Consideration for taxable service rejected where card-company reimbursements were only passed through and not retained as payment.

Amounts routed through the appellant from card companies for customer discounts and free tickets were treated as reimbursements passed on to cinema houses, not as consideration for a taxable service to the card companies. The appellant had separately charged a convenience fee for ticket booking and discharged service tax on that component, while the show cause notice itself recorded that no invoice was raised on the card companies. On those facts, the appellant did not retain the disputed sums as its own consideration, and in the absence of consideration no service could be said to have been provided to the card companies. The service tax demand and equal penalty were therefore held unsustainable.

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Issues: Whether the amount routed through the appellant from card companies for customer discounts and free tickets constituted consideration for any taxable service allegedly provided to the card companies, and whether service tax and penalty were sustainable.

Analysis: The record showed that the appellant charged convenience fee for ticket booking and paid service tax on that component, while the amounts received from card companies were intended to reimburse discounts offered to cardholders and were passed on to cinema houses. The show cause notice itself noted that no invoice was raised on the card companies. On the facts, the appellant did not retain the amounts collected from card companies as its own consideration. In the absence of consideration, no service could be said to have been provided to the card companies.

Conclusion: The demand of service tax and the equal penalty were not sustainable, and the appeal succeeded.

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