ALL INDIA HAJ UMRAH TOUR ORGANIZER ASSOCIATION MUMBAI VS UNION OF INDIA & ORS

ALL INDIA HAJ UMRAH TOUR ORGANIZER ASSOCIATION MUMBAI VS UNION OF INDIA & ORS


Landmark Cases of India / सुप्रीम कोर्ट के ऐतिहासिक फैसले

1
REPORTABLE
 IN THE SUPREME COURT OF INDIA
CIVIL ORIGINAL JURISDICTION
WRIT PETITION (C) NO. 755 OF 2020
ALL INDIA HAJ UMRAH TOUR
ORGANIZER ASSOCIATION MUMBAI … PETITIONERS
v.
UNION OF INDIA & ORS. … RESPONDENTS
 WITH
WRIT PETITION (C) NO.781 OF 2020
WRIT PETITION (C) NO.907 OF 2020
WRIT PETITION (C) NO.772 OF 2020
WRIT PETITION (C) NO.882 OF 2020
WRIT PETITION (C) NO.809 OF 2020
WRIT PETITION (C) NO.940 OF 2020
WRIT PETITION (C) NO.855 OF 2020
WRIT PETITION (C) NO.977 OF 2020
WRIT PETITION (C) NO.856 OF 2020
WRIT PETITION (C) NO.860 OF 2020
WRIT PETITION (C) NO.896 OF 2020
WRIT PETITION (C) NO.989 OF 2020
WRIT PETITION (C) NO.1034 OF 2020
WRIT PETITION (C) NO.1014 OF 2020
WRIT PETITION (C) NO.1329 OF 2020
WRIT PETITION (C) NO.1431 OF 2020
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J U D G M E N T
ABHAY S. OKA, J.
1. The broad question involved in this group of writ petitions
is about the liability of Haj Group Organizers (HGOs) or Private
Tour Operators (PTOs) to pay service tax on the service rendered
by them to Haj pilgrims for the Haj pilgrimage.
FACTUAL ASPECTS
2. The Haj pilgrimage is undertaken by thousands of pilgrims
from India, either through the Haj Committee of India (for short,
‘the Haj Committee’) or HGOs. There is a bilateral treaty between
India and the Kingdom of Saudi Arabia. As per the said bilateral
arrangement, the Haj pilgrimage can be undertaken from India
only through the Haj Committee or HGOs.
3. The service tax regime was introduced in India in the year
1994 under the provisions of the Finance Act, 1994 (for short
‘the Finance Act’). Initially, very few services were made subject
to payment of service tax. However, by subsequent Finance Acts,
a large number of services were added to the list from time to
time. The total number of services subjected to service tax
exceeded 100. A negative list regime was introduced by Act No.23
of 2012 with effect from 1st July 2012. By Act No.23 of 2012,
3
Sections 66-B and 66-C were added. Section 66-B is the charging
Section which provided that there shall be a levy of service tax at
the rate of 12% on the value of all services other than those
specified in the negative list. By amending Section 66-B, the
percentage of service tax was enhanced to 14%. Section 66-C
confers power on the Central Government to frame rules for
determining the place where such services are provided or
deemed to have been provided or agreed to be provided or
deemed to have been agreed to be provided. Accordingly, the
Place of Provision of Services Rules, 2012 (for short, ‘the 2012
Rules’) were framed which came into force with effect from 1st
July 2012. On 20th June 2012, Mega Exemption Notification
no.25 of 2012–ST (for short, ‘the Mega Exemption Notification’)
was issued containing several exemptions. Paragraph 5(b) of the
Mega Exemption Notification provided for the exemption on
services by a person by way of conduct of any religious ceremony.
Paragraph 5A of the Mega Exemption Notification provided for
the exemption 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 Mega Exemption Notification defines specified organisations
4
as Kumaon Mandal Vikas Nigam Limited, a Government of
Uttarakhand Undertaking and the Committee or State
Committee as defined in Section 2 of the Haj Committee Act,
2002 (for short, ‘the 2002 Act’). With effect from 1st July 2017,
under the provisions of the Integrated Goods and Services Tax
Act, 2017 (for short, ‘the IGST Act’), the same service tax regime
was continued. Identical exemption notification dated 28th June
2017 (for short, ‘the IGST Exemption Notification’) was issued by
exercising the powers under the IGST Act. Identical Exemption
Notification was also issued on the same date (for short, ‘the GST
Exemption Notification’) under the Central Goods and Services
Tax Act, 2017 (for short, ‘the GST Act’).
4. Some of the HGOs and PTOs filed petitions in this Court to
challenge the levy of service tax on the service regarding the Haj
pilgrimage. By the order dated 11th December 2019 passed in
Writ Petition (C) No.977 of 2014, this Court directed the
petitioners to make a representation to the Government of India
for grant of exemption from service tax. Accordingly, a detailed
representation was made by some of the petitioners on 19th
December 2019. The GST Council by the order dated 14th March
2020, rejected the representation on the basis of the
5
recommendation of the Fitment Committee. The said decision
was communicated by the Government of India by a letter dated
5th May 2020.
5. Most of the writ petitions in the current batch of petitions
have been filed by various organisations representing
HGOs/PTOs. Only one petition, i.e. Writ Petition (C) No.1329 of
2020, has been filed by an individual petitioner who desires to
undertake the Haj pilgrimage. Most of the petitions challenge the
aforesaid orders rejecting representations. In some of the
petitions, a declaration has been claimed that the provisions of
the laws relating to service tax are not applicable to services
rendered by HGOs and PTOs to Hajis for performing the religious
activity of Haj/Umrah. In some of the petitions, there is a
challenge to the validity of Rules 8 and 14 of the 2012 Rules.
However, submissions have not been canvassed on the issue of
validity.
6. Counter Affidavits have been filed in Writ Petition (C)
Nos.755, 856 and 896 of 2020, which have been treated as
common affidavits in this group of petitions.
7. At this stage, we may note here that in this batch of
petitions, we are not dealing with the issue of extra-territorial
6
operation of the service tax regime, as the said issue is pending
for adjudication before another Bench.
SUBMISSIONS OF THE PETITIONER
8. Shri Arvind P. Datar, the learned senior counsel, has made
detailed submissions in support of the writ petitions. His first
submission is based on the Mega Exemption Notification. He
pointed out that paragraph 5(b) of the said notification grants
exemption to the services provided by persons by way of conduct
of any religious ceremony. Secondly, he pointed out that under
paragraph 5A, an exemption has been granted to the services
rendered by specified organisations in respect of a religious
pilgrimage, facilitated by the Ministry of External Affairs of the
Government of India under bilateral arrangement. He pointed
out that paragraphs 14 and 63 of the IGST Exemption
Notification use similar language. He also pointed out that two
pilgrimages covered under the existing bilateral arrangements
are Kailash Manasarovar Yatra and the Haj Pilgrimage. He also
pointed out the definitions of specified organisations in both the
notifications, which in relation to Haj pilgrimage means the
Committee or State Committees as defined under Section 2 of
the 2002 Act. He pointed out that service tax is an indirect tax,
7
the burden of which is ultimately borne by the Haj pilgrims. He
also pointed out that the said Act of 2002 defines a ‘pilgrim’. It
means a muslim proceeding to, or returning from, Haj. He also
pointed out the details of the journey undertaken by a Haj
pilgrim right from his arrival in Mecca and the duties of Haj
pilgrims. He submitted that under paragraph 5(b) of the
Exemption Notifications, service by persons by way of conduct of
any religious ceremony is exempted. He pointed out that there is
no dispute that the religious ceremony in paragraph 5(b) will
include the Haj ceremony. He submitted that a wrong
interpretation is sought to be given to paragraph 5(b) by the
Revenue by contending that it applies only to the service provider
who himself performs the religious ceremony and, therefore, the
exemption will not apply to HGOs/PTOs, as they themselves do
not perform Haj ceremony. He submitted that the burden of
service tax passes on to Haj pilgrims; therefore, the object of
granting exemption under the service tax or IGST is to reduce
the financial burden on the Haj pilgrims.
9. The learned senior counsel pointed out that earlier, the
object of helping poor Muslims to perform the Haj ceremony was
sought to be achieved by granting Haj subsidy. However, this
8
Court, in the case of Union of India & Ors. v. Rafique Shiekh
Bhikan and Anr.1 held that grant of such a subsidy is contrary
to the tenets of Islam as the tenets of Islam require the Haj
pilgrims to perform the Haj ceremony with their own funds after
discharging their debts and after making a provision for the
benefit of their families. The learned senior counsel also relied
upon a decision of this Court dated 4th February 2019 in Writ
Petition (C) No.4 of 2019 (Federation Haj PTOs of India v. Union
of India). He pointed out that the role played by the HGOs and
PTOs is unique, which is recognized in both the above decisions.
He pointed out that the said decisions note that HGOs/PTOs act
as tour operators for pilgrims, provide a complete package right
from the start of the journey from various places in India to Saudi
Arabia, their arrangements for stay in Saudi Arabia, the
performance of Haj Ceremony and safe return to India. He
pointed out that the majority of Haj pilgrims are taken care of by
the Haj Committee, and only a limited number of pilgrims can
undertake Haj pilgrimage through HGOs/PTOs. He pointed out
that the cost of the package provided by HGOs/PTOs consists of
airfare from India to Saudi Arabia. He also pointed out the
1 2012 (6) SCC 265
9
importance of the Haj and the details of the pilgrimage. He
pointed out that the pilgrimage performed after Ramzan is called
Haj, and the pilgrimage performed at different times is called
Umrah. Relying upon the decision of this Court in the case of
Rafique Shiekh Bhikan1, he pointed out that the five-day
program of the Haj ceremony is extremely a rigid procedure
which is to be scrupulously followed in a rigid manner and as
per a time-bound schedule. He pointed out that the pilgrim loses
Haj if the strict procedure and time schedule are not followed.
