M/S Rajasthan Tourism Development Corporation LTD. vs. Principal Commissioner Of Central Goods And Services Tax

Facts

The appellant, M/s Rajasthan Tourism Development Corporation Ltd. (RTDC), a state tourism corporation, is challenging a judgment of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT). RTDC operates the luxury train 'Palace on Wheels', attracting foreign tourists. As part of the tourist itinerary, RTDC entered into agreements with shop owners en route the bus journey. These shop owners agreed to pay RTDC facilitation charges per season in exchange for RTDC buses carrying tourists stopping at their establishments. The respondent-department opined that this constituted business auxiliary service, making it liable for service tax. The assessing officer levied service tax and invoked the extended period of limitation. The CESTAT upheld the service tax levy but struck down the invocation of the extended period of limitation. RTDC has appealed against the CESTAT's decision regarding the service tax levy.

Held

The Court held that the activity undertaken by RTDC amounted to business auxiliary service. The reasoning was based on the definition of business auxiliary service under Section 65(19) of the Finance Act, 1994, which includes promotion for marketing or sale of goods. The Court agreed with the CESTAT's assessment of the factual situation. The agreement stipulated that shop owners would pay facilitation fees on the condition that RTDC tourist buses would stop at their showrooms for shopping. This was considered a clear case of promotion of sale of goods belonging to the shop owners. Therefore, the levy of service tax was upheld. The Court found no question of law arising from the matter.

Key Issues

1. Whether the Government company formed with the object of developing tourism and infrastructure related to it and running 'Palace on Wheels' can be charged of rendering business auxiliary service on account of realizing felicitation fee from the empaneled showrooms/Emporia’s, which was required for avoiding fraud, cheating, and to protect the foreign and domestic tourist? (This question turns on the interpretation of 'business auxiliary service' under Section 65(19) of the Finance Act, 1994). Petitioner's contention: The arrangement was primarily to provide reliable shopping avenues for foreign tourists and to protect them, not to develop the business of the shop owners. The charges collected were token amounts for this purpose. Respondent's contention: The agreements between RTDC and the shop owners, and the definition of 'business auxiliary services', are wide enough to encompass the transaction in question.