TaxTMI 
TaxTMI 
TaxTMI 
2019 (10) TMI 890
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....ting to Rs. 13,01,05,233/- (Rupees Thirteen Crore One Lakhs Five Thousand Two Hundred and Thirty Three only), including Education Cess and Higher Education for the period from 18th April 2006 to March 2011, under the proviso to Section 73(1) for the first show cause notice and under Section 73(1) for other 4 show cause notices, read with Section 66A and Section 68 of the Finance Act, 1994 and order M/s Cathay Pacific Airways Ltd to pay the same forthwith as detailed below: S No SCN No/ Date Period Amount 1 DGCEI/MZU/I&IS'C'/12(4)1121/2 008 DATED 24.10.08 July 03 to Mar 08 35843332/- 2 V/ST/Mum/DnIII/GrII/Cathay- CRS-SCN/05/09 DATED 20.10.2009 April 08 to Mar 09 25951485/- 3 V/ST/Mum/DnIII/GrXI/CPSCN/ 05/09 DATED 14.09.2010 April 09 to Mar 10 28156082/- 4 V/ST/Mum/DnIII/GrXI/CPSCN/ 05/09 DATED 25.07.2011 April 10 to Mar 11 21211420/- 5 V/ST/Mum/DnIII/GrXI/CPSCN/ 05/09 DATED 13.09.2012 April 11 to Mar 12 18942914/- Total 130105233/- 5.3 I drop the demand of service tax inclusive of education cess totally amounting to Rs. 57,42,474/- (Rupees Fifty Seven Lakhs Forty Two Thousand Four Hundred and Seventy Four Only) in respect of the ser....
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....rules framed there under or any other law for the time being in India." 2.1 Acting on intelligence investigations were undertaken by Director General Central Excise Intelligence (DGCEI), against the appellants. As result of investigation it was Service Tax 4 Appeal No.88653 of 2013 found that the appellants have entered into agreements with various Computer Reservation System (CRS) Companies i.e. Abacus, Amadeus, Galileo, Sabre and Worldspan, to facilitate sale of its products and services using online computer system provided by these companies. This enables provision of comprehensive information between airlines and air travel agents on ticket availability using the said information. The travel agents are provided with computer system (hardware, software and connectivity) by CRS having suitable software and online connectivity, which is connected with computer system of airlines, for seat availability and booking. Database of airlines are accessed by CRS and displayed for use and booking by air travel agents. Airlines can access and retrieve data of booking of ticket by travel agent from database of CRS server. This facilitates ticket booking and sales. Since the services of CR....
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....their head office which is also non resident and not liable to pay any service tax on reverse charge basis. * The service recipient are not taxable in light of clarification issued vide F No B.1101.2001-TRU dated 9.7.2001. * Service provided by CRS companies cannot be classified under taxable category "online data base access and retrieval service". * The finding of fact recorded by the Commissioner that they are making the payments to CRS companies through their head office at Hong Kong is factually incorrect. * The finding of fact recorded that CRS Companies do not have fixed and a permanent establishment in India and the Indian Companies having similar names are entirely different legal entity is factually incorrect. * The services rendered by a non resident service provider to a non service recipient cannot be taxed under Finance Act, 1994. * The Commissioner has misread and misunderstood the agreements between their Head office and CRS companies to hold that the services rendered are of "Online Database Access or Retrieval Services" * Extended period of limitation as per proviso to Section 73(10 is not invokable in the present case. * Interest could not....
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....l the tickets for travel on the appellant airlines remit the money for such sales to BSP. BSP in turn, remits the money to the bank account of the appellant. They remit the funds to their head office after issuance of Form No 15CA/ 15CB, which is a Chartered Accountant Certificate, as envisaged u/s 195 of the Income Tax Act for remittances. * Under Income Tax Act, they were not required to prepare book of accounts, since there is a special provision for computation of profits and gains of business of operation of aircraft in case of nonresidents. * To substantiate that the amount of payments made to CRS companies by the head office is not debited in India. In this regard, it is submitted that since no books of accounts are prepared by the appellant, no separate profit and loss account was prepared by the appellant for India operations under the Companies Act, 1956. After introduction of Companies Act, 2013, the appellant has been preparing an income and expenditure a/c for local operation. On perusal of same, it will be seen that even after 2013, there is no debit in the local books of account for the payments made to CRS companies by the head office. 4.3 Arguing for the re....