10. The learned senior counsel pointed out that many
persons/agencies are involved in the Haj religious ceremony,
such as the Ministry of Haj Affairs of the Kingdom of Saudi
Arabia, the Ministry of Minority Affairs of the Government of
India, Tawafa Establishments, Maollims, approved HGOs and
lastly Haj pilgrims themselves. He would, therefore, submit that
the service by a person by way of religious ceremony mentioned
in the Exemption Notification has to be properly interpreted to
mean that the word ‘person’ will also include persons
enumerated above, including Haj pilgrims. He pointed out that
all Haj pilgrims are required to register themselves with Tawafa
Establishments. He pointed out that HGOs arrange for the
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aeroplane booking and money exchanges on which service tax/
GST is duly paid. Though HGOs arrange for the stay of Haj
pilgrims in Saudi Arabia, as soon as they land in Saudi Arabia,
their entire movement is controlled by Tawafa Establishments.
Maollims, who are the agents of the Tawafa Establishments,
control their movement. He submitted that the Exemption
Notification would apply for the conduct of the Haj ceremony
except for air travel and foreign exchange services. His
submission is that the residual amount is a consideration for the
services for conduct of the Haj ceremony and therefore, the said
amount is exempted from payment of service tax / IGST. That is
how, under paragraph 5(b) of the Mega Exemption Notification
and corresponding paragraph 14A of the IGST Exemption
Notification, the HGOs are entitled to exemption on the aforesaid
residual amount.
11. He submitted that the beneficial object of the Exemption
Notification must be given full effect. He submitted that
beneficial exemptions differ from exemptions generally granted
in tax statutes. On this aspect, he relied upon this Court’s
11
decision in the case of Government of Kerala & Anr. v. Mother
Superior Adoration Convent2.
12. His next limb of argument is based on a violation of Article
14 of the Constitution of India. He pointed out that under
paragraph 5A of the Mega Exemption Notification and paragraph
63 of IGST Exemption Notification, the services rendered by
specified organisations such as Haj Committees for Haj
pilgrimage are wholly exempted. He submitted that the provision
of granting exemption from service tax/GST only to Haj
pilgrimage organised by the Haj Committees will not stand the
test of Article 14 of the Constitution of India. He pointed out that
usually, a bilateral agreement between the Government of India
and the Kingdom of Saudi Arabia is executed every year. A
specific quota of Haj pilgrims is assigned by the Kingdom of
Saudi Arabia under the bilateral agreement. Out of the said
quota, normally 70% is allotted to Haj Committee, and 30% is
allotted to approved HGOs. The selection through Haj Committee
is done through a lottery system. He pointed out that there is no
difference between the service provided by the Haj Committees
and the service provided by HGOs to Haj pilgrims. He pointed
2 2021 (5) SCC 602
12
out that the exemption granted under paragraph 5A is not
applied to airfare and foreign exchange conversion services. He
submitted that when the Haj ceremony is identical, the act of
granting exemption to those Haj pilgrims who perform Haj
ceremony through the Haj Committee but denying the exemption
to Haj pilgrims who perform Haj ceremony through HGOs, is
discriminatory.
13. The learned senior counsel also pointed out that both the
categories of Haj pilgrims, on reaching the Kingdom of Saudi
Arabia, are monitored by Tawafa Establishments. He submitted
that the Revenue cannot rely upon Section 9 of the 2002 Act for
supporting the illegal classification made as aforesaid, as the
obligation cast upon the Haj Committees by certain clauses of
Section 9 are also obligations of recognised HGOs. He submitted
that no distinction could be made between the Haj Committee
and HGOs on the ground that the Haj Committee is an agency
and instrumentality of the State. The reason is that the
Government retains some control of HGOs.
14. He submitted that the provisions of the 2012 Rules are not
in conformity with the statutory provisions. He invited our
attention to Rules 2 and 3 of the 2012 Rules. He submitted that
13
for the Haj pilgrimage, the location of the service recipient will
always be the Kingdom of Saudi Arabia, as the physical presence
of the pilgrim is required for the conduct of the religious
ceremony. He submitted that the emphasis is on the service
provider's location and the service recipient's location. He
submitted that the location of the service recipient will have to
be the place where the service is rendered. He submitted that the
Revenue is erroneously trying to equate the residence of both the
service provider and the service recipient as their respective
locations in India. He also invited our attention to Rule 8 of the
2012 Rules. He submitted that the location of the service
recipient in case of Haj pilgrimage is and will always be the
Kingdom of Saudi Arabia as per Rule 2 of the 2012 Rules. The
learned senior counsel relied on this Court’s decision in the case
of All–India Federation of Tax Practitioners & Ors. v. Union
of India & Ors3. By relying upon the said decision, he submitted
that service tax is not a charge on the business and, therefore, it
is leviable only on services provided within the country.
15. He relied upon a decision of CESTAT in the case of Cox &
Kings India Ltd. v. Commissioner of Service Tax, New
3 2007 (7) SCC 527
14
Delhi4. He submitted that CESTAT has held that the outbound
tours abroad are not liable to levy of service tax. He pointed out
that the same view is taken by CESTAT in the case of Atlas
Tours and Travels Pvt. Ltd. v. Commissioner of Service Tax,
Mumbai 5 . He pointed out that this Court upheld the said
decision.
16. The learned senior counsel submitted that even if it is
assumed that Haj is not a religious ceremony but is an event,
Rule 6 of the 2012 Rules will apply, which deals with the place
of provision of services relating to events. He urged that if the
location of the service recipient is outside the taxable territory,
service tax cannot be levied. He also invited our attention to
provisions of the GST Act and IGST Act, particularly Sections 12
and 13 of the IGST Act. He urged that the said provisions of the
IGST Act are pari materia with the 2012 Rules. Relying upon
Article 286(1)(b) of the Constitution of India, he submitted that
the said provision prohibits the State from imposing GST on the
import of goods and services outside the territory of India;
therefore, the IGST Act/GST Act will not apply to Haj pilgrimage.
4 2014 (35) S.T.R. 817
5 2015-TIOL-306-CESTAT-MUM
15
He would, therefore, submit that the decision made on the
representation of some of the HGOs is erroneous.
17. Shri Gopal Sankarnarayanan, the learned senior counsel
appearing for some of the petitioners, pointed out that the Haj
pilgrimage undertaken by thousands of the Haj pilgrims either
through Haj Committees or through HGOs, is identical, and
there is no difference between them. The reason is that the 2002
Act defines ‘pilgrim’ under Section 2(f) as a Muslim proceeding
to, or returning from, Haj. He submitted that no Indian pilgrim
can undertake Haj pilgrimage without following the mandate set
out under the bilateral arrangement between the two countries.
Therefore, such pilgrimage will be only through either the Haj
Committee or HGOs. He submitted that the Revenue has
accepted that the Haj Committee, as well as HGOs, render the
same services to the Haj pilgrims. He relied upon a chart
appended to the written submissions, which shows that the
services offered along with the prices charged by the Haj
Committee and HGOs are virtually the same. The difference in
the prices is because the Haj Committee offers accommodation
without the facility of catering at a place far away from Kabah,
16
whereas, HGOs offer accommodation with catering for five to ten
days at a location near Kabah.
18. In support of his submissions based on the violation of
Article 14 of the Constitution of India, he urged that the Haj
Committee cannot constitute a class by itself only because it is
recognised as a specified organisation under various provisions
and Exemption Notifications. He submitted that HGOs are
identically placed as Haj Committees in all respects. The learned
senior counsel relied upon a decision of this Court in the case of
S. K. Dutta, Income Tax Officer v. Lawrence Singh Ingty6.
He pointed out that this Court dealt with a case where certain
exemptions under the Income Tax Act, 1922 were denied to
government servants belonging to Scheduled Tribe. He
submitted that this Court rejected the contention of the
government that the distinction sought to be made between the
government servants belonging to Scheduled Tribes and others
belonging to the Scheduled Tribes is not imaginary and has been
made on rational basis. He pointed out that this Court held that
when tax law operates unequally and which cannot be justified
6 1968 (2) SCR 165
17
on the basis of any reasonable classification, the law would
violate Article 14 of the Constitution.
19. He submitted that the Revenue cannot make such
discrimination on the pretext that HGOs operate with a profit
motive. He submitted that the said contention has already been
negatived by this Court in paragraph 11 and 12 in the case of
Rafique Sheikh Bhikan1.
20. The learned senior counsel, further, submitted that only
those who are not selected in the lottery drawn by the Haj
Committee, have to go to HGOs. Therefore, the act of imposing
service tax on those who are compelled to go through HGOs, is
highly discriminatory.
