Service tax upheld on incentive for using AMEDEUS software by travel agency, penalties set aside.

The tribunal upheld the levy of service tax on the incentive received for using the AMEDEUS software by a travel agency, rejecting arguments of lack of enforceable contract and awareness of terms. However, penalties were set aside under section 80 of the Finance Act due to the interpretational nature of the issue. The tribunal allowed the appeal in part, setting aside penalties while maintaining the demand for service tax and interest, providing consequential relief if applicable.

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Issues:
1. Liability to pay service tax on incentive received for the use of AMEDEUS software.
2. Grounds for challenging the imposition of penalties.

Analysis:

Issue 1: Liability to pay service tax on incentive received for the use of AMEDEUS software
The appellant, a travel agency with IATA certification, used the integrated computer reservation system developed by Amadeus Global Travel Distribution, Spain. The department contended that the appellant should pay service tax on the incentive received for using the AMADEUS CRS software. The appellant argued that there was no legally enforceable contract to pay any incentive, and they were not aware of the terms between AMADEUS, Spain, and Amadeus India Pvt. Ltd. The appellant did not render any service to AIPL, and the incentive was for using the software, not for promoting AMADEUS. The appellant believed the incentive was not subject to service tax and that there was no suppression of facts to evade payment. The appellant also raised the issue of limitation, stating that they had reasonable cause for not discharging the service tax. The tribunal held that the levy of service tax was legal and proper based on a previous decision and rejected the argument on limitation. However, invoking section 80 of the Finance Act, the tribunal set aside the penalties imposed due to the interpretational nature of the issue.

Issue 2: Grounds for challenging the imposition of penalties
The appellant challenged the imposition of penalties, arguing that there was no legally enforceable contract for the incentive received and that they were not aware of the terms and conditions between the parties involved. The appellant believed they had reasonable cause for not discharging the service tax and that there was no intent to evade payment. The tribunal considered the interpretational nature of the issue and set aside the penalties while upholding the demand for service tax and interest.

In conclusion, the tribunal modified the impugned order by setting aside the penalties imposed without disturbing the demand for service tax or interest. The appeal was partly allowed with consequential relief, if any.

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