All India Haj Umrah Tour Organizer Association Mumbai vs Union of India & Ors.

HELD: 1.1: The provisions of the Place of Provisions of Services Rules, 2012 and the relevant provisions of Integrated Goods and Services Tax Act, 2017 are to a great extent pari materia. As far as the location of service provider in this case (HGOs) is concerned, there is no dispute that all of them have to be registered under Rule 4 of the Service Tax Rules, 1994 and therefore, as per sub-clause (a) of clause (h) of Rule 2, the location of HGO will be the premises for which registration has been granted to HGO. Such premises are necessarily in India. Even assuming that any other sub-clauses of clause (h) are applicable, the location of the service provider, in this case, will be in India. As far as the location of service receiver under clause(i) of Rule

2 is concerned, in this case, the service receiver is the Haj pilgrim who is obviously not registered. Therefore, sub- clause (a) of clause (i) will have no application. There are four categories listed in sub-clause (b) of clause (i) of Rule 2. The first category is of business establishments. The second category is of services which are used at a place other than the business establishment. The third category is where services are used at more than one establishment. On the face of it, the cases of Haj pilgrims undertaking the Haj pilgrimage through HGOs will not be covered by these three categories. What is applicable to them is the fourth category which is the usual place of residence of the recipient of service. It is not the place where the service recipient receives service or is rendered service. It is the place of ordinary residence of the service recipient which, in this case, will be in taxable territory. As provided in Rule 3, the place of provision of service is the location of the recipient of service. In this case, the recipients of service from HGOs are Indian residents and accordingly, their place of residence in India will be the place of provision of service. Rule 8 provides that where the location of the provider of service as well as that of the recipient of service is in the taxable territory, the place of provision of service is the location of the recipient of service. Hence, in this case, the place of provision of service is the location of the service receiver in accordance with clause (i) of Rule 2 which will be in taxable territory. [Para 39][130-C-H; 131-A]

1.2 Rule 4 is applicable to performance based service which provides that the place of provision of two services set out in the said Rule shall be the location where services are actually performed. Clause (a) of Rule 4 is applicable to services provided in respect of goods which obviously will not apply in the present case. The petitioners are relying upon clause (b) of Rule 4. The title of Rule 4 suggests that it is applicable to performance based services. HGOs do not render performance based services looking to the nature of the services they render. Therefore, Clause (b) of Rule 4 will not apply to HGOs. What will apply is Rule 3 which will mean that the place of provision of the service shall be the location of the recipient of service in accordance with Rule 2(i)(b)(iv). Thus, service is rendered by HGOs to the Haj pilgrims within taxable territory. That is how the charging section will apply.[Para 40][131-A-D]

1.3 Religious ceremonies and religious functions are not covered by Rule 6. The words ‘similar events’ will have to be construed ejusdem generis. Hence, the Haj pilgrimage cannot be an event. Even if we assume that the service rendered by HGOs to Haj pilgrims is transportation service, by virtue of Rule

9 of the 2012 Rules, the place of provision of service will be the location of service provider. In view of sub-Section (10) of Section

12 of the IGST Act, the place of supply of service will be the place where the passenger embarks.[Paras 41 and 42][131-F-G]

1.4 As per Item (iv) of sub-clause (b) of Clause (i) of Rule 2 of the said Rules of 2012, the location of the service receiver will be the usual place of residence of the Haj pilgrim in India. Therefore, the service rendered by the HGOs to Haj Pilgrims is taxable for service tax as the service to Haj pilgrims is provided or agreed to be provided in taxable territory. The service is rendered by providing or agreeing to provide Haj pilgrimage tour package.[Para 44][131-G-H; 132-A]

