Custom, Excise & Service Tax Tribunal
Yatra Tg Stays P Ltd vs Commissioner Of Service Tax-Vi Mumbai on 18 July, 2024
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL
MUMBAI
REGIONAL BENCH
Service Tax Appeal No. 85048 of 2017
(Arising out of Order-in-Original No. MUM-SVTAX-006-COM-26-16-17 dated
13.10.2016 passed by the Commissioner of Service Tax - VI, Mumbai.)
M/s. Yatra TG Stays P Ltd. ........Appellant
(Formerly known as M/s. DV Travels Guru Pvt. Ltd.)
808, 8th Floor, 'C' Wing,
Eureka Towers, Mind Space, Link Road,
Malad (W), Mumbai - 400 064
VERSUS
Commissioner of Service Tax-IV, Mumbai ........Respondent
1st Floor, Mahavir Jain Vidyalaya,
C.D. Burfiwala Marg, Juhu Lane,
Andheri (W), Mumbai - 400 058
APPERANCE:
Shri Arjun Raghavendra M, Advocate with
Shri Piyush Deshpande, Advocate for the Appellant
Dr. Badhe Piyush Barasu, Dy. Commissioner, Authorised Representative
for the Respondent
CORAM:
HON'BLE DR. SUVENDU KUMAR PATI, MEMBER (JUDICIAL)
HON'BLE MR. ANIL G. SHAKKARWAR, MEMBER (TECHNICAL)
FINAL ORDER NO. 85698/2024
Date of Hearing: 10.06.2024
Date of Decision: 18.07.2024
PER: DR. SUVENDU KUMAR PATI
Confirmation of demand of Service Tax of ₹23,76,22,610/- on
the gross amount received by the Appellant in facilitating booking of
hotel accommodation against commission for the period from April,
2006 to March, 2011 alongwith applicable interest and equal penalty
as well as additional penalty of ₹10,000/- by invocation of Section
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73, 75, 78 and 77 of the Finance Act, 1994 respectively in holding
Appellant as providing 'Tour Operator Service' and not 'travel agent
service' under which category it was paying Service Tax and filing
ST-3 Return, is assailed before this forum by the Assessee-Appellant.
2. Fact of the case, in a nutshell, is that Appellant had registered
itself for providing various services including Travel Agent,
Advertising Agency Services, Rent-a-Cab Operator Services, Business
Auxiliary Services etc. On receipt of credible information by the
DGCEI that Appellant was not appropriately discharging its Service
Tax liability, search was conducted in the address of Appellant at Link
Road, Mallad West, Mumbai on 14.01.2009, relevant records were
obtained, further investigations were carried out, officials of
Appellant company tendered their statements and it was ultimately
noticed that Appellant had discharged its Service Tax liability under
one Heading "Travel Agent" and not in respect of other services, for
which it had registered itself. It was also brought out during
investigation that Appellant was engaged in booking accommodation
for Customers through its website 'travelguru.com' in which every
detail of availability of hotels in cities, its tariff, amenities, etc. were
available enabling customers to choose the hotel on their own and
making reservation through online transactions and by virtue of
agreement with various hotels, Appellant being allowed to accept the
hotel booking, was also collecting payments from the customers and
remitting the same to respective hotels after deducting specified
amount (around 10% to 15% of the value) towards its commission
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against which it had discharged Service Tax liability, either promptly
or belatedly. It had also accepted offline bookings. Holding the
same service provided by the Appellant in making reservation of
hotel accommodation for customers as not travel agent service,
Respondent-Department classified the same to be 'Tour Operator
Service', in which Service Tax is leviable on the gross amount after
abatement (@90% permitted under Notification No. 01/2006-ST)
and issued a show-cause notice (SCN) dated 18.08.2011 for the
period noted above classifying the services provided by the Appellant
as 'tour operator only' and restricting the Appellant for payment of
Service Tax liability in respect of the said service 'alone' (para -14 of
the SCN) with a proposal for demand of the above referred amount
and its recovery with interest and penalties that got confirmed by the
Commissioner except imposition of penalty under Section 76 of the
Finance Act, 1994. Hence the appeal.
