Section 65 (105)(n) of Chapter V of Finance Act, 1994 (‘Act’ for short) defines the term ‘taxable service’ in relation to services provided by a tour operator in relation to a tour means any service provided or to be provided to any person, by a tour operator in relation to a tour.
Section 65 (113) of the Act defines the term ‘tour’ as a journey from one place to another irrespective of the distance between such places. Section 65 (114) of the Act defines the term ‘tourist vehicle’ which has assigned the meaning of Section 2(43) of the Motor Vehicles Act, 1988. Section 65 (115) of the Act defines the term ‘tourist operator’ as any person engaged in the business of planning, scheduling, organizing 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 or the rules made there under. The explanation to this section provides that for this purpose of this clause, the expression "tour" does not include a journey organized or arranged for use by an educational body, other than a commercial training or coaching centre, imparting skill or knowledge or lessons on any subject or field.
According to the Motor Vehicles Act, the tourist vehicle means a ‘contract carriage’ constructed, adopted, equipped and maintained in accordance with such specifications as may be prescribed in this behalf. Rule 128 provides that a tourist vehicle other than motor cab, taxicab, campers van house trailer, shall conform to the following specifications, namely:—
- The dimension shall conform to the dimensions specified in rule 93;
- Structure.—Structure of the tourist vehicle should be sturdy and strong structural frame work using suitable material of adequate sectional area and an aerodynamical shape. For exterior paneling, aluminium sheet or good quality panelling material should be used. As regards interior paneling it should cover the entire interior roof, sides, back and bulk head portions. The body should be made completely leak proof and dustproof. The vehicle should also be rattle proof. Sound deadening should also be done for all panelling including the floor;
- Passenger entrance and exit.—The passenger entrance-cum-exit door shall be located on the left side of the vehicle and minimum door width shall be 685 millimeters. The door handle should be capable of being handled from inside as well as from outside. The door may be operated pneumatically or hydraulically or electrically with suitable locking devices;
- Emergency exit.—The emergency exit provided on the tourist vehicle shall meet the following requirements, namely:—
- be clearly marked "EMERGENCY EXIT" in bold letters on the inside and the outside of the tourist vehicle;
- be so designed as to open from inside and the outside of the tourist vehicle;
- be equipped with a fastening device which can be quickly released but so designed as to offer protection against accidental release;
- be easily accessible to persons of normal height standing on the ground outside the vehicle;
- be easily accessible to the passengers;
- be such that no seat or other object placed in the vehicle shall restrict the passage to the emergency door;
- be located either at the back or on to the right hand side of the vehicle; and
- emergency exist may be provided in the form of a window with breakable glass. In such cases, a suitable device shall be provided at a convenient place to break open the glass in the event of an emergency.
- Driver entry and exit.—A separate door with suitable sliding window shall be provided for the driver near the driver seat;
- Windscreen.—The front windscreen shall be of clear view and distortion free, with safety glass and shall be of full width of the tourist vehicle. If made in two halves, the width of the centre vertical joint, inclusive of the rubber glazing fitment of the front windshield shall be such as to enhance the elegance of the tourist vehicle. Rear windscreen shall be of safety glass or laminated safety glass. It shall match with the windows provided on the vehicle. Sliding curtains shall be provided on the rear windscreen.
