booking charges and the tour packaging services was a key factor in the analysis.

Key evidence and findings:
- The appellant admitted to paying applicable Service Tax on other tour operator activities.
- The appellant was not an IATA member or agent.
- The appellant did not earn commissions from airlines.
- The ticket booking activity was limited to purchase and resale of tickets with or without profit margin.
- The prior decision of the Tribunal in the appellant's own case supported the non-taxability of ticket booking charges.

Application of law to facts:
Applying the legal framework to the facts, the Tribunal concluded that the ticket booking activity did not qualify as a taxable Tour Operator Service. The charges collected for booking tickets could not be included in the taxable value of Tour Operator Services. Therefore, the demand for Service Tax on such charges was not sustainable.

Treatment of competing arguments:
The Department contended that the ticket booking activity fell within the definition of Tour Operator Services and was thus taxable. The Tribunal, however, rejected this argument on the ground that the activity was purely a trading function without any connection to tour packaging. The appellant's reliance on the earlier decision was upheld, and the Department's demand was set aside.

Conclusions:
The Tribunal held that the demand for Service Tax on the amount collected for Air/Train ticket booking was not a taxable event under Tour Operator Services. Consequently, the impugned order confirming the demand, interest, and penalties was set aside to this extent.

3. SIGNIFICANT HOLDINGS

The Tribunal's crucial legal reasoning is preserved in the following excerpt from the earlier decision relied upon:

"It is the case of the appellant that the dispute pertains to the trading air tickets as bought from travel agents and sold to the customers, with or without profit, and same did not include any other activities other than mere selling of or trading in such air tickets. It is an admitted fact on record that insofar as the other activities are concerned, the appellant has admitted and paid applicable Service Tax. It is also an undisputed fact 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. Moreover, from the definition of tour operator service, we find that the same involves a gamut of activities and there is nothing to suggest that trading in air tickets per se invited Service Tax."

Core principles established:

• Mere trading or resale of Air/Train tickets without additional tour packaging activities does not constitute a taxable Tour Operator Service.
• Charges collected for ticket booking in such circumstances cannot be included in the taxable value for Service Tax under Tour Operator Services.
• Absence of nexus between ticket booking and tour packaging is determinative in excluding ticket booking charges from taxable value.
• Prior judicial discipline and precedents must be followed unless there is a material change in facts or law.

Final determinations on each issue:

• The appellant is not liable to pay Service Tax on the margin or mark-up earned from booking Air/Train tickets related to domestic travel.
• The impugned order confirming demand, interest, and penalties on this count is set aside.
• The appeal is allowed with consequential relief as per law.