2020 (3) TMI 376 - AT - Service Tax

Tribunal remands case for fresh decision on service tax issues

The Tribunal set aside the impugned order and remanded the case to the Principal Commissioner for a fresh decision on all issues, including the inclusion ... Valuation - air travel agent service - taxable value of services has been computed under rule 6 (7) of the Service Tax Rules, 1994 - invocation of extended period of limitation - Recovery of CENVAT Credit - HELD THAT:- Under rule 6 (7) of the Rules, a person is liable to pay service tax in relation to the services provided by an air travel agent, has an option to pay an amount calculated @0.6% of the basic fare in case of domestic bookings and @1.2% of the basic fare in case of international bookings. ‘Basic fare’ has been defined in the Explanation to mean that part of the air fare on which commission is normally paid to the air travel agent by the airlines. According to the appellant, commission is normally not paid to the air travel agents by the airlines on fuel surcharge and, therefore, commission, if any, received from the four airlines out of the seventy three airlines for fuel surcharge could not have been subjected to service tax under rule 6 (7) of the Rules. It is a fact that though a defence was taken by the appellant in reply to the show cause notice that the commission received on fuel surcharge could not have been subjected to levy of service tax under rule 6 (7) of the Rules, but there is no discussion of this issue in the impugned order. The appellant contends that out of the seventy three airlines only four airlines pay commission on fuel surcharge and, therefore, it cannot be said that commission is normally paid to the air travel agent by the airlines on fuel surcharge. It was, therefore, obligatory on the part of the Principal Commissioner to have considered this issue raised by the appellant in response to the show cause notice, but that has not been done. The matter, therefore, has to be remitted to the Principal Commissioner to decide this issue - It is only when this issue is decided against the appellant, that would be necessary for the Principal Commissioner to take recourse to the provisions of section 72 of the Act for determination of the taxable value. This issue again would have to be decided by the Principal Commissioner afresh as it has been submitted by the learned Authorized Representative of the appellant that a new method was adopted by the Principal Commissioner without providing any opportunity to the appellant to make submission. The impugned order dated 29 February 2016 deserves to be set aside and is set aside - Appeal allowed - decided in favor of appellant. Issues Involved:1. Inclusion of commission on fuel surcharge in the basic fare for service tax calculation.2. Method of computing taxable income under section 72 of the Finance Act, 1994.3. Denial of Cenvat credit.4. Confirmation of demand on other heads of services.Issue-wise Detailed Analysis:1. Inclusion of Commission on Fuel Surcharge in the Basic Fare for Service Tax Calculation:The main dispute revolves around whether the commission received on fuel surcharge should be included in the basic fare for calculating service tax under Rule 6 (7) of the Service Tax Rules, 1994. The appellant argued that only four out of seventy-three airlines paid commission on fuel surcharge, thus it should not be included in the basic fare. The Principal Commissioner did not address this issue in the impugned order. The Tribunal referenced the case of *Kafila Hospitality and Travels Ltd. vs. Commissioner of Service Tax, Delhi* (2015), which clarified that the basic fare is the part of the airfare on which commission is normally paid to the air travel agent by the airlines, and not the gross fare including fuel surcharge. The Tribunal remanded the matter to the Principal Commissioner to reconsider this issue, allowing both parties to present additional evidence.2. Method of Computing Taxable Income under Section 72 of the Finance Act, 1994:The appellant contested the method adopted by the Principal Commissioner for computing taxable income under section 72, arguing that no opportunity was given to make submissions on the adopted method. The Tribunal noted that the Principal Commissioner must first decide whether the commission on fuel surcharge should be included in the basic fare. If the decision is against the appellant, the Principal Commissioner must then reconsider the taxable value determination under section 72, providing the appellant an opportunity to present their case.3. Denial of Cenvat Credit:The appellant argued that the denial of Cenvat credit was done without considering their submissions. The Tribunal observed that the impugned order lacked reasons and did not take into account the appellant's submissions. Consequently, the Tribunal remanded this issue to the Principal Commissioner for a fresh examination.4. Confirmation of Demand on Other Heads of Services:The appellant also challenged the confirmation of demand on other heads of services, stating that it was done without any discussion or consideration of their submissions. The Tribunal found that the impugned order did not provide reasons or consider the appellant's arguments. Therefore, this issue was also remanded to the Principal Commissioner for a fresh decision.Conclusion:The Tribunal set aside the impugned order dated 29 February 2016 and remanded the case to the Principal Commissioner for a fresh decision on all issues, in accordance with the observations made. The appeal was allowed to the extent indicated, and the Principal Commissioner was directed to pass a new order after considering the appellant's submissions and additional evidence, if any.