- Windows.—Windows of tourist vehicles should have a minimum space of 14.25 millimeters and shall be of safety or laminated safety glass. Windows shall be of double sliding type slider running smoothly in channels without rattle. All safety or laminated safety glasses used for windows should conform to standards laid down by the Bureau of Indian Standards. Windows shall be provided with sliding curtains;
- Ventilation.—adequate arrangements shall be provided for ventilation for the passenger compartment as well as the driver compartment. All ventilators and windows shall be such that when closed they will not permit ingress of rain water or dust in the passenger or driver compartment;
- Luggage.—
- Luggage holds shall be provided at the rear or at the sides, or both, of the tourist vehicle with sufficient space and size, and shall be rattle proof, dustproof and waterproof with safety arrangements;
- The light luggage racks, on strong brackets shall be provided inside the passenger compartment running along the sides of the tourist vehicle. Except where nylon netting is used, the under side of the rack shall have padded upholstery to protect the passengers from an accidental hit. The general design and fitment of the rack shall be so designed as to avoid sharp corners and edges;
- Seats and seating arrangements.—
- Seating layout shall be 5[two and two or one and two or one and one] on either side, all seats facing forward, with a clear gangway of at least 355 millimeters width at the centre. Each passenger seat shall have a minimum area of 447 millimetres x 457 millimetres and an arm rest on both sides and seat back of full height.
- The seat frames shall be sturdy, properly finished and so mounted as to transfer the weight directly to the structural members of frame-work. The seats shall be of reclining type and adjustable;
- The seats shall be so mounted as to provide at least 280 millimetres leg room from the front of the rear seat to the back of the front seat. A foot rest at suitable location and height shall be provided for every passenger.
- Painting and finishing.—The tourist vehicle shall be painted in a manner referred to in sub-rules (7) and (8) of rule 85-A in white color with a blue ribbon of five centimeters width at the centre of the exterior of the body;
- Lighting-
- The passenger compartment shall be adequately illuminated;
- Arrangement shall be provided to eliminate reflection of the light from the passenger compartment on the windscreen;
- In addition to the lights in passenger compartment, at least two night-lights with colored domes, shall be provided in the passenger compartment.
- Front and rear destination boxes, if provided, shall be illuminated;
- One independently operated light fitting shall be provided for illumination of the driver’s or attendant’s seat area;
- A light fitting shall be provided for illuminating the steps at the passenger entrance door;
- Each luggage hold shall have a light fitting for illumination of that hold;
- Wiring in the passenger compartment shall be with low tension cable conforming to IS: 2465 of size commensurate with the estimated current loading. The wires shall be carried in PVC sleevings or conduit or casing of adequate size. When any wire passes through a hold in a panel or sheet metallic components, a rubber grommet of adequate size shall be provided for protection of the insulation;
- Fittings and accessories.—A tourist vehicle shall be equipped with the following, namely:—
- Convex rear view mirrors one on each side, universally adjustable and of adequate
dimensions;
- First-aid box with glazed front, with necessary medicines for first-aid;
- Fire extinguisher, dry powder type located near the engine compartment;
- Insulation on interior or exterior of the engine bonnet for reducing the noise and heat
from the engine;
- Provision for locating vehicle tools securely;
- Heavy duty windscreen wiper system;
- Adjustable sunvisors of adequate size for the driver and for the attendant;
- Electrically operated wide indicators or blinkers, stop lights and parking lights;
- Dual head lamps;
- Suitable illumination for the registration number plate at the rear;
- Horn;
- Electric fans, of 8 inches* sweep adjustable, at least eight in number, suitably spaced in the passenger compartment and controlled by switches located near the seat;
- Electric bell or buzzer located near the seat of driver or attendant and operated by at least four push button controls placed at suitable location in the passenger compartment;
- Ash trays near passenger seats of a design convenient for cleaning them at intermediate stops of the tourist vehicle;
- Drinking water and ice-box;
- Rack for magazines and other reading material;
- Back pockets and numbers for each seat;
- Public address system with at least four speakers suitably located in the passenger compartment;
- Document frame, located near the seat of driver, for carrying vehicle documents, tax token, licence and permit;
- Mud flaps for front and rear wheels;
Provided that the provisions of clauses (2) and (7), sub-clause (iv) of clause (12), sub-clauses (ix), (xii) and (xiii) of clause (13), of this rule shall not apply to the vehicles of integral construction.
In this article the issue to be discussed is whether providing ordinary buses for transportation of factory employees is liable for service tax under the head ‘tour operator’ with reference to the following case law.
