AI Drafter 
TaxTMI 
TaxTMI 
2014 (4) TMI 363
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.... M/s. Galileo International Partnership, USA, M/s. Abacus Distribution System Pte. Ltd., Singapore, M/s. Amadeus Marketing S.A., Spain, M/s. Sabre Travel Information Network, USA and others intended to facilitate sales of its products and services, namely, Jet's seat Inventory, by using an online computer system provided by these foreign based companies, which was commonly known as Computer Reservation System (CRS), or Global Distribution System (GDS). The CRS companies acted as a sole on-line interface between the Jet's co9mputer network and the Travel Agents, who sold the products and services of Jet. The Computer System of CRS companies thus enabled access and retrieval, both by Jet and the Travel Agents, of information on real time basis relating to products of Jet through the CRS companies. 2.2 Agreements entered into by Jet with the CRS companies were obtained for examination. Statements of the concerned officials of Jet were also recorded to ascertain the factual position in this regard. Ms. Silveria D' Souoza, Manager (Taxation) of Jet in her statement dated 05/07/2005 admitted that the CRS companies provided M/s. Jet a media or platform to sell its tickets t....
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....GDS companies so as to provide access to the booking and cancellation of tickets. 2.4 In his statement dated 19/06/2007, Shri H.V. Raghavan, Manager (Finance) of Jet stated that the payments made to the CRS companies were in US Dollars as the said companies are based abroad and TDS was deducted from the amounts paid on bookings of air tickets made in India at the applicable rates. 2.5 Examination of the agreements entered into by Jet with the CRS companies revealed that Jet had entered into said agreements with a view to ensure display of its own database through the database of Master Computer System maintained by the CRS companies which were used by the Travel Agents for booking tickets and to market the products/services of Jet in a comprehensive manner. The database of the airlines was provided to the air travel agents through CRS Computer System on a real time basis for access and use. The updated database of CRS System were also accessed or retrieved by the participating airlines (Jet in this case) for their own use. Therefore, it appeared that the process of providing access to the air travel agents to the database of respective airlines and continuously feeding and up....
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.... the services received on or after 18/04/2006. The interest liability on the said demands were also confirmed and a penalty of Rs. 44.43 crore was imposed on Jet in respect of the demand covered by the show-cause notice dated 23/10/2008 under the provisions of Section 78 of the Finance Act, 1994. In respect of balance show-cause notices, the adjudicating authority imposed penalties under Section 76 of the Finance Act, 1994. He also imposed a penalty of Rs. 50,000/- on Jet under Section 77 of the said Finance Act. Aggrieved of the same, the appellant is before us. 3. The ld. Counsel for the appellant made the following submissions, which can be summarized as follows: 3.1 The data pertaining to the flights operated by Jet, such as flight schedules/plans/traffic, etc. are the proprietary information of the appellant, which is stored in a server, hosted and maintained by M/s. Sabre Decisions Technologies International Inc. in USA. The CRS companies receive/access data pertaining to the flights operated by the appellant from the database on the Sabre Server and also transmits the updated information to the Sabre Server. As per the agreement entered into by the appellant with the C....
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.... work order dated 31/03/2008 with Sabre, M/s.Sabre is responsible for maintenance of the system for the customer's use (Jet's use) including any necessary physical lines from the system (s) to the Internet via an Internet service provider or through a direct telecommunication connection. As per Clause 3, the Customer is solely responsible for the accuracy of the Customer Data and the timely inputting of such Customer Data and any changes thereto. The Customer Database shall be and remain the property of Customer. It was contended that as per the global distribution agreement entered into by the appellant with the CRS Companies, the appellant is a participant who wishes to make available information on its flights, seat availability and related information to travel intermediates and consumers by participating in the CRS system and as per which the subscriber to the CRS system shall mean any person other than an airline using the system under a contract or other arrangements to obtain information, make reservations and/or issue documents involving travel-related services and as per the said agreement the user shall be subscriber, the Airport Ticket Offices and City Ticket Of....
