Tribunal upholds service tax liability on incentives from Galileo India, revises penalty, offers reduced payment option.

The Tribunal upheld the impugned order, confirming the service tax liability on the incentive received from Galileo India Pvt. Ltd. by the appellant assessee. The penalty was revised, and the appellant was given the option to pay a reduced penalty amount. The appeal was disposed of accordingly.

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Issues:
Service tax liability on incentive received from Galileo India Pvt. Ltd. by the appellant assessee for using their CRS system.

Analysis:
The appellant, a travel agent, received an incentive from Galileo India Pvt. Ltd. for using their Computer Reservation Software (CRS) system. The Department contended that this incentive falls under 'business auxiliary services' and attracts service tax. The impugned order confirmed the demand of service tax along with interest and imposed a penalty of Rs. 3 lakhs. The appellant appealed to the Tribunal challenging this decision.

The appellant argued that they did not engage in promotional or marketing activities for Galileo and did not act as an agent of Galileo. They highlighted that the CRS system was provided free of cost by Galileo, and there was no evidence of marketing or promotion activities in India. The appellant's advocate emphasized that the appellant did not conduct any activity falling under 'business auxiliary services.'

After considering the submissions and documents presented, the Tribunal observed a marketing and promotional relationship between the appellant and Galileo. The offer document between M/s. Dalmia Cement Bharat Ltd. and InterGlobe Technology Quotient Private Ltd. indicated marketing and promotion activities in exchange for a support fee, supporting the Department's contention. The Tribunal noted a special relationship between the appellant and Galileo, where the incentive received was considered as commission for marketing and promotional support.

The Tribunal referred to the definition of 'business auxiliary service' under Section 65(19) of the Finance Act 1994, which includes services related to the promotion or marketing of goods or services provided by the client. Citing a previous case, the Tribunal held that the appellant's activities fell under 'business auxiliary services' and were liable for service tax. The Tribunal also reduced the penalty imposed on the appellant in line with legal provisions, granting the appellant the option to pay a reduced penalty amount.

In conclusion, the Tribunal upheld the impugned order, confirming the service tax liability on the incentive received from Galileo India Pvt. Ltd. by the appellant assessee. The penalty was revised, and the appellant was given the option to pay a reduced penalty amount. The appeal was disposed of accordingly.

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