In ‘Commissioner of Central Excise, Bhopal V. Suresh Kumar Advani’ – 2014 (5) TMI 916 - CESTAT NEW DELHI the assessee during the disputed period i.e., April 2000 to August 2002 and September 2005 to November 2005 provided buses to M/s Nahar Spinning Mills Limited for the transportation of their employees. The Revenue took the view that the services provided by the assessee is ‘tour operator’ service taxable under Section 65 (105)(n) read with Section 65 (113), 65 (114) and 65(115) of the Finance Act, 1994. A show cause notice was issued to the assessee. The Adjudicating Authority confirmed the demand of service tax in two separate orders and also imposed penalty under Sections 77 and 78 of the Act.
The assessee, aggrieved against this order, filed an appeal before Commissioner (Appeals) who allowed the appeal by a common order. The Commissioner (Appeals) held that vehicles being used by the assessee for operating tours were not tourist vehicles and hence their activity is not table.
Against the order of Commissioner (Appeals), the Revenue filed appeal before the Tribunal. The Revenue contended that even during the period of dispute, a person operating tours in a contract carriage was covered by the definition of ‘tour operator’ and service in relation to operating the tours provided by the assessee would be taxable.
The assessee submitted the following arguments before the Tribunal:
- During the disputed period, the definition of ‘tour operator’ covered the person, who operates the tour in a tourist vehicle ;
- In terms of Section 65 (114), the meaning of this term is as given in Section 2(43) of the Motor Vehicles Act, 1988, the ‘tourist vehicle’ means a contract carriage constructed, adopted, equipped and maintained in accordance with such specifications as may be prescribed in this behalf;
- Rule 128 of the Central Motor Vehicles Rules, 1988 provides the specification as regards the dimensions, structure, door arrangement, ventilation, luggage, space, seating arrangement, painting and furnishing, lighting, fitting and accessories etc., for a tourist vehicles;
- Unless a vehicle confirmed to definition of ‘tourist vehicle’ as given in Section 2(43) of Motor Vehicles Act, 1988 read with Rule 128 of the Central Motor Vehicles Rules, 1988 the same cannot be called Tourist vehicle and that the person who operates tour in a vehicle not covered by the definition of tourist vehicle would not be covered by the definition of ‘tour operator’;
- The issue involved in this case stands decided in favor of the assessee by the High Courts.
The Tribunal analyzed the findings of Commissioner (Appeals). The Commissioner (Appeals) has given a clear finding that the buses being provided by the assessee to their clients were ordinary buses with carrying capacity of 52 passengers. The vehicles were neither registered as Tourist vehicle under Section 2(43) of Motor Vehicles Act nor fulfilled the conditions of Rule 128 of the Central Motor Vehicle Rules. The Revenue has not challenged this finding of Commissioner (Appeals). But the Revenue contended that both a contract carriage confirming to the specification prescribed in Rule 128 of the Central Motor Vehicle Rules as well as ordinary contract carriages are covered by the definition of ‘tourist vehicle’ as given in Section 65 (114) of the Act read with Section 2(43). Rule 128 is relevant only for grant of tourist permit to a vehicle going outside the state and such tourist permit are not required for the operators of contract carriage within the state.
In the appeal filed by the Revenue, the Tribunal found, that nowhere in the grounds of appeal, the findings of the Commissioner (Appeals) that the buses provided by the assessee did not conform to the specifications for tourist vehicles have been challenged. The Tribunal held that since during the period of dispute, a person operating tours in a contract carriage, not covered by the definition of ‘tourist vehicle’ was not covered and only the persons operating tours in a tourist vehicles was not covered by the definition of ‘tour operator. The assessee was operating tours in the vehicles, which were not the tourist vehicles as defined, would not be covered by the definition of ‘tour operator and therefore the Tribunal did not find any infirmity in the impugned order passed by the Commissioner (Appeals). The Tribunal dismissed the appeal filed by the Revenue.
