https://www.taxtmi.com/css/info/rss_sitemap/rss_feed.css?v=1746094055 https://www.taxtmi.com Business/Tax/Law/GST/India/Taxation/Policies/Legal/Corporate Tax/Personal Tax/Vat Law/Legal Information/Tax Information/Legal Services/Tax Services Tax Management India. Com / MS Knowledge Processing Pvt. Ltd. All rights reserved. One stop solution for Direct Taxes and Indirect Taxes https://www.taxtmi.com/caselaws?id=759351 https://www.taxtmi.com/caselaws?id=759351 Levy of service tax on the commission received from the airlines under the category of air travel agent services - rendering of air travel agent services to the airlines or to the sub-agents/customers? - recovery of amount of service tax collected by the appellant from the sub-agents under section 73A(2) of the Finance Act. Whether the commission received by the appellant from the airlines was inclusive of service tax? - HELD THAT:- The PSA Agreement was signed by the appellant in the year 1994, whereas air travel agent services became taxable w.e.f. 01.07.1997. Thus, the PSA Agreement could not have conceived of any service tax on air travel agent service. This apart, unless an amount has been specifically recovered as tax, the phrases such as full compensation or inclusive of all taxes would not automatically mean that tax has been recovered. Full compensation can only mean that the appellant would not claim any amount over and above the amount of commission paid by the airlines for sale of air ticket and other allied services. The appellant has also produced a certificate issued by airlines stating that no service tax was included in the commission paid by them to the appellant. It is, therefore, not possible to accept the contention of the department that the Agreement included service tax also under the remuneration clause of the Agreement. Whether the appellant rendered air travel agent services to the airlines as contended by the department or the appellant rendered this service to the subagents or customers as contended by the appellant? - HELD THAT:- The commission that was received by the appellant from the airlines was for the services that the appellant was providing to the sub-agents or to the customers and not because the appellant rendered any service to the airlines. In fact, the commission received by the appellant had a direct nexus with the services rendered by the appellant to the sub-agents. It can be seen from the provision of section 67 of the Finance Act that in respect of air travel agent services, the taxable value is the gross amount charged form the customer excluding airfare, but includes the commission received from the airlines. Hence, in addition to the amount charged from the recipient of service (customer), the provision created a specific inclusion to the extent of airline commission. The requirement of the inclusion clause existed only because the airline was not considered as the service recipient of air travel agent services. If air travel agent services were rendered to airlines, then the commission from airlines would have been taxable as gross amount charged from the customer itself. The travel agent services have been rendered by the appellant to the sub-agents, and not to the airlines and once services are provided by the appellant to subagents, the sub-agents cannot be said to be providing any services to the appellant. Whether the department is justified in recovering the amount of service tax collected by the appellant from the sub-agents under section 73A(2) of the Finance Act? - HELD THAT:- Section 73A of the Finance Act has carved out two situations which are distinct from each other. Section 73A(1) applies to cases where a person, who is liable to pay tax, has rendered a taxable service to a service recipient, but has collected service tax in excess, which has not been deposited with the government. This means that section 73A(1) mandates the existence of a service provider and a service recipient relationship and tax has been collected in excess of the applicable levy. On the other hand, section 73A(2) deals with a situation where any person, not being a service provider, has collected an amount from another person representing as service tax. This provision applies only to those cases where there is no service provider and service recipient relationship between the person collecting an amount as service tax and the person paying such amount. It is for this reason that sub-section (2) of section 73A has been invoked by the department. The contention of the appellant is that it rendered services to the sub-agents and not to the member airlines of IATA and so the appellant was entitled to collect service tax from the sub-agents, who were the service recipients. The burden of tax is borne by the service recipient. Once it is established that the sub-agents are the recipient of services rendered by the appellant, there can be no illegality in recovering service tax from the sub-agents. Section 73A(2) of the Finance Act would, therefore, not be applicable. The impugned order dated 30.05.2018 passed by the adjudicating authority deserves to be set aside and is set aside - Appeal allowed. Case-Laws Service Tax Wed, 25 Sep 2024 00:00:00 +0530