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....2 wherein it was held that when the data retrieved/accessed was owned by the recipient, the taxing entry of "Online Information and Database Access or Retrieval Service"would not be attracted. It was also argued that the CRS Companies are having offices in India and therefore, they are liable to pay service tax as service providers in terms of Rule 2 (1) (d) (iv) of the Taxation of Services (Provided from Outside India and Received in India) Rules, 2006 as per which the liability to pay service tax would fall on the resident service recipient only where the non-resident service provider does not have an office in India. Reliance was placed on the decision of the Income Tax Appellate Tribunal in the case of Amadeus Global Travel Distribution S.A. Vs. DCIT [ 113 TTJ 767] and Galileo International Inc. Vs. DCIT [MANU/ID/5178/2007]. Since the term "permanent establishment"is not defined under the Finance Act, it is permissible to refer to legislations which are pari material on the subject matter in question. In as much as the service providers have offices in India, the reverse charge mechanism would not apply and consequently, the appellant is not liable to discharge service tax on t....
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....these facts there cannot be any doubt that the CRS Companies located outside India are providing services to M/s.Jet in relation to "Online Information Database Access or Retrieval". Further, Jet is making payments to the CRS Companies for the services so rendered. Consequently Jet, as receiver of the service, is liable to pay service tax under reverse charge mechanism in terms of Section 66A of the Finance Act, 1994 read with Rule 2 (1) (d) (iv) of the Service Tax Rules, 1994. 4.3 The contention of the appellant that the CRS Companies are actually providing services to the travel agents is contrary to the facts on record. The travel agents are appointed by the airlines and they act for and on behalf the airlines and it is precisely for this reason that CRS Companies are paid by Jet for the benefit of service received by it. 4.4 As regards the reliance placed by the appellant in the case of United Telecom Ltd. (cited supra) it was submitted that the decision was rendered in the context of "Telecommunication Service"wherein the appellant therein had supplied certain equipment and was responsible only for the proper functioning of the said equipment and therefore, the facts of ....
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....ant, it was submitted that as against the net loss of Rs. 1246.39 crore for the half year ended 30/09/2013. The company's current assets amounted to Rs. 4438.85 crore. Thus, there are substantial current assets available for discharge of the tax liability and therefore, no hardship would be caused if the appellant is directed to make pre-deposit of the service tax demanded for the purpose of hearing of the appeal. The interest of Revenue, which is a paramount importance, needs to be secured. Accordingly, it is prayed that the appellant should be directed to make the pre-deposit of at least the service tax demand confirmed by the Commissioner. 5. We have carefully considered the submissions made by both the sides. 5.1 It will be useful at this juncture to see the statutory definitions of the taxable entries under Finance Act, 1994. 5.1.1 As per Section 65 (75), "on-line information and database access or retrieval"means providing data or information, retrievable or otherwise, to any person in electronic form through a computer network". 5.1.2 As per Section 65 (39), "Electronic form"has the meaning assigned to it in clause (r) of sub-section (1) of Section of the Inf....
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....s or retrieves data from the computer system maintained by the CRS Companies. The initial data recording the flight details, number of seats available, fare of the tickets, etc. are uploaded by the appellant in the server maintained by M/s. Sabre Decisions Technologies International Inc. USA. The CRS Companies access these data and loads them on to their own master computer system and thereafter transmit this information or data pertaining to the airlines to the travel agents for booking of tickets by the travelers. Once tickets are booked by the travel agents for a particular flight on particular date for a particular class, this information is received by the master computer system maintained by the CRS Companies and thereafter, transmitted to airlines computer system maintained by M/s. Sabre as the data has to be continuously updated from the booking information transmitted by the CRS Companies to the computer system maintained by the airlines. The airlines access the information relating to the passengers and also information about the bookings made for a particular flight and whether there is an over bookings made for a particular flight and whether there is an over booking or....
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....s to the Jet computer System and using the data keyed in by a travel agent who accessed the Jet Computer System via an interface with the CRS System, Jet was in a position to generate the passenger manifest detailing the names of the passengers booked on a particular flight as well as the respective sector and class of travel. These facts were further corroborated by Shri Manoj Kumar Laxman Singh, Manager-Taxation vide statement dated 16/10/2008 wherein he admitted that CRS system was used by M/s Jet Airways for making passenger seat reservation/bookings on the flights operated by them and payments were made by Jet to CRS Companies for usage of the CRS System. Shir H.V. Raghavan, Manager (Finance) had also stated that payments to CRS companies were being made by the appellant in US Dollars as the CRS Companies are based abroad, after deducting TDS, wherever necessary. From these clear admissions and the nature of the transaction undertaken, it is very evident that the appellant was accessing data from the computer system of CRS companies. 5.5 It should also be noted that the travel agents are agents of the airlines and it is to enable them to access the airlines data, the appell....