3. During course of hearing of the appeal learned Counsel for the
Appellant Mr. Arjun Raghavendra M, argued that three business
models are prevalent on hotel booking through websites. They are,
'resale model' where hotel rooms are booked by the service provider
for resale to the customers, in which no commission flows from the
hotel to the service provider namely the 'booking agent' whose
relationship with the customer reserving hotel rooms remain like
seller-buyer relationship. Second, service provider namely booking
agent, facilitates booking of hotel room through its website and
charges nothing from the customer since it earns a commission from
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the hotel for such facilitation wherein no service relationship exist
between booking agent and customer. Third, it is a combination of
both commission receivable from hotel against booking and service
fee receivable from the customer for helping them to get the hotel
booking.
3.1 He continued to explain that the nature of business of
Appellant falls under second category where there was no service
provider and service recipient relationship between the Appellant and
customers, who booked the hotel but the amount of room
accommodation that was collected by the Appellant from the
customer was passed on to the hotel after deduction of the
commission receivable from hotel by the Appellant against which
Service Tax was discharged.
3.2 On classification of service, he further argued that learned
Commissioner had arrived at an erroneous conclusion that Appellant
had been providing 'Tour Operator Service' to the customers and the
classification of service provided by it as 'travel agent' was not
correct for which the manner of discharging Service Tax liability was
unacceptable as it is based on a wrong premises without proper
interpretation of the provision of law vis. a. vis. definition of 'Tour
Operator Service' as available under Section 65(115) of the Finance
Act, 1994 wherein arrangement of accommodation was not a stand-
alone service as being made part of the business of planning,
scheduling, organising or arranging tours in a tourist vehicle or
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through any mode of transport and therefore, operating tours in
tourist vehicle is a condition precedent to providing accommodation,
which is not the situation in the present case. In drawing our
attention to the sample invoices enclosed in page 134 and 146 of the
appeal memo, he wanted to impress upon the fact that only
commission was retained by the Appellant against gross amount
collected for booking of hotel accommodation including TDS deducted
under Section 194 of the Income Tax Act.
3.3 He pointed out that CBEC Circular No. 65/14/2003-ST dated
05.11.2003 read with the judgment of Hon'ble Supreme Court
passed in the case of Union of India Vs. Inter-continental Consultants
and Technocrats Pvt. Ltd. reported in 2018 (10) GSTL 401 (SC) on
Section 67 clarifies that value of service will be the amount charged
for taxable service by the service provider and the said amount
becomes "value" of taxable service only when it has a nexus with the
service provided for which Rule, 6 has used the word value of taxable
service instead of amount and therefore, Hon'ble Supreme Court had
also held in the said case that any amount which is calculated not for
providing such taxable service can't be a part of the valuation.
3.4 His alternative suggestion is that if the payment of tax for
travel agent was unacceptable to the Department, for the reason
that nature of service as defined in the statute carry a different
meaning to that of travel agent, Appellant may be considered as
providing pure agency service under "Business Auxiliary Services",
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which definition authorises it also to collect amount on behalf of the
principal and remit the same to the principle, which portion is not
subjected to Service Tax at the hands of the agent. Important point
that he raised during hearing of this appeal is that it would have
been material to determine as to if for the travel agent or for the
hotel for providing room accommodation, the responsibility would lie
for collection of Service Tax against such hotel room accommodation,
had such a service as hotel room accommodation being taxable
during the period 2005 to 31.03.2011, for which Appellant was
subjected to show-cause cum-demand-notice as the said
accommodation in a hotel upto certain period was brought into the
purview of Service Tax statute w.e.f. 01.05.2011 upon introduction
of its definition under Section 65(105)(zzzzw) of the Finance Act,
1994 and therefore, when the entire nature of service was not
taxable, passing on the hotel room booking tariff to the hotel after
deducting applicable commissions would be of no material
consequence to the Respondent-Department.