1.5 The Exemption Notifications under the IGST and the GST Acts so far as the Haj pilgrimage is concerned, are pari materia with the Mega Exemption Notification. It is, therefore, necessary to advert to the Mega Exemption Notification. The Mega Exemption Notification contains a list of services which are exempted from service tax leviable under Section 66B. Ex facie, Clause 5A will have no application as it is applicable to services by specified organisations in respect of a religious pilgrimage facilitated by the Ministry of External affairs of the Government of India under bilateral arrangement. The specified organisations have been defined in paragraph 1(1)(a)(zfa) of the Mega Exemption Notification. Specified organisations, as stated therein, are only two categories of organisations. The first one is Kumaon Mandal Vikas Nigam Limited, a Government of Uttarakhand Undertaking and Haj Committee or State Committee under the said Act of 2002. The Haj Committee renders services in relation to the Haj pilgrimage which is facilitated by the Ministry of External Affairs of the Government of India under the bilateral arrangement with the Kingdom of Saudi Arabia.[Paras 46 and 47][132-E-F; 133-B-C]

1.6 Adverting to sub-clause (b) of Section 5, it is found that the exemption has been granted in respect of services by a person by way of conduct of any religious ceremony. Thus, it refers to a person who is naturally the service provider. The sub- Clause

(b) applies when the service provider renders service by way of conduct of any religious ceremony. The notification does not say that service provided to the service receiver to enable him to conduct religious ceremony, has been exempted. It only exempts service provided by way of conduct of any religious ceremony.[Para 51][136-D]

1.7 Clause 5A of the same Mega Exemption Notification grants exemption to the service rendered by Haj Committees in respect of a religious pilgrimage. Thus, the same Mega Exemption Notification makes a clear distinction between ‘religious ceremony’ and ‘religious pilgrimage’. As Haj Committees render services only in respect of Haj pilgrimage, the religious pilgrimage referred to in Clause 5A as regards the Haj Committee, is Haj pilgrimage. Thus, the Mega Exemption Notification exempts the two specified organisations that render services in respect of a religious pilgrimage. This exemption under Clause 5A is not applicable to HGOs as the HGOs are not the specified organizations. If the intention and object was to provide service tax exemption to services provided by HGOs in respect of religious pilgrimage, the notification would have specifically provided so. However, the exemption as regards religious pilgrimage has been confined only to the services rendered by the specified organisations in respect of a religious pilgrimage facilitated by the Ministry of External Affairs of the Government of India under a bilateral arrangement. An exemption has not been provided to any other service provider rendering service in respect of a religious pilgrimage. Whereas, sub-Clause

(b) of Clause 5 is applicable to services rendered by way of conduct of any religious “ceremony”. A clear distinction has been made between a service provided in respect of religious pilgrimage and a service rendered by way of conduct of any religious ceremony. The service rendered by HGOs to Haj pilgrims is to facilitate them to reach at the destination to perform rituals/religious ceremonies. No religious ceremony is performed or conducted by the HGOs. The religious ceremony is conducted by Haj pilgrims or by someone else in the Kingdom of Saudi Arabia. According to us, there is absolutely no ambiguity in subclause (b) of clause 5 and therefore, there is no occasion to apply the test laid down by this Court in the case of Mother Superior Adoration Convent case. [Para 52][136-E-H; 137-A-C]

1.8 The submission was that in Haj pilgrimage there are six entities involved which include concerned Ministry of the Kingdom of Saudi Arabia, the Government of India, Tawafa establishments, Molliums, approved HGOs and Haj pilgrims; that the word ‘person’ used in sub-clause (b) of clause 5 of the exemption notification will also include the plural of the term ‘person’; and that that a Haj pilgrim will fall in the category of ‘person’. This submission is completely fallacious. The word ‘person’ used in Clause 5 refers to a service provider and not to the receiver of service. Even assuming that some services are provided by the Kingdom of Saudi Arabia, the Government of India, Tawafa establishments or Maollims to Haj pilgrims from India, it may be noted here that they are not subjected to payment of service tax. The service tax is levied on HGOs being service providers. The real question is whether HGOs are rendering service by way of conduct of any religious ceremony. HGOs have no role to play in actual conduct of religious ceremonies which are a part of Haj pilgrimage. The service rendered by HGOs is by way of providing air bookings, arranging for the stay of Haj pilgrims in Saudi Arabia, arranging for food while they are in Saudi Arabia, arranging for foreign exchange and arranging registration with Tawafa establishment in the Kingdom of Saudi Arabia.[Para 53][137-D-G]

