2018 (5) TMI 1418 - AT - Service Tax

Appellant Liable for Service Tax on Incentives & Remuneration, Penalties Waived

The Tribunal held that the appellant is liable to pay service tax on incentives received for using AMADEUS systems and on remuneration/commission from ... Liability to service tax on incentive for use of reservation software - liability to service tax on commission/remuneration from insurance companies - availability and utilisation of CENVAT credit on common input services - Rule 6(3)(c) of CENVAT Credit Rules, 2004 - penalty relief where tax liability arises from bona fide or interpretational viewLiability to service tax on incentive for use of reservation software - penalty relief where tax liability arises from bona fide or interpretational view - Appellant liable to service tax on incentive received for use of AMADEUS system; penalties set aside. - HELD THAT: - The Tribunal followed its earlier decision in D. Pauls Consumer Benefit Ltd. and held that incentive received for use of the AMADEUS software is exigible to service tax. However, the appellant had a bona fide belief contesting liability before the Tribunal; in view of the issue being under litigation and the appellant's bona fide belief, the penalties imposed for this count were set aside while the tax and interest demand were maintained. [Paras 5]Liability for service tax sustained; penalties set aside.Liability to service tax on commission/remuneration from insurance companies - penalty relief where tax liability arises from bona fide or interpretational view - Appellant liable to service tax on commission/remuneration received from insurance companies for medi-claim policies; penalties set aside. - HELD THAT: - The Tribunal rejected the appellant's contention that such commission is taxable only when received by an insurance agent, holding that the commission/ remuneration received while booking international tickets is exigible to service tax. Noting that the question was interpretational and Board clarifications exist, the Tribunal sustained the tax demand but set aside the penalties in view of the interpretational nature of the issue. [Paras 5]Liability for service tax sustained; penalties set aside.Availability and utilisation of CENVAT credit on common input services - Rule 6(3)(c) of CENVAT Credit Rules, 2004 - penalty relief where tax liability arises from bona fide or interpretational view - Demand for reversal of excess CENVAT credit availed on common inputs (beyond permissible utilisation) sustained; penalties set aside. - HELD THAT: - The Tribunal held that where an output service provider avails credit on common input services used for both taxable and non-taxable services, the utilisation is governed by Rule 6(3)(c) of the CENVAT Credit Rules, 2004, and only 20% of credit availed on common input services may be utilized against output service tax. The appellant's plea that the extended period could not be invoked for lack of suppression was rejected because the appellant should have appreciated that credit was being availed for both taxable and non-taxable services. While the tax demand and interest were maintained, penalties were set aside. [Paras 5]Demand for reversal of excess credit sustained; penalties set aside.Final Conclusion: Appeal partly allowed: service tax demands and interest upheld on (a) incentive for AMADEUS use and (b) commission from insurance companies, and on (c) reversal of excess CENVAT credit under Rule 6(3)(c); penalties imposed on all three counts set aside. Issues:1. Liability to pay service tax on incentive received for using AMADEUS systems2. Liability to pay service tax on remuneration/commission received from insurance companies3. Eligibility to avail CENVAT credit for the period from October 2006 to January 2008 or whether the demand is hit by limitationAnalysis:Issue 1: Liability to pay service tax on incentive received for using AMADEUS systemsThe appellant argued that they were not promoting the business of AMADEUS and, therefore, should not be liable for service tax. However, the Tribunal, citing a previous case, held that the appellant is indeed liable to pay service tax on the incentive received. Despite the appellant's belief, the penalties were set aside considering the ongoing litigation and the appellant's bonafide belief.Issue 2: Liability to pay service tax on remuneration/commission received from insurance companiesThe appellant contended that they believed the commission from insurance companies was taxable only if received by an insurance agent. However, the Tribunal ruled that the appellant is liable to pay service tax on this commission. The penalties were set aside due to the interpretational nature of the issue and clarifications issued by the Board.Issue 3: Eligibility to avail CENVAT creditThe appellant availed credit on common inputs used for both taxable and non-taxable services, exceeding the permissible limit. The Tribunal held that the appellant should have utilized only 20% of the credit on common input services for non-taxable services. The penalties were set aside, but the demand for service tax and interest was upheld. The argument of no suppression of facts was rejected, and the extended period for demand was deemed valid.In conclusion, the penalties were set aside for all three issues, but the demand for service tax and interest was maintained. The appeals were partly allowed based on the above terms.