TaxTMI 
TaxTMI 
2014 (8) TMI 742
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....) of Section 73 of the Act, along with interest. (ii) imposition of Penalty of Rs. 1,68,33,425/- u/s 78 of the Act. (iii) penalty of Rs. 5,000/- imposed under Section 77 of the Act. While challenging above levy, it was also challenged that extended period of limitation prescribed by proviso to sub-section (1) of Section 73 of the Act was not invocable on the ground that the appellant was not liable to service tax under section 66A of the Act. 2. At the outset Sri Puri learned Chartered Accountant appearing for the appellant submitted that the material facts of the present appeal being similar to the case argued in the case of M/s Thai Airways, he adopts those arguments for the present appeal. BACK GROUND OF THE CASE, INVESTIGATION RESULT AND ADJUDICATION FINDINGS 3.1 When it came to knowledge of Revenue that certain Airlines operating in India were availing 'Online information and data base access or retrieval service' from foreign based CRS service providers and were liable to service tax as recipient of service, but no service tax due were deposited by them, investigation was made. It was reveal....
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....line was making payment to the CRS Companies for each booking, cancellation, etc. made by the Travel Agents as per terms agreed between the parties to the agreement. Airline specific CRS software was in use and data base was maintained by CRS companies for easy access and use by the Airlines as well as Travel Agents for ultimate benefit of each other so as to facilitate sale of products and services of Airlines. Airline appellant in consideration of the receipt of online data base access and retrieval thereof was paying agreed charges to the CRS companies 3.7 Enquiry was made to ascertain whether the CRS companies viz. M/s Amadeus Marketing S.A.R.L. France, M/s Abacus Distribution system Pvt. Ltd, Singapore, M/s Galileo International Partnership, USA and M/s Sabre- American airlines Inc, USA, had any office in India to determine the person liable to pay such service tax. It was revealed that Indian companies with similar names viz. M/s Galileo (India) Pvt. Ltd, M/s Abacus Distribution systems (India) Pvt. Ltd and M/s Amadeus (India) Pvt. Ltd, were functioning in India as separate legal entities. M/s Abacus Distribution System (I) P. Ltd and M/s Galileo India P Ltd function as Na....
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....apter-V of the Act was applicable to levy service tax for provision of service prescribed by clause 3(iii) of the Taxation of Services (Provided from outside India and received in India) Rules 2006 received by the Airlines operating in India through their permanent establishment in India. 3.11 Examining section 65(105)(zh) of the Act, learned Adjudicating Authority opined that it was not necessary that the data/information should be provided to a customer personally or that the computer network should be owned by the service provider as service being accessible or retrievable online in respect of data or information through the computer network as vehicle online. 3.12 Contention of the appellant that the impugned service was provided outside India as the CRS company and their parent company were situated outside India for which there cannot be tax liability of appellant was considered by ld. Adjudicating Authority. But he discarded such plea finding that the CRS companies even if situated outside India were providing service to Appellant having establishment in India which enabled Travel Agents of the appellant to achieve its object. Appellant may not be privy to the contract....
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....ordingly appellant not being recipient of service u/s 65(105)(zh) read with section 65(75) of the Act is not liable to service tax nor penalty. (B). Section 66A (2) of Finance Act, 1994 was applicable to immune the appellant from levy of service tax. Head office of the appellant entered into similar agreement with various CRS service providers. One of such service provider was AMADUES. That company had entered into agreement with this appellant in similar terms as that was entered into with M/s Thai Airways. There was no agreement between CRS companies and Travel Agents. Revenue had no evidence of agreement between CRS companies and IATA. The Appellant has suffered tax for providing passenger service. So also Travel Agents have suffered tax serving the passengers. Proceeding before Tribunal is pending in respect of the service provided by CRS companies to Travel Agents. Therefore the appellant cannot be called upon to pay tax for the same service. (C). If the appellant is required to pay tax as a service recipient, it would be eligible to avail Cenvat credit thereof and no revenue gain shall be made by the Government by adjudication exercise. (D). Appellant relying on the ....