21. He invited our attention to the recommendation of the
Fitment Committee placed before the GST Council meeting held
on 14th March 2020. The first reason set out therein is that if the
exemption is allowed for religious pilgrimage, many other
domestic and international tours can be considered as religious
pilgrimages. Secondly, all religious pilgrimage tours are made
taxable except for those which are organized by the Government
of India as per the bilateral arrangement. He submitted that this
distinction drawn by the Fitment Committee is completely
18
erroneous. He submitted that in a case like this, it is not enough
for the State to justify the object of the State Act but also the
effect of the law. He placed reliance on a decision of this Court
in the case of Rustom Cavasjee Cooper v. Union of India7. He
relied upon various decisions of the Apex Court i.e. In Re the
Special Courts Bill 19788
, Kunnathat Thatehunni Moopil
Nair, etc. v. State of Kerala & Anr.9
, East India Tobacco
Company, etc. v. State of Andhra Pradesh & Anr.
10, Vivian
Joseph Ferriera & Anr. v. Municipal Corporation of Greater
Bombay & Ors.11 and Jaipur Hosiery Mills (P) Ltd., Jaipur v.
State of Rajasthan & Ors12. He submitted that the onus which
was required to be discharged by the Revenue has not been
discharged in the present case.
22. The learned senior counsel appearing for the petitioner in
Writ Petition (C) No.1329 of 2020 pointed out that the petitioner
is a prospective pilgrim for Haj. He submitted that apart from
violation of Article 14 of the Constitution of India, the action of
the Government of India to charge service tax and GST on HGOs,
7 1970 (1) SCC 248
8 1979 (1) SCC 380
9 1961 (3) SCR 77
10 1963 (1) SCR 404
11 1972 (1) SCC 70
12 1970 (2) SCC 26
19
amounts to a violation of rights guaranteed under Article 25 of
the Constitution of India. His submissions made on the issue of
discrimination are the same as made by the learned senior
counsel appearing for the petitioners in other petitions.
23. The learned counsel for the petitioner in Writ Petition (C)
No. 772 of 2020 pointed out that the service provided by the
HGOs is far better than those provided in by the Haj Committees.
Apart from relying upon the decision of this Court in the case of
All–India Federation of Tax Practitioners & Ors.3, he relied
upon the decisions of High Courts/Tribunals in support of the
proposition that as the service rendered by the HGOs to Haj
pilgrims being outside taxable territory, the same is not taxable
for service tax.
SUBMISSIONS OF THE REVENUE
24. At the outset, Shri N. Venkatraman, the learned Additional
Solicitor General of India pointed out that the issue of extraterritorial application of service tax laws raised by the petitioners
cannot be gone into as it is the subject matter of challenge in
other cases pending before another Bench.
25. The learned ASG pointed out the nature of the regime
governing service tax prior to 1st July 2012. Thereafter, he invited
20
our attention to the law as applicable for the period between 1st
July 2012 and 30th June 2017. He pointed out the relevant
provisions of the 2012 Rules. He invited our attention to Rule
2(h) and submitted that as far as HGOs/PTOs are concerned,
they are located within India. Relying upon the definition of
‘location of service recipient’ in Rule 2(i), he submitted that by
virtue of sub-clause (iv) of clause (b) thereof, in the case of the
service recipient who is an individual Haj pilgrim, his location
will be in India. He pointed out that the decisions of CESTAT
relied upon by the petitioners, are for the period prior to 1st July
2012, when earlier service tax regime was in existence. He
submitted that as service rendered to Haj pilgrims is not a part
of the negative list under Section 66-B of the Finance Act, 1994,
it is taxable from 1st July 2012.
26. For the period from 1st July 2017 onwards, he relied upon
Section 12(2) of the IGST, which defines ‘the place of supply of
services’ and Section 12(9), which defines ‘the place of supply of
passenger transportation service’. He submitted that if both the
service provider and service recipient are within India, the
transaction becomes taxable. He submitted that the contract of
service in these cases is entered into in India and the
21
consideration is paid to HGOs/PTOs in Indian currency. He
submitted that various services consumed by Haj pilgrims as a
part of their pilgrimage outside India, are all a bundle of services
contracted with HGOs/PTOs in India and the consideration is
paid for the services in India. HGOs/PTOs may, thereafter, be
entering into separate engagements with the service providers
outside India, from whom Haj pilgrims get services. The
contracts entered into by HGOs/PTOs with service providers
outside India, are not the contracts with the Haj pilgrims. He
submitted that in this group of petitions, none of the statutory
provisions has been challenged.
27. He urged that conducting tours for Haj pilgrims is a
commercial activity undertaken by HGOs/PTOs and the said
activity is not a religious ceremony, for which exemption has
been provided in the exemption notification. The learned ASG
submitted that tour operators who conduct religious pilgrimages
of various religions, both within and outside India, are taxed
under the IGST Act. He gave examples of Char Dham Yatra,
Visits to Buddhist Temples in Nepal and Japan, etc.
28. Dealing with the arguments based on paragraph 5(b) of the
Mega Exemption Notification, he submitted that the said
22
provision will apply when the service is rendered by a person by
way of conduct of any religious ceremony. He submitted that
HGOs/PTOs arrange for travel, accommodation and other
facilities in Saudi Arabia to enable Haj pilgrims to undertake the
pilgrimage. They do not conduct any religious ceremony. The
learned ASG also pointed out paragraph 5A, under which an
exemption has been granted not to service by way of a religious
ceremony, but to services by specified organizations in respect of
a religious pilgrimage facilitated by the Ministry of External
Affairs under the bilateral arrangement. He pointed out the use
of the expression ‘religious ceremony’ in contrast to the choice of
the expression ‘in respect of religious pilgrimage’. He submitted
that in the present case, the exemption claimed is to services by
a person by way of conduct of any religious ceremony. There is
no exemption granted to services rendered by HGOs of arranging
travel, accommodation and other facilities to enable Haj pilgrims
to undertake the Haj pilgrimage. The exemption is to the services
rendered only by specified organisations for facilitating religious
pilgrimage.
29. While dealing with the argument of violation of Article 14 of
the Constitution of India, he submitted that the classification of
23
pilgrims undertaking Haj pilgrimage through the Haj Committee
under the bilateral arrangement and those undertaking tours
through PTOs is based on an intelligible differentia having
rational nexus to the object sought to be achieved by the Statute.
He pointed out that service tax exemption granted to the services
provided by the specified organisations in respect of religious
pilgrimage facilitated by the Government of India under the
bilateral arrangement is not discriminatory. He submitted that
Haj Committee constitutes a class by itself, which cannot be
treated on the same footing as HGOs/PTOs, though services
rendered by all of them may be similar. He pointed out that Haj
Committee was constituted under Section 3 of the Act of 2002
and State Haj Committees were constituted under Section 17. In
view of sub-Section (2) of Section 3, the Haj Committee is a body
corporate having perpetual succession and a common seal.
Various statutory duties are imposed on Haj Committee by
Section 9. There is an obligation to take approval to the budget
estimates from the Central Government. He submitted that
different classes of persons doing the same activity could be
treated differently and not alike. He relied upon decisions of this
Court in the cases of M. Jhangir Bhatusha & Ors. v. Union of
24
India & Ors.13
, Bharat Surfactants (Private) Ltd. & Anr. v.
Union of India & Anr.14
, P.M. Ashwathanarayana Setty &
Ors. v. State of Karnataka & Ors. 15
, Sanghvi Jeevraj
Ghewar Chand & Ors. v. Secretary, Madras Chillies Grains
& Kirana Merchants Workers Union & Anr.16 and Bangalore
Water Supply & Sewerage Board v. Workmen of Bangalore
Water Supply & Sewerage Board & Ors17.
30. He also submitted that service tax is an indirect tax;
therefore, the said tax can be passed on by the service provider
to the service recipient. He pointed out that being a tax on
service, it is not a direct tax on the service provider, but is a value
added tax in the nature of consumption tax on the activity done
by way of service. He relied on this Court’s decision in the case
of Union of India & Ors. v. Bengal Shrachi Housing
Development Ltd. and Anr.
18 and R.C. Jall v. Union of
India19 . He submitted that the classification test has to be
applied with reference to service providers, namely Haj
Committee and HGOs/PTOs, and not with reference to the
13 1989 Suppl. (2) SCC 201
14 1989 (4) SCC 21
15 1989 Suppl. (1) SCC 696
16 AIR 1969 SC 530
17 1994 (2) LLN 1239
18 2018 (1) SCC 311
19 1962 Suppl. (3) SCR 436
25
recipients of the service. In short, he submitted that Haj
Committee and HGOs/PTOs belong to different classes.
31. Reverting to the 2012 Rules, he submitted that if two
competing rules appear to cover the transaction, then the tiebreaker provided in Rule 14 comes into the picture, which lays
down that the determination must be in accordance with the
Rule that occurs later among the rules that merit consideration.
He would, therefore, submit that Rule 8 will apply, which makes
the service taxable. As regards IGST Act, he submitted that when
Section 12 is applicable, the applicability of Section 13 stands
completely excluded and therefore, clause (b) of sub-Section (3)
of Section 13 will have no application.
REJOINDER BY THE PETITIONERS
32. In rejoinder, Shri Arvind P. Datar, Senior Advocate
submitted that in the present case, Rule 8 will have no
application at all. The learned senior counsel submitted that the
test of purposive interpretation laid down by this Court in the
case of Government of Kerala & Anr. v. Mother Superior
Adoration Convent2 will have to be applied. While interpreting
the exemption provision, he submitted that the decisions relied
upon by the Revenue in the case of M. Jhangir Bhatusha &
26
Ors.13, will not apply to the facts of the case. He pointed out that
this was a case where this Court upheld different treatment given
to the State Trading Corporation and private importers. He
submitted that the differential exemptions were granted after the
Government was satisfied that it was necessary in the public
interest to pass a special exemption order considering the
exceptional circumstances set out therein.
