TaxTMI 
TaxTMI 
2018 (11) TMI 983
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....agents. While providing CRS systems, the GSA in turn pass on certain percentage of incentive that they receive from Airlines. The Appellant has no privity of contract with any of the airlines. The Appellant purchases tickets by using the said CRS system from any of the IATA agents or from Airlines and makes payment of the same through Billing Settlement Plan of IATA. Hence neither the tickets are purchased from any of the airlines or the GSA agent nor the payment is made to any of the Airlines or the GSA. 2. The case of the appellant is that there are two limbs of transaction first being purchase of ticket from IATA/GSA agent on which the service tax is charged by the Airlines, second is the sale of tickets to its customers on which it has option of discharging its service tax liability either on Commission received by it at full rate or at the rate prescribed under Rule 6(7) of the Service Tax Rules, 1994 (STR) i.e. on basic fare - commissionable fare. Since it has opted to discharge service tax liability on Basic fares i.e. Commissionable fare, the value of services rendered by it stands fixed and therefore, any other income received by it is not taxable. The Service Tax Audit t....
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....ear that the Original Authority passed ex-parte order though he recorded that adequate opportunities have been provided to the appellant. The impugned order also did not examine the issues raised by the appellant for a proper finding. We have noted the submissions by the learned Counsel for the appellant, as recorded above. We are in agreement with the learned Counsel, that the impugned order as well as original order suffers from serious infirmity on factual and legal issues. We note that when the appellants have discharged service tax as a travel agent in terms of provisions of Rule 6 (7) of Service Tax Rules, 1994 and submitted supporting documents of income received on sale of tickets, the same is required to be scrutinized for correctness. Additional service tax demand cannot be confirmed only on the ground of certain categories of income are indicated in the profit and loss account of the appellant. Similarly, on the tax liability on the commission income for use of CRS, the learned Commissioner (Appeals) did not arrive at a clear finding as to what kind of promotion or marketing of such CRS and to which client, is being made by the appellant. In a BAS three party arrangement....
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....onounced by various Benches of CESTAT on each of the issue referred in Para 3 above. We have heard both sides and also perused the material placed on record. During the course of arguments, the Learned Counsel for the Appellant has taken us through various judgments on each issue in para 3 above. Therefore, accordingly now we proceed to discuss each of the submissions made before us. On Taxability of Incentives 5. First and foremost, issue is whether 'incentive' received on appreciable performance can be subjected to service tax or not. Appellant has drawn our attention to the following judgments, wherein it has been held that 'Incentive' received Is not taxable: - (a) JM Financial Services Pvt. Ltd. v. Commissioner - 2014 (36) S.T.R. 151 (Tri.-Mumbai) 5.3 Having considered the rival submissions, we find that there is no element of promotion or marketing of any services of the bank nor any service has been provided to the bank by the appellant on behalf of any client. This being the position, the tax liability on the incentive or processing fees received from the bank is held to be not taxable to Service Tax under the heading 'Business Auxiliary Services' (b) Commissioner o....
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....espect, we reproduce the relevant paragraphs: - 14. In respect of the incentive on account of sales/target incentive, incentive on sale of vehicles and incentive on sale of spare parts for promoting and marketing the products of MUL, the contention is that these incentives are in the form of trade discount. The assessee respondent is the authorized dealer of car manufactured by MUL and are getting certain incentives in respect of sale target set out by the manufacturer. These targets are as per the circular issued by MUL. Hence these cannot be treated as business auxiliary service. 18. In respect of sales/target incentive, the Revenue wants to tax this activity under the category of business auxiliary service. We have gone through the circular issued by MUL which provides certain incentives in respect of cars sold by the assessee-respondent. These incentives are in the form of trade discount. In these circumstances, we find no infirmity in the adjudication order whereby the adjudicating authority dropped the demand. Hence, the appeal filed by the Revenue has no merit. 5.2 It can be seen from the above reproduced paragraphs that the issue is now squarely covered in favour of ....
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....2014 (34) S.T.R. 416 (Tri.-Ahmd.)] and Garrisson Polysacks Private Ltd. v. Commissioner of Service Tax, Vadodara [2015 (39) S.T.R. 487 (Tri.-Ahmd.)]. In re Jaybharat Automobiles Limited, the Tribunal held that: '6.5 On the appeal by Revenue on the issue of incentives received by the appellant from the car dealer, we find that the relationship between the appellant and the dealer is on a principal to principal basis. Only because some incentives/discounts are received by the appellant under various schemes of the manufacturer cannot lead to the conclusion that the incentive is received for promotion and marketing of goods. It is not material under what head the incentives are shown in the Ledgers, what is relevant is the nature of the transaction which is of sale. All manufacturers provide discount schemes to dealers. Such transactions cannot fall under the service category of Business Auxiliary Service when it is a normal market practice to offer discounts/institutions to the dealers. The issue is settled in the case of Sai Service Station (supra). Therefore, we reject the appeal of the department." and in re Sai Service Station Limited it was held that: '14. In respect of the....
