Incentives from CRS Developer & airlines not taxable under service tax; Tribunal allows appeal.

The Tribunal held that the incentives received by the appellant for using the CRS Developer are not subject to service tax under "business auxiliary service." Additionally, it was determined that service tax cannot be levied on target-based incentives paid to travel agents by airlines, as these incentives are not considered as "consideration" under the Finance Act. Furthermore, the commission paid by CRS Companies to travel agents was found not liable to service tax as it fell under "air travel agent service" rather than "business auxiliary service." The Tribunal set aside the demands and allowed the appeal with consequential relief.

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Issues:
1. Whether the incentive received by the appellant for using the CRS Developer is subject to service tax or not.
2. Whether service tax can be levied on target-based incentives paid to travel agents by airlines.
3. Whether the commission paid by CRS Companies to travel agents can be subjected to service tax.

Analysis:
1. The appellant, engaged in providing "Air Travel Agency Service," received incentives/commission from CRS Developers for booking tickets through their system. The Service Tax Department alleged that these incentives are subject to service tax under "business auxiliary service." The issue was whether these incentives are taxable. The appellant argued citing a precedent from the Larger Bench of the Tribunal in a similar case, which held that such incentives are not subject to service tax. The Tribunal agreed with this view and set aside the demand, stating that the incentive is not leviable to service tax.

2. The Tribunal considered whether service tax could be imposed on target-based incentives paid to travel agents by airlines. The Tribunal analyzed the nature of the relationship between airlines, travel agents, and CRS Companies. It was noted that the incentives were not for promoting or marketing the airlines' business but were linked to achieving booking targets. The Tribunal concluded that these incentives cannot be considered as "consideration" under the Finance Act and are not liable to service tax.

3. The issue of whether the commission paid by CRS Companies to travel agents is subject to service tax was also addressed. The Tribunal examined the services provided by air travel agents and the nature of their business relationship with CRS Companies. It was established that the agents were promoting their own business by selling airline tickets, not the business of the airlines or CRS Companies. Therefore, the classification of the service fell under "air travel agent service" and not "business auxiliary service." Consequently, the commission paid by CRS Companies to travel agents was not liable to service tax. The Tribunal set aside the demand and allowed the appeal with consequential relief.

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