CONSIDERATION OF SUBMISSIONS
33. The service tax was introduced by way of the Finance Act.
The Finance Act incorporated various services which were made
subject to payment of service tax. The services were enumerated
in clause 105 of Section 65 of the Finance Act.
34. Service tax is an indirect tax which is leviable on the service
provider who is the taxable person. The service tax is a tax on
service rendered. It is not a direct tax on service provider but a
value-added tax on the activity by way of service. The service
provider can pass on the burden of payment of service tax to the
service recipient. In this group of petitions, we are concerned
with the negative service tax regime, which was introduced with
effect from 1st of July 2012 by incorporation of Sections 66B and
66C by the Finance Act, 2012. When this regime was introduced
27
with effect from 1st July 2012, more than 100 specific services
were incorporated in Clause 105 of Section 65 of the Finance
Act. Section 66B introduced a negative service tax regime by
providing that tax shall be levied on the value of all services other
than those specified in the negative list. Section 66B is the
charging Section. For the sake of convenience, we are
reproducing Section 66B which reads thus:
“SECTION 66B. Charge of service tax on and
after Finance Act, 2012.— There shall be
levied a tax (hereinafter referred to as the service
tax) at the rate of fourteen percent on the value
of all services, other than those services
specified in the negative list, provided or
agreed to be provided in the taxable territory
by one person to another and collected in such
manner as may be prescribed.”
 (emphasis added)
35. Thus, the service tax is payable on all services other than
those specified in the negative list provided or agreed to be
provided in the taxable territory by one person to another. The
taxable territory is defined in Clause 52 of Section 65B of the
Finance Act to mean the territory to which the provisions of the
relevant Chapter ‘SERVICE TAX – STATUTORY PROVISIONS’
containing Sections 64 to 114 of the Finance Act apply. Subsection (1) of Section 64 of the Finance Act provides that the
relevant Chapter extends to the whole of India except the State
28
of Jammu and Kashmir. Under the negative list regime which
operated till 30th June, 2017, service tax was payable on services
provided or agreed to be provided in the taxable territory which
is the whole of India except Jammu and Kashmir. Section 66C
confers rule-making power on the Central Government for
determination of the place where such services are provided or
deemed to have been provided or agreed to be provided or
deemed to have been agreed to be provided. By exercising the
power under Section 66C of the Finance Act, the 2012 Rules
were enacted and were brought into force with effect from 1st
July 2012.
36. In these petitions, we are concerned with HGOs or PTOs. It
is, therefore, necessary to understand the nature of services
provided by HGOs/ PTOs. Haj pilgrimage is a five-day religious
pilgrimage to Mecca and nearby Holy places in Saudi Arabia. As
per the Holy Quran, all Muslims who are physically and
financially sound must perform the Haj pilgrimage at least once
in their lives. As provided in Holy Quran, the Haj pilgrimage is
one of the five pillars or duties of Islam. Haj takes place only
once a year in the twelfth and final month of Islamic lunar
calendar. Pilgrimage undertaken to Mecca at other times is
29
known as Umrah. During the five days of Haj, the pilgrims are
required to perform a series of rituals, the details of which are
not relevant for deciding the issues involved in these petitions.
37. To enable Haj pilgrims of India to undertake Haj
pilgrimage, there is a bilateral agreement executed every year
between the Kingdom of Saudi Arabia and the Government of
India. As per the bilateral agreement, a quota of number of
pilgrims is assigned to India. Out of the said quota, normally
only 30% is allocated to HGOs. The rest of the quota is made
available to the Haj Committee.
38. HGOs render services to Haj pilgrims by purchasing flight
tickets, arranging and making payments for accommodation in
Saudi Arabia, arranging and making available food during their
stay in Saudi Arabia, arranging and making payments for
transportation in Saudi Arabia and providing foreign exchange
in the form of Saudi Riyals. As stated in the written submissions
filed by Shri Arvind P. Datar, the learned senior counsel, all
Muslim devotees who wish to undertake the Haj pilgrimage have
to register themselves with Tawafa establishment in Saudi
Arabia. As soon as Haj pilgrims land in Kingdom of Saudi
Arabia, their entire movement is controlled by Tawafa
30
establishment and its agents known as Maollims. Similar kinds
of services are provided by Haj Committee to those pilgrims who
undertake Haj pilgrimage through Haj Committee. As pointed
out by Shri Gopal Sankaranarayanan, the learned senior
counsel, HGOs provide better accommodation at a place near
Kabah and also arrange for food. However, the Haj Committee
provides accommodation at far away places without the facility
of catering. The 2012 Rules have a direct connection with
liability to pay service tax as the said Rules decide the place of
provision of a service. Apart from the definitions of ‘location of
the service provider’ and ‘location of the service receiver’ under
Clauses (h) and (i) of Rule 2, Rules 3, 4, 7, 8 and Rule 9 of the
said Rules of 2012 are also relevant. Clauses (h) and (i) of Rule
2, Rules 3, 4, 7, 8 and Rule 9 read thus:
“2(h)“location of the service provider”
means- (a) where the service provider has
obtained a single registration, whether
centralized or otherwise, the premises for which
such registration has been obtained;
(b) where the service provider is not covered
under sub-clause (a):
(i) the location of his business establishment; or
(ii) where the services are provided from a place
other than the business establishment, that is
to say, a fixed establishment elsewhere, the
location of such establishment; or
(iii) where services are provided from more than
one establishment, whether business or fixed,
31
the establishment most directly concerned with
the provision of the service; and
(iv) in the absence of such places, the usual
place of residence of the service provider.
(i) “location of the service receiver” means:-
(a). where the recipient of service has obtained a
single registration, whether centralized or
otherwise, the premises for which such
registration has been obtained;
(b). where the recipient of service is not covered
under sub-clause (a):
(i) the location of his business establishment; or
(ii) where services are used at a place other than
the business establishment, that is to say, a
fixed establishment elsewhere, the location of
such establishment; or
(iii) where services are used at more than one
establishment, whether business or fixed, the
establishment most directly concerned with the
use of the service; and
(iv) in the absence of such places, the usual
place of residence of the recipient of service.
Explanation:- For the purposes of clauses (h)
and (i), “usual place of residence” in case of a
body corporate means the place where it is
incorporated or otherwise legally constituted.
Explanation 2:- For the purpose of clause (i), in
the case of telecommunication service, the
usual place of residence shall be the billing
address.
“3. Place of provision generally - The place of
provision of a service shall be the location of
the recipient of service:
Provided that in case “of services other than
online information and database access or
retrieval services” (Inserted vide Notification
46/2012- Service Tax) where the location of the
service receiver is not available in the ordinary
course of business, the place of provision shall
be the location of the provider of service.
32
4.Place of provision of performance based
services.- The place of provision of following
services shall be the location where the services
are actually performed, namely:-
(a) services provided in respect of goods that are
required to be made physically available by the
recipient of service to the provider of service, or
to a person acting on behalf of the provider of
service, in order to provide the service:
Provided that when such services are provided
from a remote location by way of electronic
means the place of provision shall be the
location where goods are situated at the time of
provision of service:
Provided further that this clause shall not apply
in the case of a service provided in respect of
goods that are temporarily imported into India
for repairs and are exported after the repairs
without being put to any use in the taxable
territory, other than that which is required for
such repair;
(b) services provided to an individual,
represented either as the recipient of service or
a person acting on behalf of the recipient, which
require the physical presence of the receiver or
the person acting on behalf of the receiver, with
the provider for the provision of the service.
7. Place of provision of services provided at
more than one location.-Where any service
referred to in rules 4, 5 or 6 is provided at more
than one location, including a location in the
taxable territory, its place of provision shall be
the location in the taxable territory where the
greatest proportion of the service is provided.
8. Place of provision of services where
provider and recipient are located in taxable
territory.- Place of provision of a service, where
the location of the provider of service as well as
that of the recipient of service is in the taxable
33
territory, shall be the location of the recipient of
service.
9. Place of provision of specified services.-
The place of provision of following services shall
be the location of the service provider:-
(a) Services provided by a banking company, or
a financial institution, or a non-banking
financial company, to account holders;
(b)[x x x]
(c) Intermediary services;
(d) Service consisting of hiring of all means of
transport other than, -
(i) aircrafts, and
(ii) vessels except yachts
upto a period of one month.”
(emphasis added)
We may note here the relevant provisions of IGST Act. SubSections (14) and (15) of Section 2 are as under:
“(14) location of the recipient of services
means,––
(a) where a supply is received at a place of
business for which the registration has been
obtained, the location of such place of business;
(b) where a supply is received at a place other
than the place of business for which registration
has been obtained (a fixed establishment
elsewhere), the location of such fixed
establishment;
(c) where a supply is received at more than one
establishment, whether the place of business or
fixed establishment, the location of the
establishment most directly concerned with the
receipt of the supply; and
(d) in absence of such places, the location of the
usual place of residence of the recipient;
(15) location of the supplier of services
means,––
34
(a) where a supply is made from a place of
business for which the registration has been
obtained, the location of such place of business;
(b) where a supply is made from a place other
than the place of business for which registration
has been obtained (a fixed establishment
elsewhere), the location of such fixed
establishment;
(c) where a supply is made from more than one
establishment, whether the place of business or
fixed establishment, the location of the
establishment most directly concerned with the
provision of the supply; and
(d) in absence of such places, the location of the
usual place of residence of the supplier;”
Sections 12 and 13 of the IGST Act read thus:
Section 12. Place of supply of services where
location of supplier and recipient is in India–
(1) The provisions of this section shall apply to
determine the place of supply of services where
the location of supplier of services and the
location of the recipient of services is in India.