1.9 An attempt was made to bifurcate the services rendered by HGOs into two parts. The first part is of the service rendered regarding providing air booking and making available foreign exchange. A submission was made that service tax or GST will be payable on these two items and for the rest of the services rendered, service tax or GST will not be payable as the services rendered are outside the taxable territory. HGOs render service to Haj pilgrims in respect of the Haj pilgrimage by providing a single package which consists of several parts such as making air booking, providing foreign exchange and making arrangements for stay and catering in Saudi Arabia, etc. HGOs offer a comprehensive package of services relating to Haj pilgrimage. They receive charges from Haj pilgrims for the entire package. It is not the case of the HGOs that they charge separately for different services forming a part of the comprehensive package. Only a part of the package cannot be picked up for invoking exemption. A particular service rendered cannot be divided into parts. For the purposes of levy of service tax, the service rendered cannot be dissected like this. The service rendered as a whole by the HGOs to the Haj pilgrims will have to be taken into account. This is apart from the fact that no part of the package offered by HGOs involves a service by way of conduct of any religious ceremony. Therefore, sub-clause

(b) of clause 5 of the Mega Exemption Notification cannot be invoked by the HGOs. The exemption under sub-clause (b) of clause 5 is to the service provider. [Para 54][137-H; 138-A-E]

1.10 With effect from 1st July 2017, service tax became payable under the IGST Act. Even GST Act came into force from the same date. Under both the enactments, tax is payable on the supply of goods or services. Sub-Section (2) of Section 13 of IGST Act provides that the place of supply of services except services specified in Sub-Sections (3) to (13) shall be the location of the recipient of services. Under sub- Section (1) of Section 5 of the IGST Act, service tax is payable on services supplied inter-state. Under sub-Section (1) of Section 9 of the GST Act, service tax is leviable on services supplied intra-state. None of the sub-sections

(3) to (13) of Section 13 of the IGST Act is applicable in this case. Clause (14) of Section 2 of the IGST Act defines the location of the recipient of service. This provision is pari materia with the same definition under the 2012 Rules. As in case of 2012 Rules, there are four categories. The service received from HGOs in connection with the Haj pilgrimage falls in the fourth category which lays down that the location of the recipient of service will be the location of usual place of residence of the recipient. Similar are the provisions in GST Act except that the service tax is leviable on services supplied intra-State. Therefore, as far as the services rendered by HGOs are concerned, there is no material change brought about by the GST and the IGST Acts except for the fact that the service tax is chargeable under these two statutes and not under the Finance Act. Thus, the HGOs supply service to the service recipient having location in India. The service is rendered by providing a package for the Haj Pilgrimage to the service recipient who is located in the taxable territory. That is how the service provided by HGOs is taxable for service tax. [Para 55][138-E-H; 139-A-C]

1.11 The question is whether Haj Committees under the 2002 Act, can be treated as a separate class. Article 14 does not prohibit the classification of persons or class of persons provided it is not arbitrary. The classification has to be reasonable. The classification is permissible provided it is founded on an intelligible differentia which must distinguish the persons grouped together from those who are left out. Moreover, the classification must have a rational nexus to the objects sought to be achieved by it. While we examine this question in the context of the infringement of Article 14 of the Constitution of India, it must be remembered that only on the ground that both HGOs and the Haj Committee render service to the same class of persons, the classification made by treating the Haj Committee as a separate class, cannot be questioned. In a given case, different classes of service providers may be rendering the same service to the same class of service recipients. That, per se, does not amount to discrimination. The attack on the ground of discrimination will have to be considered in the context of taxable persons namely, the Haj Committee and HGOs. Under Section 3 of the said Act of 2002, the Haj Committee of India was constituted. Similarly, under Section 17, the State Haj Committees were constituted. Both the categories of Haj Committees are body corporate, having perpetual succession and a common seal with the power to acquire, hold and dispose of movable and immovable properties. Section 4 determines the composition of the Haj Committee of India and Section 18 determines the composition of State Haj Committees. Section 9 lays down the duties of the Haj Committee. [Para 57][139-E-H; 140-A-C]