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....ed by the client; or (iii) Any customer care service provided on behalf of the client; or (iv) Procurement of goods or services, which are inputs for the client; or Explanation. - For the removal of doubts, it is hereby declared that for the purposes of this sub-clause, 'inputs' means all goods or services intended for use by the client; or (v) Production or processing of goods for, or on behalf of, the client; or (vi) Provision of service on behalf of the client; or (vii) A service incidental or auxiliary to any activity specified in sub-clauses (i) to (vi), such as billing, issue or collection or recovery of cheques, payments, maintenance of accounts and remittance, inventory management, evaluation or development of prospective customer or vendor, public relation services, management or supervision, And includes services as a commission agent, but does not include any activity that amounts to manufacture of excisable goods. Explanation. - For the removal of doubts, it is hereby declared that for the purposes of this clause, - (a) 'commission agent' means any person who acts on behalf of another person and causes sale or purchase of goods, or provision or receipt....
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....R. 259 (Tri. - All.)] 5. Having considered the rival submissions, we find that in the admitted fact and circumstances, the service provided by the appellant does not fall under any of the sub-clauses (i) to (vii) of Section 65(19) under the head Business Auxiliary Services. We take notice of the fact that the appellant have neither facilitated sale of any goods of their client nor service. It is admitted fact that the appellants are not involved in any activity directly relating to promoting or marketing of goods. The appellants provided services like filing drawback claims, filing application for DEPB, EPCG licences, processing application for Star Export House Certificate etc. The reasoning given by the Original Authority for tax liability is that appellants services certainly promoted and encouraged the sale of goods of the clients and served as inputs in support of their business and export activities. Considering the nature and scope of services rendered by the appellants, we find no support for such finding. In fact, in respect of drawback the appellants role comes after the goods were sold and exported. We find that the scope of Business Auxiliary Services does not cover t....
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....ly subjected to tax because the agreement between the appellant and M/s. Toyota Kirloskar Motor Limited is one of supply of vehicles by the latter on 'principal-to-principal' basis on which title and risk, as per Agreement, are passed on to appellant when the vehicles are excise cleared and placed on common carrier. Depending on order quantity, the manufacturer raises invoices after according discounts which are designated as commission/incentive merely as a management terminology. Learned Chartered Accountant for appellant places reliance in the decisions of the Tribunal in Jaybharat Automobiles Limited v. Commissioner of Service Tax, 18 ST/Misc/50448/2018 Appeal No. ST/59716/2013-CU [DB] Mumbai [2015-TIOL-1570-CESTAT-MUM = 2016 (41) S.T.R. 311 (Tri.)], Sai Service Station Limited v. Commissioner of Service Tax, Mumbai [2013-TIOL-1436-CESTAT-MUM = 2014 (35) S.T.R. 625 (Tri.)], Tradex Polymers Private Limited v. Commissioner of Service Tax, Ahmedabad [2014 (34) S.T.R. 416 (Tri.-Ahmd.)] and Garrisson Polysacks Private Ltd. v. Commissioner of Service Tax, Vadodara [2015 (39) S.T.R. 487 (Tri.-Ahmd.)]. In re Jaybharat Automobiles Limited, the Tribunal held that "6.5 On the appeal by ....
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....t, Any customer care service provided on behalf of the client and Procurement of goods or services, which are inputs for the client'. 10. Thus, it is clear from the definition that there must be three parties to any contract attracting levy of service tax under BAS first the owner of goods/provider of service, second the intermediary providing goods or services on behalf of the client and third is targeted audience/parties. Unless these three parties are present, the activity cannot fall under any of the sub set of services. Our attention has been drawn to the following judgments: - (a) Sourav Ganguly vs Union of India [2016 (43) S.T.R. 482 (Cal.)] - 61. The aforesaid amounts of service tax have been claimed by the Department under the heads of 'Business Auxiliary Service' or 'Business Support Service'. Business auxiliary service is defined in Sec. 65(19) of the Finance Act which has been set out earlier in this judgment. It is an exhaustive definition and not an inclusive one. Broadly speaking, it means any service in relation to promoting, marketing, or selling goods produced or provided by or belonging to a client or promoting or marketing service provided by the client. It ....