(2) The place of supply of services, except the
services specified in sub-sections (3) to (14),–
(a) made to a registered person shall be the
location of such person;
(b) made to any person other than a
registered person shall be,––
(i) the location of the recipient where the
address on record exists; and
(ii) the location of the supplier of services in
other cases.
(3) The place of supply of services,––
(a) directly in relation to an immovable property,
including services provided by architects,
interior decorators, surveyors, engineers and
other related experts or estate agents, any
service provided by way of grant of rights to use
35
immovable property or for carrying out or coordination of construction work; or
(b) by way of lodging accommodation by a hotel,
inn, guest house, home stay, club or campsite,
by whatever name called, and including a house
boat or any other vessel; or
(c) by way of accommodation in any immovable
property for organising any marriage or
reception or matters related thereto, official,
social, cultural, religious or business function
including services provided in relation to such
function at such property; or
(d) any services ancillary to the services referred
to in clauses (a), (b) and (c), shall be the location
at which the immovable property or boat or
vessel, as the case may be, is located or intended
to be located:
Provided that if the location of the immovable
property or boat or vessel is located or intended
to be located outside India, the place of supply
shall be the location of the recipient.
Explanation.––Where the immovable property
or boat or vessel is located in more than one
State or Union territory, the supply of services
shall be treated as made in each of the
respective States or Union territories, in
proportion to the value for services separately
collected or determined in terms of the contract
or agreement entered into in this regard or, in
the absence of such contract or agreement, on
such other basis as may be prescribed.
(4) The place of supply of restaurant and
catering services, personal grooming, fitness,
beauty treatment, health service including
cosmetic and plastic surgery shall be the
location where the services are actually
performed.
(5) The place of supply of services in relation to
training and performance appraisal to,––
(a) a registered person, shall be the location of
such person;
36
(b) a person other than a registered person, shall
be the location where the services are actually
performed.
(6) The place of supply of services provided by
way of admission to a cultural, artistic, sporting,
scientific, educational, entertainment event or
amusement park or any other place and services
ancillary thereto, shall be the place where the
event is actually held or where the park or such
other place is located.
(7) The place of supply of services provided by
way of,—
(a) organisation of a cultural, artistic, sporting,
scientific, educational or entertainment event
including supply of services in relation to a
conference, fair, exhibition, celebration or
similar events; or
(b) services ancillary to organisation of any of
the events or services referred to in clause (a), or
assigning of sponsorship to such events,––
(i) to a registered person, shall be the location of
such person;
(ii) to a person other than a registered person,
shall be the place where the event is actually
held and if the event is held outside India, the
place of supply shall be the location of the
recipient.
Explanation.––Where the event is held in more
than one State or Union territory and a
consolidated amount is charged for supply of
services relating to such event, the place of
supply of such services shall be taken as being
in each of the respective States or Union
territories in proportion to the value for services
separately collected or determined in terms of
the contract or agreement entered into in this
regard or, in the absence of such contract or
agreement, on such other basis as may be
prescribed.
(8) The place of supply of services by way of
transportation of goods, including by mail or
courier to,––
37
(a) a registered person, shall be the location of
such person;
(b) a person other than a registered person, shall
be the location at which such goods are handed
over for their transportation.
[Provided that where the transportation of
goods is to a place outside India, the place of
supply shall be the place of destination of such
goods.]
(9) The place of supply of passenger
transportation service to,—
(a) a registered person, shall be the location
of such person;
(b) a person other than a registered person,
shall be the place where the passenger
embarks on the conveyance for a continuous
journey:
Provided that where the right to passage is
given for future use and the point of
embarkation is not known at the time of issue
of right to passage, the place of supply of such
service shall be determined in accordance with
the provisions of sub-section (2).
Explanation.––For the purposes of this subsection, the return journey shall be treated as a
separate journey, even if the right to passage for
onward and return journey is issued at the
same time.
(10) The place of supply of services on board a
conveyance, including a vessel, an aircraft, a
train or a motor vehicle, shall be the location of
the first scheduled point of departure of that
conveyance for the journey.
(11) The place of supply of telecommunication
services including data transfer, broadcasting,
cable and direct to home television services to
any person shall,—
(a) in case of services by way of fixed
telecommunication line, leased circuits, internet
leased circuit, cable or dish antenna, be the
location where the telecommunication line,
38
leased circuit or cable connection or dish
antenna is installed for receipt of services;
(b) in case of mobile connection for
telecommunication and internet services
provided on post-paid basis, be the location of
billing address of the recipient of services on the
record of the supplier of services;
(c) in cases where mobile connection for
telecommunication, internet service and direct
to home television services are provided on prepayment basis through a voucher or any other
means,––
(i) through a selling agent or a re-seller or a
distributor of subscriber identity module card or
re-charge voucher, be the address of the selling
agent or re-seller or distributor as per the record
of the supplier at the time of supply; or
(ii) by any person to the final subscriber, be the
location where such prepayment is received or
such vouchers are sold;
(d) in other cases, be the address of the recipient
as per the records of the supplier of services and
where such address is not available, the place of
supply shall be location of the supplier of
services:
Provided that where the address of the recipient
as per the records of the supplier of services is
not available, the place of supply shall be
location of the supplier of services:
Provided further that if such pre-paid service is
availed or the recharge is made through internet
banking or other electronic mode of payment,
the location of the recipient of services on the
record of the supplier of services shall be the
place of supply of such services.
Explanation.––Where the leased circuit is
installed in more than one State or Union
territory and a consolidated amount is charged
for supply of services relating to such circuit,
the place of supply of such services shall be
taken as being in each of the respective States
or Union territories in proportion to the value for
39
services separately collected or determined in
terms of the contract or agreement entered into
in this regard or, in the absence of such contract
or agreement, on such other basis as may be
prescribed.
(12) The place of supply of banking and other
financial services, including stock broking
services to any person shall be the location of
the recipient of services on the records of the
supplier of services:
Provided that if the location of recipient of
services is not on the records of the supplier, the
place of supply shall be the location of the
supplier of services.
(13) The place of supply of insurance services
shall,––
(a) to a registered person, be the location of such
person;
(b) to a person other than a registered person,
be the location of the recipient of services on the
records of the supplier of services.
(14) The place of supply of advertisement
services to the Central Government, a State
Government, a statutory body or a local
authority meant for the States or Union
territories identified in the contract or
agreement shall be taken as being in each of
such States or Union territories and the value of
such supplies specific to each State or Union
territory shall be in proportion to the amount
attributable to services provided by way of
dissemination in the respective States or Union
territories as may be determined in terms of the
contract or agreement entered into in this
regard or, in the absence of such contract or
agreement, on such other basis as may be
prescribed.
Section 13. Place of supply of services where
location of supplier or location of recipient is
outside India – (1) The provisions of this section
shall apply to determine the place of supply of
40
services where the location of the supplier of
services or the location of the recipient of
services is outside India.
(2) The place of supply of services except the
services specified in sub-sections (3) to (13)
shall be the location of the recipient of services:
Provided that where the location of the recipient
of services is not available in the ordinary course
of business, the place of supply shall be the
location of the supplier of services.
(3) The place of supply of the following services
shall be the location where the services are
actually performed, namely :—
(a) services supplied in respect of goods which
are required to be made physically available by
the recipient of services to the supplier of
services, or to a person acting on behalf of the
supplier of services in order to provide the
services:
Provided that when such services are provided
from a remote location by way of electronic
means, the place of supply shall be the location
where goods are situated at the time of supply
of services:
Provided further that nothing contained in this
clause shall apply in the case of services
supplied in respect of goods which are
temporarily imported into India for repairs and
are exported after repairs without being put to
any other use in India, than that which is
required for such repairs or treatment or
process;
(b) services supplied to an individual,
represented either as the recipient of services or
a person acting on behalf of the recipient, which
require the physical presence of the recipient or
the person acting on his behalf, with the
supplier for the supply of services.
(4) The place of supply of services supplied
directly in relation to an immovable property,
including services supplied in this regard by
experts and estate agents, supply of
41
accommodation by a hotel, inn, guest house,
club or campsite, by whatever name called,
grant of rights to use immovable property,
services for carrying out or co-ordination of
construction work, including that of architects
or interior decorators, shall be the place where
the immovable property is located or intended to
be located.
(5) The place of supply of services supplied by
way of admission to, or organisation of a
cultural, artistic, sporting, scientific,
educational or entertainment event, or a
celebration, conference, fair, exhibition or
similar events, and of services ancillary to such
admission or organisation, shall be the place
where the event is actually held.
(6) Where any services referred to in sub-section
(3) or sub-section (4) or sub-section (5) is
supplied at more than one location, including a
location in the taxable territory, its place of
supply shall be the location in the taxable
territory.
(7) Where the services referred to in sub-section
(3) or sub-section (4) or sub-section (5) are
supplied in more than one State or Union
territory, the place of supply of such services
shall be taken as being in each of the respective
States or Union territories and the value of such
supplies specific to each State or Union territory
shall be in proportion to the value for services
separately collected or determined in terms of
the contract or agreement entered into in this
regard or, in the absence of such contract or
agreement, on such other basis as may be
prescribed.