3.5 Learned Counsel for the Appellant also led his argument on two
more vital issues - namely, double taxation and invocation of
extended period. Drawing our attention to para 21 of the Order-in-
Original (page 105 of the appeal memo) he submitted that while
acknowledging payment of Service Tax of ₹3,33,45,046/- by the
Appellant for the said period, learned Commissioner had confirmed
the entire amount proposed in the demand-cum SCN after holding
that no legal provision exist whereby set off of Service Tax could be
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made in respect of Service Tax receipt and Service Tax confirmed,
which is contrary to the very conception of taxation statute which no
law of the land would approve of and the very element of double
taxation even of a small fraction has made his order unsustainable.
3.5.1 Secondly, on the point of a demand raised for the extended
period, he restricts his argument to the fact that there were at least
13 communications made by the DGCEI as well as Respondent-
Department between 05.10.2006 and date of issue of show-cause
notice i.e. on 18.08.2011 and several documents were being
produced before them where-after, satisfactory note by way of reply
letter were also received from them and therefore, matter was well
within the knowledge of the Department for which suppression etc.
with intent to evade payment of tax cannot be made out against the
Appellant apart from the fact that issue was interpretating in nature.
He has drawn our attention to the table placed under para 11.2 of his
written submission filed on 25.04.2024 to point out that the normal
period which was then 12 months, maximum Service Tax demand
could be raised was ₹6 crores 41 thousands and 12 only, which was
also not leviable to Service Tax on the relevant time on hotel
accommodation, but the very fact that statement of the AVP
(Finance) was taken on 08.04.2011 i.e. two years after the search
was conducted on dated 13.01.2009 would go to say that undue
delay was caused to deprive the Appellant in getting speedy justice,
apart from the fact that Appellant was being subjected to another
adjudication proceeding for recovery of inadmissible credit for the
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period from October, 2005 to September, 2010 through another
SCN, as being pointed out in para 4 and 5 of the SCN and therefore,
demand for the extended period for an amount of ₹15,90,02,179/-
with equal penalty on the entire amount including normal period is
unsustainable in both law and facts. In toto he pleads for acceptance
of their appeal on the ground of erroneous classification, non-
leviability, double taxation and on limitation.
4. In response to such submission learned Authorised
Representative Dr. Badhe Piyush Barasu argued in support of the
reasoning and rationality of the order passed by the Commissioner
and had drawn our attention to the finding of the Commissioner
made at para 14 of the Order-in-Original where learned
Commissioner had clearly mentioned that Appellant was issuing
invoices to the customers for the gross amount including amount of
hotel room booking charges without indicating the actual hotel
charges in the bill, whereas travel agency supposed to show the tour
cost on commission separately in their invoices and this being facts
on record it is Appellant who was liable under the law to collect
Service Tax and pay the same to the Government Treasury, for
which no error could be noticeable in the order passed by the
Commissioner so as to invoke jurisdiction of this Tribunal.
4.1 He also pointed out that para 2.2 of the Order-in-Original, that
brings on record the detail of investigation carried out by the DGCEI,
bears testimony to the fact that Appellant had not filed ST-3 return
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from April, 2007 to October, 2008 but subsequently filed the same
which is manifest in ST-3 return copies available from page 236 to
256 with a noting that filed belatedly and therefore, the contention of
Appellant that suppression is not made out is not tenable, for which
interference by the Tribunal in the order passed by the Commissioner
is uncalled for.
5. We have perused the case record, written note and additional
written submissions received from learned Counsel for the Appellant
alongwith compilation of case laws. Primarily issue being one of
classification of the service, the same is taken up at the first instance
for the purpose of discussion and for rendering our finding on it.
6. Para 14 of the show-cause notice (SCN) dated 18.08.2011
reads:
"Para 14 The notice is restricted to the
Service Tax liability of M/s. DVTG 1 in respect of
service provided by them as "tour operator only".
(emphasis supplied)
It is admitted fact of the parties that Appellant had registered for
providing various services. For providing both offline and online
services for booking of hotels, it was receiving a separate
commission against such booking and was discharging its Service
Tax liability as a "travel agent" but the dispute of Appellant with the
Department is that it was collecting entire amount for the booking
from the customers for which it can't be considered as a travel agent
1
M/s. DV Travels Guru Pvt. Ltd.
