All India Haj Umrah Tour Organizer ... vs Union Of India on 26 July, 2022

Outcome**
The Supreme Court dismissed the writ petitions, upholding the levy of service tax/GST on services rendered by Haj Group Organizers (HGOs) / Private Tour Operators (PTOs) for Haj pilgrimage. The Court found no merit in the challenge against the tax liability or the alleged discrimination. The issue of extra-territorial operation of service tax laws was expressly kept open for adjudication in other pending proceedings.

2. Core Issue
The core issue was the liability of HGOs/PTOs to pay service tax (under the Finance Act, 1994, post-negative list regime) and subsequently GST (under IGST/GST Acts) on services provided for Haj/Umrah pilgrimages, and whether such services were eligible for exemption under relevant notifications, specifically in comparison to services rendered by the Haj Committee of India.

3. Key Facts
* Haj pilgrimage from India is facilitated either through the Haj Committee of India or HGOs/PTOs, as per a bilateral treaty with Saudi Arabia.
* The service tax regime was revamped to a negative list approach from July 1, 2012, making all services taxable unless specifically exempted or in the negative list.
* Mega Exemption Notification No. 25/2012-ST (and later identical IGST/GST Exemption Notifications) provided exemptions:
* Paragraph 5(b): Services by a person by way of "conduct of any religious ceremony."
* Paragraph 5A: Services by "specified organisations" (defined as Kumaon Mandal Vikas Nigam Limited and the Haj Committee/State Committee under the Haj Committee Act, 2002) in respect of a "religious pilgrimage facilitated by the Ministry of External Affairs... under bilateral arrangement."
* HGOs/PTOs offer comprehensive packages including airfare, accommodation, food, transportation, foreign exchange, and registration with Tawafa establishments in Saudi Arabia.
* The Haj Committee is a statutory body under the Haj Committee Act, 2002, with welfare duties for pilgrims and operates without a profit motive, under government control. HGOs operate commercially for profit.
* HGOs/PTOs filed petitions challenging the levy and the rejection of their representations for exemption, alleging discrimination and non-applicability of tax due to the place of service provision.

4. Arguments
* Taxpayer (HGOs/PTOs):
* Exemption: Services fall under Para 5(b) exemption for "conduct of any religious ceremony" as they facilitate the religious activity of Haj. The burden of tax ultimately falls on pilgrims, defeating the beneficial intent.
* Discrimination (Article 14): Denying exemption to HGOs while granting it to the Haj Committee (under Para 5A) for identical services is discriminatory and violates Article 14, as there is no intelligible differentia. Both HGOs and Haj Committee facilitate the same pilgrimage.
* Place of Supply/Territoriality: Under the Place of Provision of Services Rules, 2012 (PoPS Rules) and the IGST Act, the service is primarily rendered outside India (Saudi Arabia), where the physical presence of the pilgrim is required for the religious ceremony. Thus, it should not be taxable in India.
* Beneficial Construction: Exemption provisions, being beneficial for religious pilgrimages, should be interpreted liberally.
* Revenue (Union of India):
* Taxability: Services rendered by HGOs are not in the negative list and are therefore taxable. The contract for service is entered into and consideration paid in India.
* Place of Supply/Territoriality: As per PoPS Rules (Rules 2, 3, 8) and IGST Act (Section 12), the location of both the service provider (HGO) and the service recipient (pilgrim) is in India (based on usual place of residence), making the service taxable in India. Rules 4 (performance-based) and 6 (events) are not applicable.
* Exemption (Para 5(b)): HGOs do not conduct religious ceremonies; they facilitate pilgrims to perform them. The notification clearly distinguishes "religious ceremony" from "religious pilgrimage," and HGOs' services fall under the latter.
* Exemption (Para 5A) & Discrimination: The exemption under Para 5A is specifically for "specified organisations" like the Haj Committee, which are statutory bodies entrusted with public welfare functions and operate without profit. HGOs are commercial, profit-making entities. This constitutes an "intelligible differentia" with a "rational nexus" to the object of promoting state-facilitated pilgrimages.
* Strict Construction: Exemption notifications must be interpreted strictly, and any ambiguity is resolved in favour of the revenue, as per the Constitution Bench decision in Dilip Kumar and Company.

5. Court’s Reasoning
* Liability to Service Tax/GST:
* The Court held that under the negative list regime (post July 1, 2012) and the subsequent GST regime, the services provided by HGOs are taxable unless specifically exempted.
* Applying the PoPS Rules, 2012, and the IGST Act, the location of the service provider (HGO) is in India (registered premises), and the location of the service recipient (pilgrim) is also in India (usual place of residence as per Rule 2(i)(b)(iv) / Section 2(14)(d) IGST Act). Therefore, the place of provision/supply of service is in India (Rules 3 & 8 PoPS Rules; Section 12 IGST Act), making the services taxable.
* The services provided by HGOs are not "performance-based services" (Rule 4) nor "events" (Rule 6).
* Previous CESTAT decisions relied upon by petitioners were held inapplicable as they pertained to the service tax regime prior to July 1, 2012.
* Applicability of Exemption Notifications:
* Para 5(b) (conduct of any religious ceremony): The Court held that HGOs do not conduct religious ceremonies but merely facilitate pilgrims to perform them. The language of the notification makes a clear distinction between "conduct of a religious ceremony" and services "in respect of a religious pilgrimage." Since HGOs do not conduct the ceremony, this exemption is not available. The Court applied the strict interpretation rule for exemption notifications laid down in Dilip Kumar and Company, finding no ambiguity in the clause.
* Para 5A (specified organisations for religious pilgrimage): This exemption is exclusively for "specified organisations," which HGOs are not.
* The Court rejected the argument to dissect the HGOs' comprehensive package of services, stating that the service is to be viewed as a whole.
* Discrimination (Article 14):
* The Court held that the classification between the Haj Committee and HGOs is founded on an "intelligible differentia" and has a "rational nexus" to the object sought to be achieved.
* The Haj Committee is a statutory body with specific welfare duties, operates under government control, is non-profit, and its funds are statutorily governed for pilgrim welfare. HGOs, in contrast, are private commercial entities operating for profit.
* This distinction provides a reasonable basis for the differential treatment in tax exemptions, and therefore, it does not violate Article 14 of the Constitution. The Court cited R. K. Garg v. Union of India for the principle of judicial self-restraint in economic legislation.
* The argument regarding violation of Article 25 was not substantiated.

