2026-VIL-1058-CESTAT-MUM-ST
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SERVICE TAX CESTAT Cases

Service Tax - Service tax liability on tour operator services rendered in relation to tours within the State of Jammu & Kashmir - Whether a tour operator is liable to pay service tax under the Finance Act, 1994 on services provided in relation to tours where both the commencement and completion of the tour occur within the State of Jammu & Kashmir, to which Chapter V of the Finance Act, 1994 does not extend – HELDD - The Section 64(1) of the Finance Act, 1994 explicitly provides that Chapter V extends to the whole of India except the State of Jammu & Kashmir. Service tax is a destination-based consumption tax that must be levied at the place where services are consumed. When a tour commences and terminates within Jammu & Kashmir where the service receiver consumes the service while remaining within that territory, the service falls outside the taxable territory to which the Finance Act applies. The definition of taxable service under Section 65(105)(n) requires that the service be provided by a tour operator in relation to a tour, and such taxable service can only be levied under Section 66 within the geographical boundaries to which Chapter V of the Finance Act extends - The legislature deliberately excluded Jammu & Kashmir from the purview of service tax, and it is not permissible to extend the provisions of an Act made inapplicable by the legislature to a state through judicial interpretation, as this amounts to judicial enactment of legislation. The expansion of the definition of tour operator in 2004 to include planning, scheduling, organizing and arranging tours by any mode of transport was merely a widening of the tax base within the taxable territory and did not intend to bring services relating to tours in Jammu & Kashmir within the service tax net. Therefore, services provided in relation to journeys between places within Jammu & Kashmir are not covered under the service tax statute - The impugned order confirming service tax demand. The appeal filed by the tour operator is allowed and the appeal filed by the revenue is dismissed
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