ST/85048/2017
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since the services would fall, as per assertion of Respondent-
Department, in the category of "tour operator services". Claim of the
Appellant is that it was providing service to the hotels for facilitating
reservation of their rooms by its customers and was receiving
commission from the hotels, though it was collecting the gross
amount inclusive of the room accommodation charges of the hotels
only for the purpose of passing it on to the hotels as its collection
agent, for which if its classification as travel agent is not accepted, it
can be considered as "commission agent" providing "Business
Auxiliary Service" [defined under Section 65(19) of the Finance Act,
1994] to the hotel on whose behalf it, as a commission agent, is
empowered to collect payment of sale price of such goods or services
as per explanation appended to the same provision and therefore, in
no circumstances the services rendered by it should be treated as
"tour operator services".
7. We have carefully gone through the definition of "travel agent"
given under Section 65(15a) of the Finance Act, 1994 that is
concerned with service connected with booking of passage for travel,
which is admittedly not similar to the nature of service provided by
the Appellant though it was paying Service Tax under that category.
Therefore, there is a requirement to closely scrutinise the proposal
made in the show-cause cum demand of Service Tax made to the
Appellant for providing "tour operator service" as was existing during
the relevant time up to 16.05.2008. Section 65(115) of the Finance
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Act, 1994 dealing with defining "tour operator service" is reproduced
below:
"Section 65(115) "tour operator" means any
person engaged in the business of planning,
scheduling, organising 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 thereunder."
(Underlined to emphasise)
Thereafter, definitions of "tour operator service" had undergone a
slight change and w.e.f. 16.05.2008 the provision is as hereunder.
"Section 65(115) "tour operator" means any
person engaged in the business of planning,
scheduling, organising 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
covered by a permit granted under the Motor
Vehicles Act, 1988 (59 of 1988) or the rules made
thereunder."
(Also underlined to emphasise)
8. A Bare reading of the above definitions of "tour operator
service" would go to show that primary engagement or activity or
business of a person is that of planning, scheduling, organising or
arranging tours by any mode of transport covered by permit granted
under the Motor Vehicle Act. 1988 or the rules made there under and
in so doing i.e. while conducting tour arrangement, accommodation,
if made, can be included within the definition of "tour operator
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service" but a stand alone provision for arrangement of
accommodation in a hotel room can't alone put the service under the
category of "tour operator service". This fact has been vividly
narrated, analysed and discussed in the reply to the SCN furnished
by the Appellant but the same was not taken into consideration by
the Commissioner nor any finding as to non-acceptance of such
meaning and interpretation offered by the Appellant, was given in his
Order-in-Original. We feel it proper to reproduce two sub-
paragraphs of para 1 of the Appellant's reply to SCN. They run as
follows:
"It is evident from the above definitions that the
taxability is restricted to services provided by the
tour operator only. The tour operator has been
defined in the following two parts
1) any person engaged in the business of
planning, scheduling, organizing or arranging
tours
2) any person engaged in the business of
operating tours in tourist vehicle covered by a
permit.
The assessee does not have any tourist vehicle
covered by a permit and therefore is not engaged
in operating tours in a tourist vehicle. Thus in
order to be classified under the category of tour
operator the assesse should be engaged in the
business of planning, scheduling, organizing or
arranging tours.
---
---
Without prejudice, the allegation in the SCN to classify the services under Tour operator services appears to be based on the use of the phrase "(which may Include arrangements for accommodation, sightseeing or other similar services)" in the definition of tour operator. The SCN seems to have interpreted the said phrase on an Independent basis. It is submitted that the said ST/85048/2017 13 phrase has to be read in the context of the entire definition of tour operator. In order to fall under the definition of tour operator the person has to be necessarily carry out the activities of planning, scheduling, organizing and arranging the tours. If while carrying out such activities the tour operator also undertakes activity of arrangements for accommodation, sightseeing or other similar services then the same are also covered.
Therefore, the phrase used within the brackets is clarificatory in nature and cannot be said to enhance the scope of the term tour operator."