1.12 Under Section 27 of the 2002 Act, it is the duty of the State Committees to implement the policies and directions of the Haj Committee and perform prescribed duties. The functions and duties assigned to the Haj Committee need to be considered in the context of the preamble of the 2002 Act. The object is to establish Committees for making arrangements for the Muslims for the pilgrimage of Haj. The HGOs are otherwise the tour operators carrying on business of arranging tours. They get themselves registered as HGOs. As can be noticed from Section 9, the functions of the Haj Committee are not confined only to making arrangements for enabling the pilgrims to undertake the Haj pilgrimage. Its first duty is to collect and disseminate the information useful to the pilgrims and to arrange orientation and training programmes for the pilgrims. It is the duty of the Haj Committee to give relief to pilgrims and visitors. It is its duty to generally look after the welfare of the pilgrims. The Haj Committee has an important duty to assist the pilgrims in distress. One of the duties is to finalize the Annual Haj Plan with the approval of the Central Government and to execute the same. The Haj Committee is under an obligation to publish proceedings of the Committee. Under Section 30, it is the duty of the Committee to create Central Haj Fund. Similarly, under Section 32, the State Committees are under an obligation to create State Haj Funds. The Central Government has the powerto reconstitute the Haj Committee and to remove the Chairperson, the ViceChairperson and the Members of the Committee. There is a similar power vesting in the State Government in respect of the State Committees. Thus, the Haj Committees are statutory bodies working under the control and supervision of the Government. The Haj Committees are the agencies and instrumentalities of the State. Apart from arranging visits of Haj pilgrims for the purposes of Haj pilgrimage, there are important statutory duties assigned to the Haj Committee which we have set out above. As per clause (b) of Section 30, money collected from pilgrims for the performance of the Haj pilgrimage becomes a part of the Central Haj Fund, which can be utilized only for the purposes specified under Section 31. The funds can be used only for the purposes of paying salary and allowances to the officers and employees of the Committee and for payment of charges and expenses incidental to the objects specified in Section 9. Other expenditure can be made only with the approval of the Central Government. Therefore, when the Haj Committee facilitates the Haj pilgrims by making arrangements for their visit to the Kingdom of Saudi Arabia for undertaking the Haj pilgrimage, there is a complete absence of profit motive. On the contrary, the money received by the Haj Committee from the Haj pilgrims goes to the statutory fund, which in turn, has to be used inter alia for the benefit of Haj pilgrims. Even the budget of the Haj Committee is required to be submitted to the Central Government. Thus, the Central Government has all pervasive control over the Haj Committee. The State Governments have the same control over the State Committee. On the other hand, there are no onerous duties attached to HGOs. They earn profit by rendering service to Haj pilgrims. Except for the stringent conditions for the registration, the Government has no control over HGOs.[Para 58][141-B-D; 142-A-C]

1.13 The Haj Committee is a statutory committee which is entrusted with various functions for the welfare of Haj pilgrims. Moreover, the profit motive is completely absent in the case of the Haj Committee. The money received by the Haj Committee from the pilgrims for rendering service goes to a statutory fund created under the 2002 Act which is to be used only for the purposes specified in the 2002 Act. That is the reason why the Haj Committee constitutes a class in itself when it comes to rendering service to Haj pilgrims. It is a separate class as distinguished from HGOs. There is an intelligible differentia for this classification. The object of exemption in paragraph 5A of the Mega Exemption Notification is to promote the activity of the specified organisations of rendering service for the religious pilgrimage. Both the organisations which are specified in the notification are statutory organisations over which the Government has an effective control. Moreover, the service rendered by the specified organisations to the devotees is not with the object of making profit. Therefore, there is a nexus between the classification made and the object sought to be achieved by granting exemptions.[Para 60][143-H; 144-A-D]

1.14 In the meeting of the Fitment Committee, there were deliberations on the representation made by the petitioners. The decision/recommendation of the Fitment Committee contains valid reasons for making a distinction between HGOs and Haj Committees. [Para 62][144-F-G]

