Service Tax Not Chargeable On Tour Services For Carrying Out Hajj Pilgrimage In Saudi Arabia By Indian Pilgrims: CESTAT

The Delhi Bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) has held that service tax is not chargeable on tour services for carrying out the Hajj pilgrimage in Saudi Arabia by Indian Pilgrims.

The bench of Rachna Gupta (Judicial Member) and P.V. Subba Rao (Technical Member) has observed that the Ministry of External Affairs only allocates 30% of its Hajj pilgrimage quota to the tour operators. The services are exempt from tax liability.

The appellants/assessee are engaged in providing the services of tour operators and air ticket agents. They were also providing packaged tour operator services by way of conducting packaged tours for Hajj and Umrah pilgrims to Mecca-Madina in Saudi Arabia. Based on intelligence, it was observed that the appellants have not obtained the service tax registrations and have failed to declare their taxable receipts to the service tax Department.

The assessee contended that no service tax is applicable on inbound tours. The Hajj tour to Mecca is outside the taxable territory. As per the Rules of Place of Provision, there is no service tax liability. As per exemption notification No. 25/2012, Entry 5 B of the Mega Notification exempts the services provided by a person by way of conducting a religious ceremony; the payment of service charges is also exempt for such services. The Board Circular dated October 30, 2009 is also relied upon, under which the service tax is not changeable on the services provided in respect of tours undertaken for the Hajj Pilgrims. With respect to the period post-negative list, the amendments in the rules of the place of provision of service in the year 2012 have been impressed upon, submitting that the services were still not made taxable. The demand is alleged to have been wrongly confirmed.

The assessee contended that there was no reason for the imposition of a penalty. The extended period is also alleged to have been wrongly invoked for want of any mens rea with the appellant to evade tax.

The department contended that tour operator service is otherwise a taxable service in terms of Section 65 (105)(n) of the Finance Act, 1994, even after the negative list period. The service is not covered under the negative list of Section 66 D of the Finance Act of 1994. The service has to be considered a taxable service.

The issue raised was whether a tour operator is liable to pay service tax in respect of outbound tours for performing Hajj or Umrah.

The CESTAT held that the appellant's non-registration was due to its bona fide belief that the activity or service was not taxable. The question of the imposition of a penalty does not at all arise.

Case Title: M/s. Amber Travel Services Versus Commissioner, Central GST & Central Excise, Jaipur

Case No.: Service Tax Appeal No. 51443 Of 2018

Date: 10/07/2023

Counsel For Appellant: Rahul Lakhwani

Counsel For Respondent: S.K. Meena

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