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....des the issue. Further they also state that submissions of revenue in respect of the Paul Merchants case relying on the decision of Bombay High Court in case of Jagat Alloys do not reflect collect position in law. They also disputed the submissions made by the revenue on limitation. 5.1 We have considered the impugned order along with the submissions made in appeal during the course of arguments and written submissions filed. 5.2 Appellants have in their appeal and submissions, have argued that for the purpose of levy service tax under reverse charge mechanism (Section 66A of the Finance Act, 1994), the services should have been received by them from the service provider who is not having any permanent establishment in India. In the present case they are not the recipient of the service and their head office located in Hong Kong is the recipient of the service, Since no service has been received by them they are not liable to pay any service tax in respect of the services rendered by the foreign service provider to their head office located in Hong Kong. They heavily rely on the decision of the tribunal in case of British Airways [2014 (36) STR 598 (T-Del)] in their support. Th....
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....provided by the CRS/GDS companies located abroad or whether British Airways, UK have to be treated as recipient of the said services." 5.3 Commissioner has in para 8 of impugned order recorded his findings as follows: "8. The issue was, therefore, examined at length with reference to the agreements entered into by notice with the CRS companies. A perusal of the various agreements so entered, copies of which were submitted by notice, revealed that the sum and substance of all the agreements was one and the same, with the only significant difference being the one relating to the quantum of charges payable to the respective CRS companies, notice per se has entered into agreements with the CRS companies with a view first to ensure display of its own data base through the data base of Master Computer System maintained by the CRS companies, comprising of the flight schedule, the fares, and the availability of seats on a particular flight for use by the air travel agents on behalf of the customers of airlines and thus, to market their product/services in a comprehensive manner. The database of the airlines is provided to the air travel agents by making it available on the CRS compute....
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....provided or has his permanent address or usual place of residence, in a country other than India, and (b) received by a person (hereinafter referred to as the recipient) who has his place of business, fixed establishment, permanent address or usual place of residence, in India, such service shall, for the purposes of this section, be taxable service, and such taxable service shall be treated as if the recipient had himself provided the service in India, and accordingly all the provisions of this Chapter shall apply: Provided that where the recipient of the service is an individual and such service received by him is otherwise than for the purpose of use in any business or commerce, the provisions of this sub-section shall not apply: Provided further that where the provider of the 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. (2) Where a person is carrying on a business through a permanent establishment in India and through another ....
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....ble services is deemed to be a service provider. Before enactment of Section 66A, there was no such provision in the Act and therefore, the Respondents had no authority to levy service tax on the members of the Petitioners-association." Following the said decision Commissioner has dropped the demand for the period prior to 18.04.2006. The question for consideration before us whether the services of CRS Companies for which contractual agreement was made between the Headquarters of Cathay Pacific Airlines be said to be provided to services received by the Cathay Pacific, Branch Office located in India, for the purpose of levy of service tax. 5.6 In our view the independent identity of branch office or head office of the Appellant is not the criteria for determination of liability to service tax in terms of Section 66A. The issue to be determined is the location of provider and recipient of service as per the provisions of that section. In the instant case the "place of business, fixed establishment, permanent address or usual place of residence" of recipient of service are the relevant criteria for determination of the liability to payment of service tax, in case were the provide....
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....that not only the places specified therein are to be treated as PEs, the list of such PEs is not exhaustive. In order to bring any other establishment which is not specifically mentioned, the requirements laid down in sub-article (1) are to be satisfied. Twin conditions which need to be satisfied are: (i) existence of a fixed place of business; and (b) through that place business of an enterprise is wholly or partly carried out. We are of the firm opinion, and it cannot be denied, that Buddh International Circuit is a fixed place. From this circuit different races, including the Grand Prix is conducted, which is undoubtedly an economic/business activity. The core question is as to whether this was put at the disposal of FOWC? Whether this was a fixed place of business of FOWC is the next question. We would like to start our discussion on a crucial parameter viz. the manner in which commercial rights, which are held by FOWC and its affiliates, have been exploited in the instant case. For this purpose entire arrangement between FOWC and its associates on the one hand and Jaypee on the other hand, is to be kept in mind. Various agreements cannot be looked into by isolating them fro....
