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

2

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 1

st 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 1

st

July 2012. On 20

th 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 1

st 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 28

th 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 11

th 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 19

th

December 2019. The GST Council by the order dated 14

th 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

5

th 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 4

th 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 Bhikan

1, 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 th at 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

10

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 Convent

2.

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 & Ors

3. 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

Delhi

4. 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 Ingty

6.

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 Bhikan

1.

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 14

th 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 India

7. He

relied upon various decisions of the Apex Court i.e. In Re the

Special Courts Bill 1978

8

, Kunnathat Thatehunni M oopil

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 & Ors

12. 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 extra-

territorial 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 1

st July 2012. Thereafter, he invited

20

our attention to the law as applicable for the period between 1

st

July 2012 and 30

th 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 1

st 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 1

st July 2012.

26. For the period from 1

st 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 tha t

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 & Ors

17.

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

India

19. 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 tie-

breaker 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 Convent

2 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 1

st of July 2012 by incorporation of Sections 66B and

66C by the Finance Act, 2012. When this regime was introduced

27

with effect from 1

st 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. Sub-

section (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 30

th 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 1

st

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 payment s 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. Sub-

Sections (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 co-

ordination 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 sub-

section, 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 pre-

payment 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 sub-

section, 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 sub-

section, 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 non-

taxation 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, sub-

clause (a) of clause (i) will have no application. There are four

categories listed in sub-clause (b) of clause (i) of Rule 2. The first

category is of business establishments. The second category is

of services which are used at a place other than the business

establishment. The third category is where services are used at

more than one establishment. On the face of it, the cases of Haj

pilgrims undertaking the Haj pilgrimage through HGOs will not

be covered by these three categories. What is applicable to them

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 1

st 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 Income-

tax 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 Company

20 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 exempt ion

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

Convent

2 relied upon by Shri Datar, this Court referred to its

decision in the case of Commissioner of Customs (Preventive)

Mumbai v. M. Ambalal and Company

21

and held that the law

laid down in the case of M. Ambalal and Company

21 has not

been disturbed by the Constitution Bench in the case of Dilip

Kumar and Company

20. In paragraph 23, this Court in the

case of Mother Superior Adoration Convent

2 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 Company

20. 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 ourselv es

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 sub-

Clause (b) applies when the service provider renders service by

way of conduct of any religious ceremony. The notification does

not say that service provided to the service receiver to enable

him to conduct religious ceremony, has been exempted. It only

exempts service provided by way of conduct of any religious

ceremony.

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 exemp ts 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 Convent

2.

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 1

st July 2017, service tax

became payable under the IGST Act. Even GST Act came into

force from the same date. Under both the enactments, tax is

payable on the supply of goods or services. Sub-Section (2) of

Section 13 of IGST Act provides that the place of supply of

services except services specified in Sub-Sections (3) to (13)

shall be the location of the recipient of services. Under sub-

Section (1) of Section 5 of the IGST Act, service tax is payable

on services supplied inter-state. Under sub-Section (1) of

Section 9 of the GST Act, service tax is leviable on services

supplied intra-state. None of the sub-sections (3) to (13) of

Section 13 of the IGST Act is applicable in this case. Clause (14)

of Section 2 of the IGST Act defines the location of the recipient

of service. This provision is pari materia with the same definition

under the 2012 Rules. As in case of 2012 Rules, there are four

categories. The service received from HGOs in connection with

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 Ha j

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 Bhikan

1. 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 an y 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. Dutta

6. 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 "St ate

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 tour s 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 & Ors

13. 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 cann ot 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 strait-

jacket 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 o f times the

judges have been overruled by events — self-

limitation 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.