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....s the rules framed under the Act brought the appellant to the purview of section 66A of the Act and levied the demand which is sustainable. Section 66A (2) of the Act is not applicable to the case of the appellant. 5.3 The appellant as a business entity was supposed to be covered by Part XI of Companies Act, 1956 which prescribes rules regarding companies incorporated outside India and governed by mandatory requirement of Accounting Standard 17 for segment reporting by the appellant and was also governed by mandatory requirement of Accounting Standard 18 i.e., making related party disclosure. Therefore it was covered by section 66A (1) without being covered by section 66A (2) of the Act read with the Taxation of Services (Provided from outside India and Received in India) Rules, 2006 and liable to service tax. 5.4 The appellant being recognized as an entity in India by Reserve Bank of India at the approved address was recipient of service from CRS companies abroad to make that available to its Travel Agents and others for booking tickets etc., and was making payment to CRS companies through regulatory measures of RBI under FEMA by settlement of its account with its head offic....
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....icting the basis of allegation bringing home the appellant to charges and that could not be defended by the appellant for which no interference to adjudication is desirable. Adjudication should be sustained without any concession on time bar plea. Tax and Penalty imposed by the learned Adjudicating Authority should remain untouched by Tribunal. FINDING AND CONCLUSION OF TRIBUNAL 6. Learned Adjudicating Authority considering role of the appellant and operating in India under RBI permission at the place of business establishment in India having its head office and availing on-line information and data base access and retrieval service provided by CRS companies abroad for booking air tickets by its Air Travel Agents in India for the appellant making use of the service of master computer of the CRS company and also examining the considerations paid by the appellant to avail above service during the period 18/04/2006 to April 2008 held that the appellant as a service recipient of taxable service u/s 65(105)(zh) of the Act was liable to service tax under section 66A of the Act. Accordingly, he raised demands as set out at the outset. Section 65(105)(zh) of the Act which is the ta....
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....tion, reservations, ticketing, distribution and related functions on worldwide. Meaning of the participating carrier was defined by the agreement to mean 'any carrier that has entered into a participating carrier agreement with Amadeus'. Appellant was one of the participating carriers and defined as Participant in the agreement. 11. The agreement aimed to facilitate dissemination of information supplied by Amadeus affiliates and participating carriers including the participating appellant, for the promotion of its products and services. An Amadeus subscriber i.e. IATA and affiliate were allowed under a contract arrangement with the Amadeus system to obtain information, make reservations and issue documents involving travel related service. 12. The term AMADEUS Subscribers as defined by Article 1 of the agreement means 'any person other than an Amadeus affiliate or participating carrier, using under a contract or other arrangement the AMADEUS system to obtain information, make reservations and issue documents involving travel related services'. They were user of on line data service provided by CRS Company to achieve the object of the appellant. 13. Responsibilities and rig....
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....ect to a separate agreement that will cover the equipment lease or purchase, the connection and communication costs. 6. At the PARTICIPANT's option, AMADEUS will take all reasonable steps necessary to provide to AMADEUS Subscribers, ATOs and CTOs Direct Assess to the PARTICIPANTs system to obtain flight information and last seat availability. This option, and the conditions hereof, are described in Schedule 2 of the present Agreement. B) Compliance with applicable formats 1. If the PARTICIPANT elects to supply its schedule and fare information directly to AMADEUS, the PARTICIPANT will be responsible for compliance with the SSIM or ATPCO formats used by AMADEUS. 2. The PARTICIPANT will ensure that the PARTICIPANTs system fully complies with the interline reservation policies, procedures and message-formats set forth in AIRIMP and amendments thereto. C) Seat availability PARTICIPANTs seat availability status on each flight will be recorded under the terms expressed in ATTACHMENT B (Schedule Loading and Sales Facility) to this agreement. D) Issuance of tickets 1. The PARTICIPANT will take all necessary steps to authorise AMADEUS Subscribers to issue tickets ....
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....f booking fees paid by the appellant in the event of damages arising out of the performance or breach of the agreement between the parties. It may be appreciated that no one would prefer to cause prejudice to himself surrendering his right of self-protection. The Appellant was not an exception to that. Thus existence of right of appellant to access data base on line including retrieval thereof by appellant is undeniable. 17. Article 4 of the agreement dealing with consideration payable by service recipient exhibit that the participant shall pay AMADEUS a booking fee for each participant net booking through the Amadeus system, including booking made by ATOs ad CTOs. ATO means 'Airport Ticket Offices' and CTO means 'City Ticket Offices'. 18. Article 5 of the agreement dealt with periodical payments to be made by appellant participant which reads as under: ARICLE 5 PAYMENTS AMADEUS shall submit a monthly invoice to the PARTICIPANT for all charges and fee due to AMADEUS under attachment A to this agreement and incurred during the preceding month. The PARTICIPANT will settle the invoice by paying the amounts due to AMADEUS or any entity AMADEUS may designate, within thirty (....