(8) The place of supply of the following services
shall be the location of the supplier of services,
namely:––
(a) services supplied by a banking company, or
a financial institution, or a non-banking
financial company, to account holders;
(b) intermediary services;
42
(c) services consisting of hiring of means of
transport, including yachts but excluding
aircrafts and vessels, up to a period of one
month.
Explanation.––For the purposes of this subsection, the expression,––
(a) “account” means an account bearing interest
to the depositor, and includes a non-resident
external account and a non-resident ordinary
account;
(b) “banking company” shall have the same
meaning as assigned to it under clause (a) of
section 45A of the Reserve Bank of India Act,
1934 (2 of 1934);
(c) ‘‘financial institution” shall have the same
meaning as assigned to it in clause (c) of section
45-I of the Reserve Bank of India Act, 1934 (2 of
1934);
(d) “non-banking financial company” means,––
(i) a financial institution which is a company;
(ii) a non-banking institution which is a
company and which has as its principal
business the receiving of deposits, under any
scheme or arrangement or in any other manner,
or lending in any manner; or
(iii) such other non-banking institution or class
of such institutions, as the Reserve Bank of
India may, with the previous approval of the
Central Government and by notification in the
Official Gazette, specify.
(9) The place of supply of services of
transportation of goods, other than by way of
mail or courier, shall be the place of destination
of such goods.
(10) The place of supply in respect of passenger
transportation services shall be the place where
the passenger embarks on the conveyance for a
continuous journey.
(11) The place of supply of services provided on
board a conveyance during the course of a
passenger transport operation, including
services intended to be wholly or substantially
43
consumed while on board, shall be the first
scheduled point of departure of that conveyance
for the journey.
(12) The place of supply of online information
and database access or retrieval services shall
be the location of the recipient of services.
Explanation.––For the purposes of this subsection, person receiving such services shall be
deemed to be located in the taxable territory, if
any two of the following noncontradictory
conditions are satisfied, namely:––
(a) the location of address presented by the
recipient of services through internet is in the
taxable territory;
(b) the credit card or debit card or store value
card or charge card or smart card or any other
card by which the recipient of services settles
payment has been issued in the taxable
territory;
(c) the billing address of the recipient of services
is in the taxable territory;
(d) the internet protocol address of the device
used by the recipient of services is in the taxable
territory;
(e) the bank of the recipient of services in which
the account used for payment is maintained is
in the taxable territory;
(f) the country code of the subscriber identity
module card used by the recipient of services is
of taxable territory;
(g) the location of the fixed land line through
which the service is received by the recipient is
in the taxable territory.
(13) In order to prevent double taxation or nontaxation of the supply of a service, or for the
uniform application of rules, the Government
shall have the power to notify any description of
services or circumstances in which the place of
supply shall be the place of effective use and
enjoyment of a service.”
(emphasis added)
44
39. The provisions of the 2012 Rules and the relevant
provisions of IGST Act 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, subclause (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
45
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.
40. However, reliance was sought to be placed by the
petitioners on Rule 4, in particular Clause (b) thereof. 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
46
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, which we have discussed
above in detail. 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.
41. There was an attempt made to argue that Haj pilgrimage
will be an event covered by Rule 6, which reads thus:
“Rule 6. Place of provision of services
relating to events.– The Place of provision of
services provided by way of admission to, or
organization of, a cultural, artistic, sporting,
scientific, educational, or entertainment event,
or a celebration, conference, fair, exhibition, or
similar events, and of services ancillary to such
admission, shall be the place where the event is
actually held.”
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.
47
42. 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.
43. 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.
44. We may reiterate here that as prayed by the parties during
arguments, we are not going into the issue of extra-territorial
operations of the laws relating to service tax and the said issue
is left open. Even the issue of the validity of the 2012 Rules has
not been seriously canvassed at the time of oral submissions.
In one of the writ petitions, the ground of violation of Article 25
48
of the Constitution of India has been taken without making even
an attempt to substantiate the same.
45. The petitioners have relied upon the decision of this Court
in the case of All–India Federation of Tax Practitioners &
Ors.3 and certain decisions of High Courts and CESTAT. The
said decisions apply to the fact situation before 1st July, 2012
when negative tax regime was not in force. We are concerned in
these cases with the negative service tax regime which
commenced from 1st July 2012. Therefore, the same will not
apply to these cases.
APPLICABILITY OF EXEMPTION NOTIFICATION
46. The question is whether the exemption granted under the
Mega Exemption Notification will apply in this case. As
mentioned earlier, 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. In this case, Clauses 5 and 5A are pressed into
service by the petitioners which read thus:
49
“5. Services by a person by way of-
(a) renting of precincts of a religious place
meant for general public, owned or managed
by an entity registered as a charitable or
religious trust under section 12AA of the
Income-tax Act, 1961(hereinafter referred to
as the Income-tax Act), or a trust or an
institution registered under sub clause (v) of
clause (23C) of section 10 of the Income-tax
Act or a body or an authority covered under
clause (23BBA) of section 10 of the Incometax Act;” substituted vide Notification
40/2016- Service Tax; or
(b) conduct of any religious ceremony;
5A. Services by a specified organisation in
respect of a religious pilgrimage facilitated
by the Ministry of External Affairs of the
Government of India, under bilateral
arrangement;”
 (emphasis added)
47. 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
50
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.
48. In support of the contention that the Clause 5(b) of the
Mega Exemption Notification is applicable, Shri Arvind P. Datar,
the learned senior counsel with all fairness pointed out that in
the case of Commissioner of Customs (Import) Mumbai v.
Dilip Kumar and Company and Ors.
20, a Constitution Bench
of this Court held that an exemption notification should be
interpreted strictly and in case of any ambiguity in the
exemption notification, the same must be interpreted in favour
of the revenue. In paragraph 66 and in particular 66.1 to 66.3
in the case of Dilip Kumar and Company20 it was held thus:
“66.1. Exemption notification should be
interpreted strictly; the burden of proving
applicability would be on the assessee to
show that his case comes within the
parameters of the exemption clause or
exemption notification.
66.2. When there is ambiguity in exemption
notification which is subject to strict
interpretation, the benefit of such ambiguity
20 2018 (9) SCC 1
51
cannot be claimed by the subject/assessee
and it must be interpreted in favour of the
Revenue.
66.3. The ratio in Sun Export case [Sun Export
Corpn. v. Collector of Customs, (1997) 6 SCC
564] is not correct and all the decisions which
took similar view as in Sun Export case [Sun
Export Corpn. v. Collector of Customs, (1997) 6
SCC 564] stand overruled.”
 (emphasis added)
49. But Shri Datar urged that when the exemption is for
beneficial purposes, a different rule will apply. In the case of
Government of Kerala & Anr. v. Mother Superior Adoration
Convent2 relied upon by Shri Datar, this Court referred to its
decision in the case of Commissioner of Customs (Preventive)
Mumbai v. M. Ambalal and Company21 and held that the law
laid down in the case of M. Ambalal and Company21 has not
been disturbed by the Constitution Bench in the case of Dilip
Kumar and Company20. In paragraph 23, this Court in the
case of Mother Superior Adoration Convent2 held thus:
“23. Likewise, even under the Customs Act,
this Court in Commr. of Customs v. M. Ambalal
& Co. [Commr. of Customs v. M. Ambalal & Co.,
(2011) 2 SCC 74] made a clear distinction
between exemptions which are to be strictly
interpreted as opposed to beneficial exemptions
having as their purpose—encouragement or
promotion of certain activities. This case
21 2011 (2) SCC 74
52
felicitously put the law thus follows : (SCC p. 80,
para 16)
“16. It is settled law that the notification has to
be read as a whole. If any of the conditions laid
down in the notification is not fulfilled, the party
is not entitled to the benefit of that notification.
The rule regarding exemptions is that
exemptions should generally be strictly
interpreted but beneficial exemptions having
their purpose as encouragement or
promotion of certain activities should be
liberally interpreted. This composite rule is
not stated in any particular judgment in so
many words. In fact, majority of judgments
emphasise that exemptions are to be strictly
interpreted while some of them insist that
exemptions in fiscal statutes are to be
liberally interpreted giving an apparent
impression that they are contradictory to
each other. But this is only apparent. A close
scrutiny will reveal that there is no real
contradiction amongst the judgments at all.
The synthesis of the views is quite clearly
that the general rule is strict interpretation
while special rule in the case of beneficial
and promotional exemption is liberal
interpretation. The two go very well with
each other because they relate to two
different sets of circumstances.”
 (emphasis added)
Thereafter, in paragraph 25, this Court referred to and
quoted the relevant portion of the Constitution Bench decision
in the case of Dilip Kumar and Company20. In paragraphs 26
and 27, this Court proceeded to hold thus:
“26. It may be noticed that the five-Judge
Bench judgment [Commr. of Customs v. Dilip
Kumar & Co., (2018) 9 SCC 1] did not refer to
53
the line of authority which made a distinction
between exemption provisions generally and
exemption provisions which have a beneficial
purpose. We cannot agree with Shri Gupta's
contention that sub silentio the line of
judgments qua beneficial exemptions has been
done away with by this five-Judge Bench. It is
well settled that a decision is only an authority
for what it decides and not what may logically
follow from it
(see Quinn v. Leathem [Quinn v. Leathem,
1901 AC 495 (HL)] as followed in State of
Orissa v. Sudhansu Sekhar Misra [State of
Orissa v. Sudhansu Sekhar Misra, (1968) 2
SCR 154 : AIR 1968 SC 647] , SCR at pp. 162-
63 : AIR at pp. 651-52, para 13).