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....herefore, the reliance placed on the said decision does not help the case of the appellant. As regards reliance placed on the decision in the Philips India Ltd. Case, there also the facts are different. That case dealt with providing wide area IP network dedicated to supporting Philips' businesses throughout the globe. The network was an internally open network providing 'any to any' IP communication between all Philips locations connected to the Philips global Network. The said services were delivered by Philips Global Infrastructure services to all its group entities. In the facts of that case, it was held since the Revenue was not able to demonstrate that the impugned services results in providing access to the applicant to any data other than their own data, it cannot be prima facie held that the activity fell under the category of online data or retrieval services. Those are not facts obtaining in the present case. Further, the said decision was only an interim order does not have any precedent value and therefore, does not help the appellant's case. 5.7 In an identical case pertaining to Thai Airways International Public Company Ltd. a question arose as to whet....
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....istence under RBI permission. Section 66A (2) of the Act recognizes only different situs under law but the said sub-section does not grant immunity from taxation in India once incidence to tax arises in India. Appellant's operation in India was to achieve its object of serving Air Travel Agents in India. To do so, it had reserved its right of access to data base of CRS companies to ensure that those travel agents do not frustrate its object and the appellant operates in India competing with other airlines." The Ld. Technical Member concurred with the classification of service as follows: 38. Coming first to the question of classification of the service, the activity of the CRS Companies is maintaining online information on real time basis about the flight schedule, fare, seat availability etc. of the flights being operated by Thai Airways all over the world, for which CRS Companies have linkage with the computer system of Thai Airways, Bangkok and providing access in respect of this information to the IATA agents appointed by Thai Airways which is used by them for selling of air tickets of Thai Airways. I agree ....
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....ered by the CRS companies to the airlines was held to be classifiable under the category of "online database access and/or retrieval services". 5.9 We are of the view that in the present case also services received by Jet from CRS companies fall under the category of online database access and/or retrieval service. Since the service provider is situated abroad, in terms of Section 66A the appellant is liable to discharge the service tax liability on reverse charge basis and we hold accordingly. 5.10 The next question for consideration is whether the service tax has to be demanded for the appellant airline or from a group company of the foreign service provider in India. As per Section 66A where the provider of service has his business establishment both in that country and elsewhere, the country, where the establishment of the provider of service directly concerned with the provision of service is located, shall be treated as the country from which the service is provided or to be provided. Sub-section (2) of Section 66A says that where a person is carrying on a business through a permanent establishment in India and through another permanent establishment in a country other ....
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....ax on the income earned in India. Chapter V of the Finance Act, 1994 which deals with the provisions of levy of service tax does not refer to the provisions of Income Tax Act or DTAA between India and other countries. Further the definition of permanent establishment under DTAA also varies form agreement to agreement. In such a scenario, it would be highly inappropriate and unwise to apply the definition given in a DTAA agreement to the provisions of Finance Act, 1994. If the legislature wanted that definition given in Income Tax Act should be adopted for levy of service tax, the legislature would have specifically stated so. In the definition of online database access and/or retrieval service itself, references have been made to various provisions of the Information Act, 2000. Therefore, in the absence of any reference to the Income Tax Act or to the DTAA in Section 66A, it cannot be presumed that the definitions given in those laws would apply. It is a well settled position in law that the provisions of tax statute has to be strictly construed. "In a taxing Act one has to look merely at what is clearly said. There is no room for any intendment. There is no equity about a tax. ....
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....ld not be disposed of in a routine manner unmindful of the consequences flowing from the order requiring the assessee to deposit full or part of the demand. There can be no rule of universal application in such matters and the order has to be passed keeping in view the factual scenario involved. Merely because this Court has indicated the principles, that does not give a license to the forum/authority to pass an order which cannot be sustained on the touchstone of fairness, legality and public interest." The same ratio was followed by the Hon'ble Andhra Pradesh High Court in the case of SQL Star International Ltd., Vs. CC, Hyderabad [2012 (276) ELT 465 (AP)] wherein it was held that- "(1) Three aspects to be focused while dealing with the applications for dispensing of pre-deposit are: a) prima facie case, b) balance of convenience, and c) irreparable loss. (2) Interim orders ought not be granted merely because a prima facie case has been shown; (3) The balance of convenience must be clearly ....