2024 (12) TMI 1244 - AT - Service Tax

Appellant legitimately shared service tax burden with sub-agents, no illegal collection found under Section 73A

M/s TSI Yatra Pvt. Ltd. Versus Commissioner of Central Excise, Goods and Service Tax, Gurugram

CESTAT Chandigarh held that appellant did not illegally collect service tax from sub-agents. The tribunal found that commission and tax burden were ... Legality of amount collected by the appellant from the sub-agents/customers, representing as Service Tax - liability to deposit it to the credit of the Central Government under the provisions of Section 73A(2) of the Finance Act 1994 - Procedural variations - Invocation of the provisions of Section 73A. Legality of mount collected by the appellant from the sub-agents/customers, representing as Service Tax - liability to deposit it to the credit of the Central Government under the provisions of Section 73A(2) of the Finance Act 1994 - HELD THAT:- It is found that in the entire transaction there is nothing to indicate that an amount representing as service tax that is collected and retained by the appellants. It is found that due to an understanding between the appellant and the sub-agent, the liability of the the subagentto pay this Service Tax to the exchequer, is shifted to the Appellant and an accounting entry is made as the liability stands discharged at the hands of the Appellant. Effectively, the service tax on the portion of the amount of commission paid to the sub-agent is discharged first by the appellant and thereafter recovered. His portion of the commission (net of service tax) is already withheld by the sub-agent. Therefore, it cannot be said that the appellants have recovered service Tax from their agents and have not paid it. The only plausible conclusion is that what was recovered was the service Tax already paid by the appellants on the commission actually retained by the sub-agent; no service tax is actually collected by the Appellant which is payable or recoverable under Section 73A. It is found that the SCN alleges that the appellants also illegally collected an amount as representing Service Tax from the sub-agents by wrongly impressing upon them that they (M/s TSIYPL) were providing services to the sub-agents and therefore, they (M/s TSIYPL) were entitled to collect Service Tax from them; M/s TSIYPL did not deposit the amount collected by them as representing Service Tax, with the Government exchequer. During investigations, M/s TSIYPL failed to provide any legal justifications/statutory authority under which Service Tax was collected by them from their sub-agents/customers of the airlines. There are no evidence in the Notice to allege that the appellants impressed upon their sub-agents that they were providing certain services and therefore, are eligible to collect some service tax from them. Procedural variations - HELD THAT:- It has to be construed that appellants and their subagents are rendering the ‗Air Travel Agent service. As a natural corollary, they share the commission and so, the tax burden. While alleging that the appellants have collected an amount representing service Tax form their sub-agents, Revenue has conveniently ignored the fact that the commission was also shared. It is not the case of the Revenue that tax burden cannot be shared more so, when remuneration is shared. There is no law forbidding such sharing of the tax burden when Revenue is shared - Revenue cannot enrich itself on the strength of procedural variations and accounting practices of the appellant. Invocation of the provisions of Section 73A - HELD THAT:- Revenue conveniently ignored the fact of sharing of remuneration, given by the Airlines, by the appellant and their sub-agents. Therefore, it was wrong to seek tax again on the sharing of Tax burden. Tax on the total remuneration was discharged. Demanding service tax again on the portion of sub-agent‘s commission would amount to double taxation - Revenue cannot enrich itself on the strength of procedural variations and accounting practices of the appellant. The amount shown as service tax in the invoice issued by the appellants is to account for the sub-agent‘s share of service tax. No case is made by revenue for invocation of the provisions of Section 73A. The impugned order is set aside - appeal allowed. Issues Involved:1. Whether the amount collected by the appellant from the sub-agents/customers, representing as Service Tax, was illegal and liable to be deposited to the credit of the Central Government under Section 73A(2) of the Finance Act, 1994.2. Whether the appellant was justified in charging service tax from the sub-agents and whether the service tax had been deposited by the appellant with the government.3. Whether the provisions of Section 73A(2) of the Finance Act were applicable in this case.4. Whether there was any double taxation involved in the transactions.5. Whether the adjudicating authority's findings were based on a correct understanding of the business model of the appellant.Issue-wise Detailed Analysis:1. Legality of Service Tax Collection from Sub-Agents:The core issue was whether the appellant illegally collected service tax from sub-agents/customers and failed to deposit it with the Central Government. The tribunal found that the transaction involved sharing of revenue between the agent and the sub-agent after receiving the commission (inclusive of service tax) from airlines. The service tax liability was shared between the agent and sub-agent, and no extra service tax was collected from the sub-agent. The tribunal concluded that the service tax was not illegally collected or retained by the appellant, and the accounting entries were made to reflect the sharing of tax liability.2. Justification of Service Tax Charged from Sub-Agents:The tribunal examined whether the appellant was justified in charging service tax from sub-agents and found that the appellant discharged the service tax liability on the entire commission received from airlines. The tribunal noted that the appellant had shared the commission and tax burden with the sub-agents, which was reflected in the invoices. The tribunal held that the service tax component was shown on the invoice for accounting clarity and that the actual tax liability was already paid by the agent when receiving the commission from the airline.3. Applicability of Section 73A(2) of the Finance Act:The tribunal analyzed the applicability of Section 73A(2), which deals with amounts collected as representing service tax that were not required to be collected. The tribunal found that the appellants did not collect any service tax from sub-agents that was not required. The tribunal concluded that the provisions of Section 73A(2) were not applicable as the service tax collected from the sub-agents was part of the revenue sharing mechanism and not an illegal collection.4. Double Taxation Concerns:The tribunal addressed the issue of potential double taxation, noting that the service tax on the total commission was already discharged by the appellants. The tribunal found that demanding service tax again on the portion of the sub-agent's commission would amount to double taxation. The tribunal emphasized that the revenue sharing and tax burden sharing mechanism did not result in double taxation.5. Understanding of the Business Model:The tribunal critiqued the adjudicating authority's understanding of the appellant's business model, which involved a chain of agents in the air travel agency business. The tribunal noted that the legislature recognized the possibility of multiple agents and provided options for service tax payment. The tribunal found that the adjudicating authority's conclusions were based on a misunderstanding of the appellant's business model and accounting practices.Conclusion:The tribunal allowed the appeal, finding that the appellant was justified in its accounting and tax practices, and that the provisions of Section 73A(2) were not applicable. The tribunal emphasized that the service tax liability was appropriately discharged, and there was no illegal collection or retention of service tax by the appellant. The tribunal's decision was based on a comprehensive analysis of the transactions, accounting practices, and legal provisions.