The main legal point established in the judgment is that Rule 6A of the Service Tax Rules, 1994, which sought to describe export of tour operator services to include non-taxable services provided by tour operators, was found to be ultra vires the Finance Act 1994 and, therefore, invalid.

S. Muralidhar, J.

Introduction

1. This writ petition by the Indian Association of Tour Operators, seeks a declaration that Rule 6A of the Service Tax Rules, 1994 (‘ST Rules’), concerning ‘Export of services’ is ultra vires the Finance Act 1994 (‘FA’). The validity of Section 94 2 (f) of the FA is also challenged on the ground that it gives unguided and uncontrolled power to the central government to frame rules regarding ‘provisions for determining export of taxable services’.

2. The members of the Petitioner, who are Indian tour operators, are inter alia engaged in the business of arranging tours for foreign tourists visiting India as well as her neighbouring countries. They state that they enter into contracts with the foreign clients either directly or through foreign tour operators. Such contracts/bookings are generally made through phone calls or emails. The bookings are confirmed generally in writing by stating the cost and other terms and conditions. They make all arrangements for the foreign tourist including hotel accommodation, transport by all modes such as rail, tourist buses, monuments visits including entrance tickets, entertainment, food and restaurant bookings etc. Members of the Petitioner organize package tours which include a bouquet of services. It is stated that the foreign tourists/foreign tour operators make the entire payment for the package tour in convertible foreign exchange through bank transfer, or bank draft or credit card payment etc.

3. Sample copies of the invoices issued by the Indian tour operators to the foreign tourists for the period prior to 1st July 2012 and thereafter have been placed on record. Prior to insertion of Section 6A of the ST Rules with effect from 1st July 2012 tour operator services provided to foreign tourists was treated as ‘Export of services’ and exempted from the levy of service. The invoices raised after 1st July 2012 reveal that service tax @ 3.09% is charged on the cost of services provided by the Indian tour operators to foreign tourists.

4. At the outset, a caveat requires to be entered. With the introduction of the Goods and Service Tax regime with effect from 1st July 2017, the provisions of the earlier FA and the rules thereunder stand repealed. We are in the present petition concerned with the legal position as it existed prior to 1st July 2017. In other words, 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.

Position prior to 1st July 2012

5. Service tax was introduced for the first time by the FA with effect from 1st July 1994. The relevant provisions concerning service tax were set out in Chapter V of the FA. Section 64 (1) of the FA stated that Chapter V would apply to the whole of India except Jammu and Kashmir. Section 64 (3) provided that it would apply to ‘taxable services provided on or after the commencement of this Chapter”.

6. Section 65 (105) of the FA defined 'taxable service' to mean "any service provided or to be provided" to a whole range of persons as mentioned in clauses (a) to (zzzzw). Clause (n) of Section 65 (105) of the FA, which is relevant for the present petition, stated that the provision of service to any person "by a tour operator in relation to a tour" would be a taxable service. Section 66 of the FA provided for the 'charge of service tax." Again, relevant for the present petition is the fact that Section 66 provided inter alia that service tax at the rate of 12% of the value of the taxable service referred to in Section 65 (105) (n) of the FA shall be levied and "collected in such manner as may be prescribed."

7. Section 93 (1) of the FA empowered the central government to exempt generally, or subject to such conditions as may be specified, a taxable service of any specified description from the whole or part of the service tax leviable thereon. Sec