(Underlined to emphasise) We must place it on record that the above noted submissions carry the proper interpretation and give a proper meaning to the definition of "tour operator service", which is admittedly not being carried out by the Appellant as a service provider, since conducting tour by tourist vehicle having permit is a condition precedent to include arrangement for accommodation and not such arrangement of accommodation would alone put the service in the category of "tour operator service" and therefore, SCN justifying activity of the Appellant falling under the category of "tour operator service" only because the word "accommodation" is used in the definition, is a mere allegation and substantiation of the same by the Commissioner is erroneous as not in conformity to the statutory provisions. On this ground alone Appellant succeeds in its appeal.
9. Next comes leviability of Service Tax on the alleged service of providing hotel accommodation by the Appellant. Consistently Appellant is asserting that it is not providing any hotel accommodation service to the customers of hotel but facilitating ST/85048/2017 14 reservation of such accommodation in the hotel through its website, which it was doing at the behest of hotels who under contractual obligation accepted such service from the Appellant. Further, contention of the Appellant is that it was collecting money on behalf of the hotel from the customers and passing on the same to the hotel after deducting its commission against such booking which was receivable by the Appellant from the hotel under such contract/agreement terms. This being so and after vividly producing the findings of investigation in para 8 of his order that clearly indicates that payment was collected by Appellant from customers of hotel by issuing booking confirmation voucher and the same was being remitted to the respective hotels after deducting a specified amount of commission, it is not understood as to on what basis learned Commissioner had made his observation in para 14 that Appellant was issuing invoices to the customers for the gross amount without bifurcation of actual hotel charges and other charges. We, therefore, closely scrutinised sample booking confirmation copy annexed to the appeal memo at page 134 as Annexure 9 that looks like a booking confirmation issued to one customer Mr. Rohan Choudhary for booking made by him from 24.12.2013 to 29.12.2013 in Hotel Kailash Residency at Ahmedabad and also the copy of invoice issued by Hotel Taj Garden Restaurant to the Appellant on dated 09.12.2009 indicating booking of its room in respect of one customer Mr. Nilesh Kr. Chheda that reflects also the commission amount receivable by the Appellant with TDS, as annexed to the appeal memo at page 146 vide Annexure 12. We don't intent to take ST/85048/2017 15 into consideration the booking voucher of 2013 for Hotel Kailash Residency that was issued after the period of dispute but taking note of Annexure 12 and the description contained therein under the heading "Particulars" it can be said that Mr. Nilesh K. Chheda had paid ₹12,650/- vide bill/folio No. 44098, that was entered in the voucher issued by the Appellant (TA - Travel Agent) and after deducting its commission of ₹1650/- as well as TDS of ₹170/- under Section 194 of the IT Act, ₹11,170/- was accepted as room rent by hotel Taj Garden from the Appellant for allotment of room to Mr. Nilesh K. Chheda. Appellant's discharge of Service Tax on this ₹1650/- is not disputed by the Department but the confirmation of demand was made on the entire amount of ₹12,650.00/-, that was collected by the Appellant from the customer. Appellant asserts that this demand is illegal for the reason that on ₹1650/- that was received by it as commission, tax was already paid and demanding tax on it even constitute a small component would amount to double taxation, which no law of the land would approve of and on ₹11,170/- that was admittedly acknowledged by the Taj Hotel to have been realised for room accommodation in their hotel was not taxable during the relevant time as Section 65(105)(zzzzw) was brought into the Service Tax statute by way of amendment to Finance Act made w.e.f. 01.05.2011, making hotel room accommodation liable to Service Tax and the period of dispute ends on March 31, 2011, much before introduction of the said levy and therefore, whether the amount was collected by the Appellant and ST/85048/2017 16 gone to the hotel or directly paid to the hotel is of no consequence to the Revenue.
10. It is noticed that learned Commissioner had avoided to give his finding on this specific issue by taking the classification to "tour operator" in which, hotel room accommodation was stated to be a composite service activity despite the fact that in the reply to the SCN, specific averment regarding non-taxability of hotel room accommodation before dated 01.05.2011 was made in para 3 of the said reply. We are in incomplete agreement to the fact that hotel room accommodation has been brought to Service Tax net w.e.f. 01.05.2011 and the same is an independent levy that stands without any link to "tour operator service", unless it is a component of the same main service namely "tour operator service". The other contention of the Appellant concerning double taxation and none extension of cum tax benefit would require no consideration when the activities are not leviable to Service Tax. However it is required to be mentioned here that prohibition on double taxation has emerged from principle of "equity" law for which even no constitutional recognition is required though in the Indian scenario for various taxation statute like Income Tax Act under Section 90 & 91 and in Indirect Tax, Double taxation avoid Agreement (DTAA) among the nation including India is available to contend such punity actions.