27. This being the case, it is obvious that
the beneficial purpose of the exemption
contained in Section 3(1)(b) must be given
full effect to, the line of authority being
applicable to the facts of these cases being
the line of authority which deals with
beneficial exemptions as opposed to
exemptions generally in tax statutes. This
being the case, a literal formalistic
interpretation of the statute at hand is to
be eschewed. We must first ask ourselves
what is the object sought to be achieved by
the provision, and construe the statute in
accord with such object. And on the
assumption that if any ambiguity arises in
such construction, such ambiguity must be
in favour of that which is exempted.
Consequently, for the reasons given by us, we
agree with the conclusions reached by the
impugned judgments [Mother Superior v. State
of Kerala, 2007 SCC OnLine Ker 578] ,
[Unity
Hospital (P) Ltd. v. State of Kerala, 2010 SCC
54
OnLine Ker 4679] of the Division Bench and
the Full Bench.”
 (emphasis added)
50. The submission of the petitioners is that clause (5) of the
Mega Exemption Notification contains a beneficial exemption
and therefore, the same will have to be construed in accordance
with the object sought to be achieved. The submission is that
as there is an ambiguity in the construction of Clause 5, the
construction in favour of that which is exempted should be
accepted.
51. Now, adverting to sub-clause (b) of Section 5, we find 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 subClause (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.
52. It must be noted here that Clause 5A of the same Mega
Exemption Notification grants exemption to the service
55
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
56
“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. We may
give an example of a person engaging a priest to perform certain
religious ceremonies or ritual or puja on his behalf. In such a
case, the priest renders service by way of conducting a 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 sub-clause (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 Convent2.
53. The submission of Shri Datar, learned senior counsel 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. His submission is that the
word ‘person’ used in sub-clause (b) of clause 5 of the exemption
57
notification will also include the plural of the term ‘person’. The
submission is that a Haj pilgrim will fall in the category of
‘person’. According to us, 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. As held earlier, 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.
54. 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
58
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, in our
considered view, sub-clause (b) of clause 5 of the Mega
59
Exemption Notification cannot be invoked by the HGOs. We
may also note here that the exemption under sub-clause (b) of
clause 5 is to the service provider. We are noting this as one of
the petitions has been filed by a service recipient.
55. Before we go to the argument regarding discrimination, we
may note here that 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 subSection (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
60
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.
CONSIDERATION OF THE ISSUE OF DISCRIMINATION
56. The other issue which arises for consideration is about the
submissions based on discrimination made under the Mega
Exemption Notification between the services rendered by
specified organisations and the services rendered by other
service providers in respect of religious pilgrimage.
57. The submission of the petitioners is that there is no
difference between the service rendered by HGOs and the
61
service rendered by the Haj Committee to the Haj pilgrims. It is
contended that the nature of service rendered by both is the
same. The submission of the petitioners is that for the purposes
of this exemption, the Haj Committee cannot constitute a class
in itself. In short, the submission is that two equals are being
treated as unequal. 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
62
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, which reads thus:
“9.Duties of Committee-(1) The duties of the
Committee shall be-
(i) to collect and disseminate information useful
to pilgrims, and to arrange orientation and
training programmes for pilgrims;
(ii) to advise and assist pilgrims during their
stay at the embarkation points in India, while
proceeding to or returning from pilgrimage, in
all matters including vaccination, inoculation,
medical inspection, issue of pilgrim passes and
foreign exchange, and to liaise with the local
authorities concerned in such matters;
(iii) to give relief to pilgrims in distress;
63
(iv) to finalise the annual Haj plan with the
approval of the Central Government, and
execute the plan, including the arrangements
for travel by air or any other means, and to
advise in matters relating to accommodations;
(v) to approve the budget estimates of the
Committee and submit it to the Central
Government at least three months before the
beginning of the financial year for its
concurrence;
(vi) to co-ordinate with the Central Government,
railways, airways and travel agencies for the
purpose of securing travelling facilities for
pilgrims;
(vii) to generally look after the welfare of the
pilgrims;
(viii) to publish such proceedings of the
Committee and such matters of interest to
pilgrims as may be determined by bye-laws
made in this behalf by the Committee;
(ix) to discharge such other duties in connection
with Haj as may be prescribed by the Central
Government.
(2) The Central Government shall afford all
reasonable assistance to the Committee in the
discharge of the duties specified in sub-section
(1).”
58. 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
64
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 power
65
to reconstitute the Haj Committee and to remove the
Chairperson, the Vice-Chairperson 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,
66
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.
59. Shri Gopal Sankarnarayanan, the learned senior counsel
relied upon certain observations made by this Court in the case
of Rafique Sheikh Bhikan1. He relied upon paragraphs 11 and
12 of the said judgment, which read thus:
“11. The pilgrim is actually the person behind all
this arrangement. For many of the pilgrims Haj
is once in a lifetime pilgrimage and they
undertake the pilgrimage by taking out the
savings made over a lifetime, in many cases
especially for this purpose. Haj consists of a
number of parts and each one of them has to be
performed in a rigid, tight and time-bound
schedule. In case due to any mismanagement in
the arrangements regarding the journey to Saudi
Arabia or stay or travelling inside Saudi Arabia
any of the parts is not performed or performed
67
improperly then the pilgrim loses not only his life
savings but more importantly he loses the Haj. It
is not unknown that on landing in Saudi Arabia
a pilgrim finds himself abandoned and
completely stranded.
12. It is, thus, clear that in making selection
for the registration of PTOs the primary object
and purpose of the exercise cannot be lost
sight of. The object of registering PTOs is not
to distribute the Haj seats to them for making
business profits but to ensure that the pilgrim
may be able to perform his religious duty
without undergoing any difficulty,
harassment or suffering. A reasonable profit
to the PTO is only incidental to the main
object.”
 (emphasis added)
However, the learned counsel has not referred to paragraph
10 of the same judgment, which takes a note of very substantial
profits earned by the PTOs. Paragraph 10 reads thus:
“10. From these facts, it is not difficult to
deduce that the dispute between the private
operators/travel agents and the Government
of India in regard to registration as PTOs
arises from a conflict of object and purpose.
For most of the private operators/travel
agents registration as PTOs is mainly a
question of more profitable business. Under
the bilateral agreement no PTO can be given
a quota of less than fifty pilgrims. Normally,
a quota of fifty pilgrims would mean, on an
average and by conservative standards, a
profit of rupees thirty-five to fifty lakhs.
This in turn means that any private
operator/travel agent, successful in getting
registered as a PTO with the Government of
India would easily earn rupees thirty-five to
68
fifty lakhs in one-and-a-half to two months
and may then relax comfortably for the rest
of the year without any great deal of
business from any other source. For the
Government of India, on the other hand, the
registration of the PTOs, is for the purpose to
ensure a comfortable, smooth and trouble-free
journey, stay and performance of Haj by the
pilgrims going through the PTOs.”
 (emphasis added)
In fact, what is observed in paragraph 12 is in the context
of the controversy before this Court. It can be seen from
paragraph 17 of the said decision that the controversy was about
the stringent conditions imposed for the registration of PTOs.
The observations in paragraph 12 are in that context. This Court
held that the object of putting such stringent conditions is to
ensure that proper service is rendered to the Haj pilgrims. In this
context, the aforesaid observation has been made that the
reasonable profit to PTOs is incidental. It is not the case of the
HGOs in these petitions that they are doing any kind of
charitable work by providing service to Haj pilgrims. It is not
their case that they are not earning any profit while providing a
package to Haj pilgrims. They are rendering the services with the
object of earning profit.
60. Thus, the Haj Committee is a statutory committee which is
entrusted with various functions for the welfare of Haj pilgrims.
69
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.
61. The learned senior counsel relied upon the decision of this
Court in the case of S. K. Dutta6. Certain provisions of the
Income Tax Act, 1961 granting exemption to the members of the
70
Scheduled Tribes were the subject matter of challenge before the
High Court. While granting exemption to the members of the
Scheduled Tribes, the class of the government servants who
were the members of Scheduled Tribes was excluded from the
benefits. It is in this context that the Apex Court observed that
the classification made on the basis of imaginary distinction
cannot be a valid classification. There has to be a reasonable
and substantial distinction for the purposes of making a valid
classification. On facts, the said decision will not help the
petitioners.
62. 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. We are reproducing the reasons recorded by
fitment committee on the plea of discrimination which read thus:
“Ground 3: GST exemption [SL No. 60 of
Notification No.12/2017-CTR and Sl. No. 63
of Notification No. 9/2017-ITR] has been
granted only to the pilgrims for whom Haj
Committee of India is organizes the
Haj/Umrah pilgrimage and not for the
pilgrims for whom HGO[PTO] organizes and
conducts the pilgrimage. It is discriminatory
and violative of Article 14 of the
Constitution of India.
71
Services provided by a specified organisation in
respect of a religious pilgrimage facilitated by
the Government of India, under a bilateral
arrangement, is exempt from GST. "Specified
organizations" are Kumaon Mandal Vikas
Nigam Limited, a Government of Uttarakhand
Undertaking and ‘Committee' or "State
Committee as defined in section 2 of the Haj
Committee Act, 2002 (35 of 2002).