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....ns and changes to its programme and services it consider necessary from time to time. AMADEUS will notify the PARTICIPANT of any significant change. C) Flight Availability AMADEUS will store PARTICIPANT flight availability status coded in accordance with the relevant provisions of Attachment B (Schedule Loading and Sales Facility) to this Agreement, and in accordance with AIRIMP formats. D) Rejected messages AMADEUS will review rejected messages it receives from the PARTICIPANT and will investigate and implement measures to reduce such rejects where volume so justified. E) Loading of schedules and routing requests AMADEUS will load the PARTICIPANTS schedules in the AMADEUS Global core in accordance with the options expressed in Attachment B. (Schedule Loading and Sales Facility) F) Interruption of service AMADEUS will take all reasonable steps to ensure that service is not interrupted. However, AMADEUS has the right to interrupt the operation of its global Core System or its communication network for technical or operational reasons. G) Compliance with rules and regulations AMADEUS will comply at all times with the rules or regulations imposed by Civil....
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....n India, such permanent establishments shall be treated as separate persons for the purposes of this section. Explanation 1. - A person carrying on a business through a branch or agency in any country shall be treated as having a business establishment in that country. Explanation 2. - Usual place of residence, in relation to a body corporate, means the place where it is incorporated or otherwise legally constituted.] 23. The appellant having its place of business in India was recipient of online data base access and retrieval thereof to promote its business in India ensuring error free information to the travel agents in India. Storage of such data in the computer of CRS companies for use thereof was an inevitable necessity of the appellant since liability of the subscribers to the appellant was limited to the service charge paid by it in respect of each service of ticket booking. Therefore the appellant did not remain silent without exercise of its right of access to such data base and/or retrieval thereof to ensure that that it becomes litigation free. The appellant having right of access to the data base and for such service of access, it had made payments to the CRS C....
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....at credit of service tax levied by the adjudication order does not exonerate it from the liability it has incurred under the law. Grant of Cenvat credit arises only if service tax is paid by the appellant and such grant not otherwise disallowed by law. Without undergoing scrutiny of law as to admissibility of Cenvat credit, appellants hypothetical argument has no sense in the eyes of law. 27. Appellant's reliance on Paul Merchants case (supra) is of no use to it as the issue involved therein was whether there was an export of service made by Paul Merchants from India. Present case of appellant is not export of service from India but an import of service into India by virtue of right of access of the appellant to the online data base and retrieval thereof. Nor also reliance on the Board Circular (supra) has any force as circular cannot override the law. Appellant has thus misplaced the cited decision. 28. When the appellant failed to be registered under the Act and file returns periodically, its plea of bonafide belief does not arise sine it escaped scrutiny of law. There was deliberate breach of law to cause evasion. Had there been no investigation, appellants liability wou....
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....egistration at New Delhi in respect of service of transportation of goods by air and transportation of passengers by air provided by all the branches in India. The appellant have appointed IATA authorized travel agents in India for selling of tickets of Austrian Airlines. The tickets are sold by the IATA agents on behalf of Appellant. The IATA Agents after selling the tickets of the Airlines remit the money after retaining their agreed commission, to the appellant through Billing Statement Plan (BSP) and the appellant, in turn, remit the money to their Head Office at Viena. The appellant, accordingly pay service tax in respect of services of transportation of goods by air and passenger transportation by air, being provided by them in India. IATA Agents pay the service tax on the commission earned by them for the services of air tickets booking being provided by them. To facilitate the selling of air tickets, the Appellants head office at Austria has entered into agreements with several computerized reservation system companies (hereinafter referred to as 'CRS' Companies). Some of the CRS Companies with whom Austrian Airlines have entered into the agreement, are: M/s Galilio Intern....