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....ia that the said activity has to be 'on behalf of the client', we find that the matter is no longer res integra and stand settled by various decisions of the Tribunal. Even the Board's Circular has clarified the same. For ready reference we may reproduce the relevant portion : Circular No. 137/111/2007-CX, dated 15-7-2007 "03. The matter has been examined by the Board. The view of the Board is that the incineration/shredding of bio-medical where can, by no stretch of imagination, be called as 'processing of goods', even if in certain cases the shredded materials may be used as filters etc. Further, the activity also does not qualify to be called as provision of service on behalf of the client. This is because the taxable activity envisaged under this category of „business auxiliary service‟ is that while the 'client' is obliged to provide some service to a 3rd person but instead of the client providing such service, the service provider provides the such service to the 3rd person, on behalf of the client i.e. acting as an agent of the client. Admittedly, in the instant case, there is no 3rd person. Thus, the activity as undertaken does not fall under business auxili....
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....ut further processes. Since there is no dispute that this activity of the appellants does not amount to manufacture, it can only be called processing not amounting to manufacture, which was not taxable during the period of dispute. We also agree with the appellant‟s plea that as held by the Tribunal in cases of M/s. Auto Coats. v. CCE, Coimbatore (supra), M/s. Gedee Weiler Pvt. Ltd. v. CCE, Coimbatore (supra) and M/s. Sonic Watches v. CCE, Vadodara (supra) during the period of dispute, the wordings of Clause (v) of Section 65(19) of the Finance Act, 1994 did not cover processing of goods of job work basis which got covered by this clause, when the same was substituted by 'production or processing of goods for, or on behalf of, the clients.' In view of this, the impugned order is not sustainable. The same is set aside. The appeals as well as the stay applications are allowed". 11. In view of our foregoing discussions, we hold that the appellant's activity prior to June 2005 cannot be held to be exigible to service tax under the category of BAS. Accordingly, we set aside the impugned order and allow the appeal with consequential relief to the appellant. Inasmuch as we have he....
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...." (f) Coca Cola (I) Pvt. Ltd. vs. Commissioner of Service Tax, Delhi [2015 (40) S.T.R. 547 (Tri. - Delhi)] '12. It is admittedly unusual to copiously and verbatim quote paragraphs after paragraphs from the adjudication order. However, it was felt necessary in the present case to do so to drive home the point that the adjudicating authority has been highly and conspicuously non-speaking, non-reasoned, arbitrary and cavalier while passing the impugned order. Non-application of mind (on the part of the adjudicating authority) is indeed writ bold and large across the impugned order. Such orders adversely and severely impinge upon the public's trust in the public authorities and for that reason a public authority displaying such egregiously irresponsible conduct and that too while performing quasi-judicial functions deserves to the put to costs. Accordingly, we set aside the impugned order, allow the appeal and impose costs of Rs. 25,000/- on the adjudicating authority who passed the impugned order payable to the Prime Minister's National Relief Fund, within four (4) weeks (g) Commissioner of Service Tax, Mumbai vs M/s Ideal Road Builders Pvt. Ltd. M/s MEP Toll Road Pvt. Ltd., 201....
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....ermed as consideration for any service. The reliance placed by the Revenue upon Board Circular No. 152/3/2012-S.T., dated 22-2-2012 is not correct for the reason that the respondents has not collected such toll charges on commission or charges on behalf of NHAI/MSRDC. The toll collection is their own income and is not parted with NHAI/MSRDC as they are concerned only with the bid amount finalized in auction and therefore cannot be termed as activity of Business Auxiliary Service. In view of above findings and judgments cited by the respondents we hold that the activity of the respondent cannot be considered as 'Business Auxiliary Service' and cannot be taxed to service tax. Thus, the appeals filed by the Revenue is not sustainable on merits and accordingly dismissed". 11. Therefore, CESTAT had been all along maintaining and continues to maintain a consistent view that in order to attract taxability under BAS, there must be three parties. On value of service fixed 12. Now the next issue to be examined whether appellants registered as travel agent having opted to discharge service tax liability under Rule 6(7) of the Service Tax Rules, 1994 (as amended up to date) [STR], can be ....
