Service tax adjustment for cancelled air tickets allowed where circular permits net commission-based tax calculation.

An air travel agent could adjust service tax already paid on cancelled tickets against tax payable for later periods where the governing circular recognised that cancellations and modifications are routine and allowed commission to be adjusted in the fortnightly return, with tax payable only on net commission received. A demand disallowing those adjustments was unsustainable because the tax already paid after adjustment reflected the amount correctly due. The assessee was therefore entitled to consequential relief.

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Issues: Whether the assessee, an air travel agent, was entitled to adjust service tax already paid on cancelled tickets against tax payable for subsequent periods in terms of the Board circular.

Analysis: The circular governing service tax on air travel agents recognised that cancellations and modifications are common and permitted adjustment of commission in the fortnightly return, with service tax payable on the net commission received. The impugned demand disallowed such adjustments despite the circular. Since the tax already paid after adjustment represented the amount correctly due, the demand could not survive.

Conclusion: The adjustment was permissible and the demand was unsustainable, with consequential relief to the assessee.

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