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....interest on it under section 75 of the Finance Act, 1994 and also for imposition of penalties on the appellant under section 76,77 & 78 of the Finance Act, 1994. 31. This Show Cause Notices was adjudicate vide order No.31-ST/PKJ/CCE/ADJ/20 dtd.15.11.2011 by which the service tax demand along with education cess totaling Rs. 1,68,33,425/- was confirmed against the appellant under section 73 of Finance Act, 1994 along with interest on it under section 75 ibid. Besides this, while penalty of Rs. 5,000/- was imposed on the appellant under section 77 ibid, and another penalty of Rs. 1,68,33,425/- was imposed on the appellant under section 78 of the Finance Act, 1994. Against this order of the Commissioner, this appeal has been filed. 32. Since the arguments made on behalf of the appellant and on behalf of the Revenue have been recorded in the order prepared by my learned brother, I am not repeating the same in this order. 33. I have considered the submissions from both the sides and perused the records. While the case of the Department against the appellant is that the CRS Companies located abroad are providing services of 'online data base access and/or retrieval' taxable u....
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....which CRS Companies have linkage with the computer system of Austrian Airlines, Viena and providing access in respect of this information to the IATA agents appointed by the Airlines which is used by them for selling of air tickets of the Airlines. I agree with the findings of my learned brother that this activity of the CRS Companies is covered by the definition of 'Online Database access and/or retrieval' service, as given in Section 65(75) read with Section 65(75) of the Finance Act, 1994 and this service, if provided or deemed to be provided in India, would attract service tax under section 65(105)(zh) ibid. In this regard, I do not accept the Appellant's contention that the activity of CRS Companies is e-commerce and therefore, not taxable, as there is no sale of tickets by the CRS Companies. The Tickets of Austrian Airlines are sold through IATA agents by using the information/database maintained by the CRS Companies and it is the IATA agents who collect payments from the passengers. Another plea of the Appellant that for taxing a service under section 65(105)(zh) read with section 65(75), as 'Online Database access and/or retrieval service', the data stored in computer syste....
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....arranty period and engages C to provide the service of free repairs to B for which he pays to C, the recipient of the service provided by C is A, not B. The B is only the beneficiary of the service provided by C. However when there is no legal obligation of A to provide any service to C and still on his instructions B provides service to C for which B receives payment from A and circumstance indicate that A has acted merely as facilitator or agent for C and has made payment on behalf of C, flow of consideration from C to the service provider B can be presumed and it is C who will be treated as the recipient of the service. (2) Services mentioned in various clauses of Section 65(105) of the Finance Act, 1994 attract service tax under section 66 ibid. However:- (a) When the service provider as well as the service recipient, both, are located in India (except the state of Jammu & Kashmir), the service tax is charged from the service provider, except for the services notified under section 68 for reverse charge, where the service tax is charged from the service recipient; &nb....
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....ncerned with the Provision of service [2nd Proviso to Section 66 A(1)]. In my view, the underlying principle behind this Proviso will also be applicable for determining as who is the service recipient, when a service provider A located abroad, has provided service to a Company having head office outside India and a branch office in India and in such a situation, it will be reasonable to treat the establishment most directly concerned with the use of the service provided as the recipient of the service provided by A. (3) Thus irrespective of the location of service provider- whether in India or outside India, service tax is charged in India if the service recipient is located in India i.e. the service has been received and, hence, consumed in India, and if service recipient is located abroad i.e. the service has been received and, hence, consumed abroad, there is no liability of the service provider in India to pay the service tax. This is in accordance with the principle of equivalence mentioned in the Apex Court's judgment in the case of All India Federation of Tax Practitioner reported in 2007 TIOL-149-SC-ST and Associatio....
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....ty, as enumerated in these rules, the same are treated as having been received at the location where the immovable property is located. In respect of performance based services, as enumerated in these rules, the same are treated as having been received at the place where the same have been performed and in case a service is partly performed at one place and completed at another place, it is treated as performed at the place of completion [for the purpose of export of a performance based service, service partly performed outside India is treated as performed outside India and for the purpose of import of performance based service, the service partly performed in India is to be treated as performed in India]. In case of the service availed for use in relation to business or commerce, the same are deemed to have been received at the place where the recipient using the service in his business is located. Thus, when the service provider is located in India and the service recipient is located outside India, there will be export of service and there would be no taxation in India and if service provider is located outside India and service recipient is located in India, there will be impo....