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....r the purpose of assessment, the appellant was issued with a show cause notice dated 7-5-2010 which culminated into the passing of impugned Order-in-Appeal. The Original authority has dropped the demand holding that the appellant had exercised option not to pay tax on commission at the rates specified in Section 66 of the Act and they were paying service tax according to option available under Rule 6(7) of Service Tax Rules, 1994 on the basic fare value of the Air Ticket at rates specified in the said Rule. The said finding was set aside by the Learned Commissioner (Appeals) in the impugned Order-in-Appeal. We find that the view taken by the original authority, as recorded hereinabove is sustainable in law. 5. Therefore, we set aside the Order-in-Appeal and uphold and restore the Order-in-Original No. 39/STC/A.C./LKO/Div-1/2010-11, dated 30-12-2010 and allow the appeal filed by the appellant. 13. Once the issue has been settled in favour of the Appellant in its own case, the same has been accepted by the Department as no appeal has been filed against the said order by the Revenue. On gross value of service 14. The Appellant has also drawn our attention to the fact that while....
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.... conforming to the relevant description in the charging section. Service, its taxability and the provision of the taxable service to a recipient, in that order, are necessary pre-requisites to ascertaining the quantum of consideration on which ad valorem tax will be levied. This fundamental will not alter in the scheme of the negative list too; a service that is clearly identifiable has to be provided or agreed to be provided before it can be taxed. The factual matrix of the existence of a monetary flow combined with convergence of two entities for such flow cannot be moulded by tax authorities into a taxable event without identifying the specific activity that links the provider to the recipient. 12. For that very reason, mere capacity to deliver a service cannot be equated with providing or agreeing to provide a service; such service has to reach the recipient in exchange for the consideration or the consideration is made over in exchange for a schedule of delivery of the service. In a combined human activity, contribution of, or agreement to contribute, funds cannot, therefore, be construed as consideration to be taxed under Finance Act, 1994 unless attributable to an activity....
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....the consideration for the service. The opening words of the definition consist of the above four aspects or characteristics and unless all the four are present, the activity cannot be charged with service tax. A mere transaction in money or actionable claim cannot under the ordinary notions of a service be considered as a service, neither can it be considered as falling within the first part of the definition because it lacks the four constituent elements which are required by the definition 16. The Appellant's counsel submits that in any case before subjecting any transaction in money to service tax the first and foremost condition to be satisfied whether the relationship of service provider and service receiver exists or not. On D. Pauls Consumer Benefit Ltd., vs. CCE, New Delhi 2017 (52) S.T.R. 429 (Tri. - Del.) 17. Now coming to decision rendered by the Principal Bench CESTAT we find that in Para 2 of the order the appellant therein had challenged order passed by Commissioner (Appeals) confirming demand of service tax under Taxable category of Tour Operator Services on Incentive received by the Appellant for using Computer Reservation System provided free of cost by the Ga....
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....eted audience before whom the services provided by Galileo India, Amadeus India and Calleo Distribution were promoted; (b) The incentives were held to be taxable only on the sole ground that the case law cited before Bench related to Advertising agency; (c) On what basis the taxable category of Tour operator was changed to 'Business Auxiliary Services' (d) What was the consideration of service provided by Galileo India, Amadeus India and Calleo Distribution to the assessee therein. 19. Learned DR on the other hand defended the order passed by the Principal Bench on the ground that the Order passed by the Principal Bench is perfectly in order and is being followed by all the Benches of CESTAT. The case laws referred by the Appellant are not relevant as the law has been finally settled in the case of D.Paul and hence there is no need to refer the matter to Larger Bench. However, Learned DR could not place any decision contrary to the decisions placed on record by the Learned Counsel for the Appellant. 20. After hearing the rival submissions and on perusal of records and consideration of various judgment placed on record it appears that the order in case of D.Paul's case has been....
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....h to resolve this conflict. It may also be recorded that against the judgment of the Tribunal in Hindustan Gum and Chemicals Ltd. the Department had filed an appeal in this Court and this Court has referred the matter back to the Tribunal observing that some of the aspects have not been properly dealt with by the Tribunal. The said judgment remanding the case back to the Tribunal is reported as Commissioner of Central Excise, Ahmedabad v. Hindustan Gum & Chemicals Ltd. - 2011 (272) E.L.T. 336 (S.C.). 5. We, thus, set aside the impugned order and remit the case back to the Tribunal. We also direct that the matter shall be heard by a Larger Bench. We may record that in the impugned order the Tribunal has held that the aforesaid process constitutes 'manufacture'. Since in the case of Hindustan Gum and Chemicals Ltd. this issue was left open to be decided by the Tribunal, the Larger Bench of the Tribunal can take a fresh look into this issue in the instant case as well. (b) SRD Nutrients Pvt Ltd., vs. CCE, Guwahati - 2017 (355) E.L.T. 481 - SC - Para 22 22. It is rightly pointed out by the learned counsel for the appellants that the CESTAT in the earlier two judgments given in Bh....