2017 (10) TMI 505 - AT - Service Tax

Tribunal upholds service tax on commission from Amadeus India but sets aside tax on others

The Tribunal upheld the demand for service tax under Business Auxiliary services for the commission received from M/s. Amadeus India Pvt. Ltd. However, it ... Business Auxiliary services - Air Travel Agent services - service tax levy on commission - use of Central Reservation System (CRS) - principal-to-principal sale - sub-agent liabilityBusiness Auxiliary services - use of Central Reservation System (CRS) - service tax levy on commission - Levy of service tax as Business Auxiliary services on commission received from M/s. Amadeus India Pvt. Ltd. for use of CRS - HELD THAT: - The Tribunal applied its earlier decision in D. Pauls Consumer Benefit Ltd. (Final Order No.50861/2017 dated 15.2.20017) and followed that precedent to hold that the commission received from M/s. Amadeus for use of its CRS falls within the taxable category of Business Auxiliary services. The appellant's contentions that CRS usage is for self-use, that facilities are provided free, that incentives are rewards for increased usage, and that no promotion activity occurs were considered but the Tribunal adhered to its prior ruling which classifies such commission as chargeable to service tax under Business Auxiliary services. The demand in respect of commissions from M/s. Amadeus is therefore upheld. [Paras 7, 8, 12]Demand of service tax under Business Auxiliary services in respect of commission received from M/s. Amadeus is upheld.Air Travel Agent services - principal-to-principal sale - sub-agent liability - service tax levy on commission - Chargeability of service tax as Business Auxiliary services on commission received from other IATA agents - HELD THAT: - The Tribunal examined whether the amounts received from principal IATA agents by the appellant (acting as sub-agent) constitute Business Auxiliary services or form part of Air Travel Agent services. Relying on the reasoning of the Madras High Court in Airlines Agents Association v. Union of India and on analogous Tribunal authority, the Tribunal concluded that the service rendered by the appellant to customers is the same character of service as that of the principal IATA agent (air travel agent services). The commission shared between agents reflects the remuneration connected to air travel agency services rendered to customers rather than a distinct promotional service attracting Business Auxiliary services. Consequently, the view of Revenue that such shared commission is taxable as Business Auxiliary services was not sustained and the demand in this respect was set aside. [Paras 10, 11, 12]Demand of service tax under Business Auxiliary services on commission received from other IATA agents is set aside; such receipts relate to Air Travel Agent services.Final Conclusion: Appeal partly allowed: demand sustained in respect of commission from M/s. Amadeus (treated as Business Auxiliary services) but set aside in respect of commission received from other IATA agents (held to relate to Air Travel Agent services). Issues:1. Whether the commission received from M/s. Amadeus India Pvt. Ltd. is chargeable to Service Tax under Business Auxiliary services.2. Whether the commission received from International Air Tickets Association (IATA) agents is liable to Service Tax under Business Auxiliary services.Analysis:Issue 1: Commission from M/s. Amadeus India Pvt. Ltd.The appellant, engaged in International Air Ticket Booking services, received commission from M/s. Amadeus India Pvt. Ltd. The Revenue contended that this commission is chargeable to Service Tax under Business Auxiliary services as it was seen as promoting the business of M/s. Amadeus India Pvt. Ltd. The appellant argued that their use of Central Reservation Systems (CRS) software provided by M/s. Amadeus was for self-use and did not involve promoting M/s. Amadeus' business. The Tribunal, citing a previous decision, upheld the demand of service tax under Business Auxiliary services for the commission received from M/s. Amadeus.Issue 2: Commission from IATA AgentsThe appellant also received commission from IATA agents on booking air tickets for clients. The Revenue claimed that this commission, shared between the principal IATA agent and the appellant, was for providing marketing support and thus liable to service tax under Business Auxiliary services. The appellant argued that as they operated on a principal-to-principal basis with IATA agents and the service tax was already paid by the principal IATA agent, no further tax was due. The Tribunal, considering the nature of services provided and previous decisions, concluded that the commission received from other IATA agents was not liable to service tax under Business Auxiliary services, setting aside the demand.In summary, the Tribunal upheld the demand of service tax under Business Auxiliary services for the commission received from M/s. Amadeus India Pvt. Ltd. However, it set aside the demand for service tax on the commission received from other IATA agents. The appeal was partly allowed based on these findings.