Service tax adjustment for cancelled air tickets upheld where tax was paid on net commission and trade notice allowed cancellation reversals.

Service tax on air travel agency commission could be adjusted through credit notes for cancelled tickets where the governing trade notice contemplated cancellation adjustments and tax was discharged on net commission. The Tribunal followed the settled practice recognised in earlier appellate authority and held that, on those facts, no separate refund claim was required for amounts later reversed. The demand for tax, interest and penalty therefore could not be sustained, and the adjustment mechanism was treated as permissible for cancelled air tickets.

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Issues: Whether service tax paid on cancelled air tickets could be adjusted through credit notes against future service tax liability, in view of the trade notice and the settled practice for air travel agents.

Analysis: The dispute turned on the treatment of cancellations in air travel agency services. The Tribunal noted that the departmental trade notice recognised cancellation or modification of tickets as a common feature and contemplated adjustment of commission in the fortnightly return, with tax being discharged on the net commission. The Tribunal also relied on earlier appellate authority holding that, where the tax is computed on the adjusted net commission, no separate refund claim is required for cancelled tickets. As the appellant had followed the same practice and the issue was covered by the cited precedent, the demand could not be sustained.

Conclusion: The adjustment of service tax through credit notes on cancelled air tickets was held to be permissible, and the issue was decided in favour of the assessee.

Final Conclusion: The demand, interest, and penalty did not survive, and the appeal was allowed with consequential relief.

Ratio Decidendi: Where the governing trade notice contemplates adjustment for ticket cancellations and service tax is effectively discharged on net commission, no separate tax demand can be sustained on amounts later reversed through credit notes.

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