6. Statutory References
* Finance Act, 1994: Sections 64(1), 65(105), 65B(52), 66B, 66C.
* Finance Act, 2012: (for introduction of Sections 66B, 66C).
* Place of Provision of Services Rules, 2012: Rules 2(h), 2(i), 3, 4, 6, 8, 9, 14.
* Integrated Goods and Services Tax Act, 2017 (IGST Act): Sections 2(14), 2(15), 5(1), 12, 13 (Sub-sections 1, 2, 3(b), 10).
* Central Goods and Services Tax Act, 2017 (GST Act): Section 9(1).
* Haj Committee Act, 2002: Sections 2(f), 3, 4, 9, 17, 18, 27, 30, 31, 32.
* Constitution of India: Articles 14, 25, 286(1)(b).
* Mega Exemption Notification No. 25/2012-ST (Paras 1(1)(a)(zfa), 5(a), 5(b), 5A).
* IGST Exemption Notification dated 28th June 2017 (Paras 14, 63).
* GST Exemption Notification dated 28th June 2017.
* Income-tax Act, 1961: Sections 10(23C)(v), 10(23BBA), 12AA.
* Customs Act, 1962: Section 25(2).
* Reserve Bank of India Act, 1934: Sections 45A, 45-I(c).

7. Precedents Cited
* Union of India & Ors. v. Rafique Shiekh Bhikan and Anr. (2012 (6) SCC 265)
* Federation Haj PTOs of India v. Union of India (W.P. (C) No. 4 of 2019, 4 Feb 2019)
* Government of Kerala & Anr. v. Mother Superior Adoration Convent (2021 (5) SCC 602)
* All–India Federation of Tax Practitioners & Ors. v. Union of India & Ors (2007 (7) SCC 527)
* Cox & Kings India Ltd. v. Commissioner of Service Tax, New Delhi (2014 (35) S.T.R. 817 - CESTAT)
* Atlas Tours and Travels Pvt. Ltd. v. Commissioner of Service Tax, Mumbai (2015-TIOL-306-CESTAT-MUM)
* S. K. Dutta, Income Tax Officer v. Lawrence Singh Ingty (1968 (2) SCR 165)
* Rustom Cavasjee Cooper v. Union of India (1970 (1) SCC 248)
* In Re the Special Courts Bill 1978 (1979 (1) SCC 380)
* Kunnathat Thatehunni Moopil Nair, etc. v. State of Kerala & Anr. (1961 (3) SCR 77)
* East India Tobacco Company, etc. v. State of Andhra Pradesh & Anr. (1963 (1) SCR 404)
* Vivian Joseph Ferriera & Anr. v. Municipal Corporation of Greater Bombay & Ors. (1972 (1) SCC 70)
* Jaipur Hosiery Mills (P) Ltd., Jaipur v. State of Rajasthan & Ors (1970 (2) SCC 26)
* M. Jhangir Bhatusha & Ors. v. Union of India & Ors. (1989 Supp. (2) SCC 201)
* Bharat Surfactants (Private) Ltd. & Anr. v. Union of India & Anr. (1989 (4) SCC 21)
* P.M. Ashwathanarayana Setty & Ors. v. State of Karnataka & Ors. (1989 Supp. (1) SCC 696)
* Sanghvi Jeevraj Ghewar Chand & Ors. v. Secretary, Madras Chillies Grains & Kirana Merchants Workers Union & Anr. (AIR 1969 SC 530)
* Bangalore Water Supply & Sewerage Board v. Workmen of Bangalore Water Supply & Sewerage Board & Ors (1994 (2) LLN 1239)
* Union of India & Ors. v. Bengal Shrachi Housing Development Ltd. and Anr. (2018 (1) SCC 311)
* R.C. Jall v. Union of India (1962 Supp. (3) SCR 436)
* Commissioner of Customs (Import) Mumbai v. Dilip Kumar and Company and Ors. (2018 (9) SCC 1 - Constitution Bench)
* Commissioner of Customs (Preventive) Mumbai v. M. Ambalal and Company (2011 (2) SCC 74)
* Quinn v. Leathem (1901 AC 495 (HL))
* State of Orissa v. Sudhansu Sekhar Misra (1968 (2) SCR 154)
* R. K. Garg v. Union of India & Ors. (1981 (4) SCC 675)
* Morey v. Doud (351 US 457)