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....e branch office and the head office are to be treated as two separate persons. The Revenues plea is that as the service provided by the CRS Companies has been used by the IATA agents in India appointed by the Appellant for sale of the Airlines Tickets, it is the Appellant who have to be treated as the service recipient, not there head office in Thailand. 36.2 I am of the view that the Revenues stand that it is the Appellant, the branch office of Austrian Airlines, Viena, who are the recipient of the service provided by the CRS Companies, is totally incorrect for the following reasons. (1) During the period of dispute, there was no definition of 'service recipient' in the Finance Act, 1994 or in the Rules made there under. Even in negative list based regime of service tax in force since 2012, there is no definition of 'service recipient', though there is definition of 'service'. Therefore, the meaning of 'Service' and 'Service Recipient' during the period of dispute has to be ascertained from the nature of the service transaction. As discussed in para 35(i) above, a service transaction is akin to....
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....of consideration from C to B can be presumed and C will have to be treated as the service recipient. Applying the above criteria, in respect of the service provided by CRS Companies, the Appellant can be treated as the recipient only if the service provided by the CRS Companies is meant for the Appellant and their Head Office had acted only as facilitator and there is flow of consideration, direct or indirect from the Appellant to CRS Companies. In this case, as discussed in the next paragraphs, neither the Appellant can be treated as the recipient of the service provided by the CRS Companies, nor there is any flow of consideration, direct or indirect from the Appellant to CRS Companies. (2) In this case, from the agreements between the Appellants Head Office at Australia, Viena and the CRS Companies, it is clear that the CRS Companies were not providing any Indian branch specific service. It is the Head Office at Viena which, in order to facilitate the booking of air tickets though IATA agents all over the world, had negotiated with the CRS Companies and had entered into contacts with them for storage of update....
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....tion of the Department that the Appellant is the person liable to make payment to CRS Companies for there services or have made payment to them directly or indirectly. (5) When the service has been received by the Head Office of the Appellant at Viena against its agreements with CRS Companies and as accepted in the impugned order, entire payment has been made abroad by the Head Office directly to CRS Companies and when in view of the provisions of Section 66A(2), the Appellant (Indian branch of Austrian Airlines) and their Head Office at Austria, Viena are to be treated as separate persons, the entire transaction of provision of Service has to be treated as having taken place outside India and the service received by the Head Office at Viena cannot be treated as received by the Appellant, in India. (6) In my view, the only situation where in respect of the service provided by a service provider A located outside India against an agreement/contract with Head Office of a company 'B', incorporated outside India i.e. located outside India, the service tax can be charged from the branch off....
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....ation to the credit available to the assessee himself of the duty paid by him and not by the way of availability of credit to the buyer of the assessee's manufactured goods [para 13(b) of the judgment], longer limitation period under Proviso to section 11A (1) of Central Excise Act, 1994 would not be applicable. The ratio of this judgment is squarely applicable to the facts of this case, as the Provisions of Section 11A (1) of Central Excise Act, 1944 are in pari-materia with the Provisions of section 73 (1) of the Finance Act, 1994. Since in this case, intention to evade the tax is absent, the penalty under section 78 of Finance Act, 1994 would not be attracted. 38. In view of the above discussion, the impugned orders are not sustainable. The same are set aside. The appeals are allowed. 43. Since there is difference of opinion between Member (Judicial) and Member (Technical), the Registry is directed to place this matter before Hon'ble President in accordance with the Provisions of Section 129 C(5) of Customs Act, 1962, as made applicable to service tax matters by section 35D(1) of Central Excise Act, 1944 read with section 86(7) of the Finance Act, 1994, for constituting a ....
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....ve Bank of India (RBI) to carry out air transport activity in India was a branch in India and was recipient of 'online Database Access or retrieval Service' from CRS Service provider abroad and liable to service tax in terms of section 65 (105) (zh) read with section 65 (75) of Finance Act, 1994 on reverse charge mechanism basis u/s 66A of the said Act w.e.f. 18.04.2006 or exempt in terms of section 66A(2) thereof 2. 'If service tax is payable by the appellant in respect of the service provided by the CRS companies, whether longer limitation period under provision to section 73(1) finance Act, 1994 would be available to the Department for recovery of tax and whether penalty on the appellant u/s 78 ibid would be attracted?' 2. I have heard the representatives of the appellants as also the Revenues representative. The short issue involved in all the differences is as to whether the appellant's who have their Branch offices in India for providing airline services, were liable to pay the service tax in respect of services provided by various CRS or GDS companies to their head offices. The said services were being received in respect of various computer reservation system from var....