GST is leviable on tour operator service for
organizing Haj/Umrah pilgrimage tour. GST
exemption is available only on services of
religious pilgrimage facilitated by Central govt or
State govt, under a bilateral arrangement. There
is no exemption available to services of religious
pilgrimage of any religion provided by any
private tour operator. Therefore, existing
exemption available on services of religious
pilgrimage facilitated by Government of India is
not discriminatory. The legislature intends to
exclude private tour operators from the
purview of Service Tax/GST exemption.
Catena of court judgments have upheld that
legislature has wide latitude in taxation to
choose the subject and people to be taxed.
Article 14 prohibits class legislation and not
reasonable classification. It is very much
within the powers of legislature to categorize
goods and services for the purpose of
taxation in such manner as meets the
policies and objectives of the government.
The legislation intends to differentiate
between tour operator services rendered by
public and private entities. There is no
discrimination between religious pilgrims.
All pilgrims who undertake Haj/Umrah
pilgrimage or any other religious pilgrimage
through private tour operators are treated
equally.
The Constitutional bench of Supreme Court in
R.K. Garg v. Union of India(1981) 4 SCC 675,
72
laid down the test of classification by reference
to article 14 was as under –
"The clarification must not be arbitrary but must
be rational, that is to say, it must not only be
based on some qualities or characteristics which
are to be found in all the person grouped together
and not in others who are left out but those
qualities or characteristics must have a
reasonable relation to the object of the legislation.
In order to pass the test, two conditions must be
fulfilled, namely, (1) that the classification must
be founded on an intelligible differentia, which
distinguishes those that are grouped together
from others, and (2) that differentia must have a
rational relation to the object sought to be
achieved by the Act.”
The classification of pilgrims undertaking
Haj/Umrah pilgrimage tours through Haj
Committee of India under bilateral
arrangement and those undertaking tours
through private tour operators is based on an
intelligible differentia having a rational
relation to the object sought to be achieved
by the statute in question. Therefore, services
Tax/GST exemption on services provided by a
specified organization in respect of a religious
pilgrimage facilitated by Government of India
under bilateral arrangement are not
discriminatory and not violative of Article 14 of
the Constitution.
As discussed above, the service of organizing
and conduct of tour for Haj/Umrah pilgrims by
private tour operators is taxable under GST. It
is not covered under any of the existing
exemptions from GST. Therefore, the request to
not levy GST or to clarify that GST is not leviable
on the same is not acceptable.
As regards the request for exemption GST on the
services of Haj and Umrah tour provided by Haj
Group Operators [Private Tour Operators], the
same has no merit. The private tour operators
supply such services on purely commercial
73
basis to pilgrims who can afford it. GST is an
indirect tax. The burden of the tax is not on
the suppliers but on the recipients. The
service was taxable in Service Tax also. There
is no justification for granting a new
exemption. Exemptions not only cause loss of
revenue but also block input tax credit chain
and credit distortions.”
 (emphasis added)
The reasons recorded are based on consideration of relevant
factors.
63. Strong reliance was placed by the Revenue on the decision
of this Court in the Case of M. Jhangir Bhatusha & Ors13. The
subject of this petition was an order passed by the Government
under sub-Section (2) of Section 25 of the Customs Act, 1962.
By the said order, import of the specified oils by the State
Trading Corporation was made liable to customs duty at the rate
of 5% only and total exemption from auxiliary and additional
duty was granted. On the other hand, import of the same
specified oils by private importers was made liable to customs
duty at the rate of 12.5% ad velorem. Discrimination was alleged
in this case by contending that there is no rational basis for
treating State Trading Corporation differently. In paragraphs 13
to 15 of the said decision, this Court held thus:
“13. First, as to the contention that both the
reasons set forth in the exemption notifications
74
under Section 25(2) of the Act are without
foundation. It seems to us that the two reasons
set forth in the exemption notifications can
constitute a reasonable basis for those
notifications. It does appear from the material
before us that international prices were
fluctuating, and although they may have
shown a perceptible fall there was the
apprehension that because of the history of
fluctuations there was a possibility of their
rising in the future. The need to protect the
domestic market is always present, and
therefore encouragement had to be given to
the imports effected by the State Trading
Corporation by reducing the rate of customs
duty levied on them. This involved a long
term perspective, since the exclusive
monopoly to import these edible oils was
now entrusted to the State Trading
Corporation. What appears to have dominated
the policy of the government in issuing the
exemption notifications was the consideration
that the domestic prices of vanaspati should be
maintained at reasonable levels. It cannot be
doubted that the entire edible oil market is an
integrated one, and that it is not reasonable to
treat any one of the edible oils or vanaspati in
isolation. It is a well accepted fact that vanaspati
manufacturers constitute a powerful organised
sector in the edible oil market, and a high
vanaspati price would encourage an
unauthorised diversion of the edible oils to
vanaspati manufacturing units, resulting in a
scarcity in the edible oil market, giving rise to
erratic prices and depriving consumers of
access to edible oils. The need for preventing
vanaspati prices ruling high was also to prevent
people normally using vanaspati from switching
over to other edible oils, thus leading to an
imbalance in the oil market. An overall view
made it necessary to ensure that domestic
prices of vanaspati remained at reasonable
75
levels. To all these considerations the learned
Attorney-General has drawn our attention, and
we cannot say that they are not reasonably
related to the policy underlying the exemption
orders. So that the government would have
sufficient supplies of edible at hand in order to
feed the market, the learned Attorney-General
says, it was considered desirable and in the
public interest to reduce the rate of customs
duty to 5 per cent on the imports made by the
State Trading Corporation. Now it is the
Central Government which has to be
satisfied, as the authority appointed by
Parliament under Section 25(2), that it is
necessary in the public interest to make the
special orders of exemption. It has set out
the reasons which prompted it to pass the
orders. In our opinion, the circumstances
mentioned in those notifications cannot be
said to be irrelevant or unreasonable. It is
not for this Court to sit in judgment on the
sufficiency of those reasons. The limitations
on the jurisdiction of the court in cases
where the satisfaction has been entrusted to
executive authority to judge the necessity
for passing orders is well defined and has
been long accepted.
14. It is true that the State dons the robes of a
trader when it enters the field of commercial
activity, and ordinarily it can claim no favoured
treatment. But there may be clear and good
reason for making a departure. Viewed in the
background of the reasons for granting a
monopoly to the State Trading Corporation,
acting as an agent or nominee of the Central
Government in importing the specified oils,
it will be evident that policy considerations
rendered it necessary to make
consummation of that policy effective by
imposing a concessional levy on the imports.
No such concession is called for in the case
of the private importers who, in any event,
76
are merely working out contracts entered
into by them with foreign sellers before 2-12-
1978.
15. We are also not satisfied that any of the
private importers have made out that their
business will be crippled or ruined in view of the
rate of customs duty visited on their imports.
The material before us is not sufficient to
warrant any conclusion in their favour.”
(emphasis added)
64. We are tempted to quote what the majority view in the case
of R. K. Garg v. Union of India & Ors.22 on the approach of
the Court in such matters. We quote paragraph 8:
“8. Another rule of equal importance is that
laws relating to economic activities should
be viewed with greater latitude than laws
touching civil rights such as freedom of
speech, religion etc. It has been said by no
less a person than Holmes, J., that the
legislature should be allowed some play in
the joints, because it has to deal with
complex problems which do not admit of
solution through any doctrinaire or straitjacket formula and this is particularly true
in case of legislation dealing with economic
matters, where, having regard to the nature
of the problems required to be dealt with,
greater play in the joints has to be allowed
to the legislature. The court should feel more
inclined to give judicial deference to legislative
judgment in the field of economic regulation
than in other areas where fundamental human
rights are involved. Nowhere has this
admonition been more felicitously expressed
than in Morey v. Doud [351 US 457 : 1 L Ed 2d
22 1981 (4) SCC 675
77
1485 (1957)] where Frankfurter, J., said in his
inimitable style:
“In the utilities, tax and economic
regulation cases, there are good reasons for
judicial self-restraint if not judicial
deference to legislative judgment. The
legislature after all has the affirmative
responsibility. The courts have only the
power to destroy, not to reconstruct. When
these are added to the complexity of
economic regulation, the uncertainty, the
liability to error, the bewildering conflict of
the experts, and the number of times the
judges have been overruled by events — selflimitation can be seen to be the path to
judicial wisdom and institutional prestige
and stability.”
The Court must always remember that
“legislation is directed to practical problems,
that the economic mechanism is highly
sensitive and complex, that many problems are
singular and contingent, that laws are not
abstract propositions and do not relate to
abstract units and are not to be measured by
abstract symmetry”.
 (emphasis added)
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. We will
have to show judicial self-restraint in this case.
78
65. Hence, we are of the considered view that 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.
66. Therefore, there is no merit in the challenge in the
petitions. We have already clarified that we have not dealt with
the issue of extra-territorial operation of the service tax regime
which is kept open to be decided in appropriate proceedings, as
requested by the parties.
67. We are, therefore, of the view that the petitions are devoid
of merit and the same are, accordingly, dismissed. No order as
to costs.
…………..…………………J.
(A.M.Khanwilkar)
…………..…………………J.
(Abhay S. Oka)
…………..…………………J.
(C. T. Ravikumar)
New Delhi;
July 26, 2022. 

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