1.15 In the matter of grant of exemptions in tax matters, latitude has to be given to the decision making. Ultimately, it is also a matter of policy. We have already held that there is a rational basis for classifying specified organisations as a class and keeping out the Private Tour Operators from exemption under Clause 5A. Judicial self-restraint is shown in this case.[Para 64][150-B]

1.16 The arguments based on discrimination have no substance at all, as HGOs and the Haj Committees do not stand on par and in fact, the Haj Committees constitute a separate class by themselves, which is based on a rational classification which has a nexus with the object sought to be achieved. Therefore, there is no merit in the challenge in the petitions. [Paras 65 and 65][150-C-D]

Union of India & Ors. v. Rafique Shiekh Bhikan and Anr. (2012) 6 SCC 265; Federation Haj PTOs of India v. Union of India (2019) 2 SCALE 460: [2019] 2 SCR 627; Government of Kerala & Anr. v. Mother Superior Adoration Convent (2021) 5 SCC 602; Cox & Kings India Ltd. v. Commissioner of Service Tax, New Delhi 2014 (35) S.T.R. 817; Rustom Cavasjee Cooper v. Union of India (1970) 1 SCC 248 : [1970] 3 SCR 530; In Re the Special Courts Bill 1978 (1979) 1 SCC 380 : [1979] 2 SCR 476; Kunnathat Thatehunni Moopil Nair, etc. v. State of Kerala &Anr. 1961 AIR 552 : [1961] 3 SCR 77; East India Tobacco Company, etc. v. State of Andhra Pradesh &Anr. 1962 AIR 1733 : [1963] 1 SCR 404; Vivian Joseph Ferriera & Anr. v. Municipal Corporation of Greater Bombay & Ors. 1972 (1) SCC

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3 SCR 356; Bharat Surfactants (Private) Ltd. &Anr. v. Union of India & Anr. (1989) 4 SCC 21: [1989] 3 SCR 367; P.M. Ashwathanarayana Setty & Ors. v. State of Karnataka &Ors. (1989) Suppl. 1 SCC 696 : [1988] 3 SCR Supl. 155; Sanghvi Jeevraj Ghewar Chand &Ors. v. Secretary, Madras Chillies Grains & Kirana Merchants Workers Union & Anr. AIR 1969 SC 530 : [1969] 1 SCR 1 366; Bangalore Water Supply & Sewerage Board v. Workmen of Bangalore Water Supply & Sewerage Board & Ors. 1994 (2) LLN 1239; Union of India &Ors. v. Bengal Shrachi Housing Development Ltd. and Anr. (2018) 1 SCC 311 : [2017] 14 SCR 347; R.C. Jall v. Union of India (1962) AIR 1281 : [1962] 3 Suppl. SCR 436; Commissioner of Customs (Import) Mumbai v. Dilip Kumar and Company and Ors. (2018)

9 SCC 1 : [2018] 7 SCR 1191; Commissioner of Customs (Preventive) Mumbai v. M. Ambalal and Company (2011) 2 SCC 74 : [2010] 15 SCR 937; Quinn v. Leathem, 1901 AC 495 (HL); State of Orissa v. Sudhansu Sekhar Misra AIR 1968 SC 647 : [1968] 2 SCR 154; R.K. Garg v. Union of India (1981) 4 SCC

675 : [1981] 1 SCR 947; Sun Export Corpn. v. Collector of Customs, (1997) 6 SCC 564 : [1997] 1 Suppl. SCR 434; All–India Federation of Tax Practitioners & Ors. v. Union of India & Ors. (2007) 7 SCC 527: [2007] 9 SCR 147; Atlas Tours and Travels Pvt. Ltd. v. Commissioner of Service Tax, Mumbai 2015-TIOL-306CESTAT-MUM; S. K. Dutta, Income Tax Officer v. Lawrence Singh Ingty (1968) AIR 658 : [1968] 2 SCR 165- referred to.

Morey v. Doud [351 US 457 : 1 L Ed 2d 1485 (1957)referred to.