ST/85048/2017 17 10.1 To delve more in detail into the mode of business model adopted by the Appellant, we have also perused the agreement copy annexed to the appeal memo at page no. 136 to 145 vide Annexure 11 as well as relied upon by the Appellant and referred in its written submission, that was executed with the Indian Hotels Co. Ltd. by the Appellant. We have noticed that Appellant was permitted to sale hotel rooms and resale hotel rooms (as principal) after buying it from participating hotels. So Appellant had also covered its activities under the category shown in the first business model but Appellant was authorised to make rooms available only at the applicable rates that is also made available to the public i.e. through website. However, there is nothing available in the agreement to suggest that Appellant was allowed to purchase the hotel room at a lesser price and sale the same at a higher price, which would have put it in the category of providing hotel room accommodation services, though not taxable at the relevant period of dispute. Moreover, Appellant having authorising the participating hotels to charge the value of rooms plus taxes, as applicable, from the guest/customers at the time of checkout clearly takes itself completely outside the purview of service defined under hotel accommodation apart from the fact that no consideration was flowing from the customers of the hotel to the Appellant towards such accommodation service.
11. Appellant has also challenged the invocation of extended period throughout the proceedings and the grounds raised by the Appellant are noted above as the submissions made by the learned Counsel for ST/85048/2017 18 the Appellant in the preceding paragraphs. Going by the submissions made in para 11.4 of its written submission filed on 25.04.2024, series of communications were stated to have been made by the DGCEI intelligence and the Respondent-Department with the Appellant in between 05.10.2006 and 21.04.2011 numbering about 13 correspondence and learned Counsel for the Appellant has drawn out attention to some of the letters including the one issued by the Respondent-Department on 26.11.2008 asking for financial accounts like Balance Sheet and Profit & Loss Account and the other one issued by the Respondent-Department on 27.03.2008, in which there is a reference of completion of scrutiny of ST-3 Returns of the Appellant that was found to be correct alongwith intimation concerning wrong availment of CENVAT Credit of few amount of ₹46,477/- (page 256 of the appeal paper book). This being the facts and evidence of record, none registration of Appellant's Company initially at the setting up stage and not filing of ST-3 Return in some quarters, which were remediable defects and subsequently remediated by the Appellant would evoke no penalty for suppression of facts etc. with intent to evade payment of tax. On the other hand the sluggish nature of investigation carried out by the Department in putting a gap of more than 2 years between examination of two witnesses that culminated in issue of SCN in June, 2011 would go to say that with full knowledge at hand the Respondent-Department has issued SCN at a belated stage and to cover its lacuna provision on extended period was brought in to service to complete the proceeding that took another 5 long years for ST/85048/2017 19 the adjudicating authority to decide. Further, it is a settled principle of law developed through several decisions of the Hon'ble Apex Court, one of which was delivered recently in the case of Continental Foundation Joint Venture Vs. Commissioner of Central Excise, Chandigarh as reported in [2023 (385) ELT 826 (SC)] / [2023 (8) CENTAX 210 (SC)] (passed in respect of Excise Act on similar provision) that when the facts are known to the parties, omission by one party to do what he might have done would not render it to suppression. In the instant case service tax itself is held to be not leviable. We are, therefore, of the firm opinion that extended period is also not invocable in this proceeding since taxability of the service was not in existence in the statute book under which classification was made while confirming the demand under "tour operator service". Hence the order.
THE ORDER
12. The appeal is allowed and the order passed by the Commissioner of Service Tax - VI, Mumbai vide Order-in-Original No. MUM-SVTAX-006-COM-26-16-17 dated 13.10.2016 is hereby set aside with consequential relief, if any.
(Order pronounced in the open court on 18.07.2024) (Dr. Suvendu Kumar Pati) Member (Judicial) (Anil G. Shakkarwar) Member (Technical) Prasad