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....ansferred those rights to Bharti Airtel for a consideration of US$ 8 million. Service agreement is signed between FOWC and FOAM on October 28, 2011 (i.e. on the date of the race) whereby FOAM engaged FOWC to provide various services like licensing and supervision of other parties at the event, travel and transport and data support services. The aforesaid arrangement clearly demonstrates that the entire event is taken over and controlled by FOWC and its affiliates. There cannot be any race without participating/ competing teams, a circuit and a paddock. All these are controlled by FOWC and its affiliates. Event has taken place by conduct of race physically in India. Entire income is generated from the conduct of this event in India. Thus, commercial rights are with FOWC which are exploited with actual conduct of race in India. Even the physical control of the circuit was with FOWC and its affiliates from the inception, i.e. inclusion of event in a circuit till the conclusion of the event. Omnipresence of FOWC and its stamp over the event is loud, clear and firm. Mr. Rohatgi is right in his submission that the undisputed facts were that race was physically conducted in India an....
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....evident that though FOWC's access or right to access was not permanent, in the sense of its being everlasting, at the same time, the model of commercial transactions it chose is such that its exclusive circuit access - to the team and its personnel or those contracted by it, was for up-to six weeks at a time during the F1 Championship season. This nature of activity, i.e racing and exploitation of all the bundle of rights the FOWC had as CRH, meant that it was a shifting or moving presence: the teams competed in the race in a given place and after its conclusion, moved on to another locale where a similar race is conducted. Now with this kind of activity, although there may not be substantiality in an absolute sense with regard to the time period, both the exclusive nature of the access and the period for which it is accessed, in the opinion of the Court, makes the presence of a kind contemplated under Article 5(1), i.e. it is fixed. In other words, the presence is neither ephemeral or fleeting, or sporadic. The fact that RPC- 2011's tenure is of five years, meant that there was a repetition; furthermore, FOWC was entitled even in the event of a termination, to two years....
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....ties of the business. Coming to the second aspect of the issue, namely, whether FOWC carried on any business and commercial activity in India or not, substantial part of this aspect has already been discussed and taken care of above. Without being repetitive and pleonastic or tautologous, we may only add that FOWC is the Commercial Right Holder (CRH). These rights can be exploited with the conduct of F-1 Championship, which is organised in various countries. It was decided to have this championship in India as well. In order to undertake conducting of such races, the first requirement is to have a track for this purpose. Then, teams are needed who would participate in the competition. Another requirement is to have the public/viewers who would be interested in witnessing such races from the places built around the track. Again, for augmenting the earnings in these events, there would be advertisements, media rights, etc. as well. It is FOWC and its affiliates which have been responsible for all the aforesaid activities. The Concorde Agreement is signed between FIA, FOA and FOWC whereby not only FOWC became Commercial Rights Holder for 100 years, this agreement further enabled pa....
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....t in India. 57. It is also noteworthy that by virtue of the Concorde Agreement, the teams have undertaken to engage in every race - with the added condition that each team would involve two cars for every race in any circuit chosen by FOWC. RPC-2011 also assured that the FOWC would ensure that such team did in fact participate in the event in the Budh Circuit. This is an important fact- which shows that the entire event, i.e. F1 FIA Championship in the circuit was organized and controlled in every sense of the term by FOWC. The peculiarity of this activity is such that FOWC's dominant role is evident; it is the moving spirit with all pervasive presence and control through the teams, which are contracted to participate in the event. In fact, it creates the event, i.e. the race. Each actor, such the promoter/Jaypee, the racing teams, the constructing teams and the other affiliates, plays a part in the event. FOWC's participation and the undertakings given to it by each of these actors, who are responsible for the event as a whole, brings out its central and dominant role. If Jaypee is the event promoter, which owns the title to the circuit in the sense that it owns the lan....
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....nstant case, only with the actual conduct of these races and active participation of FOWC in the said races, with access and control over the circuit. We are of the opinion that the test laid down by the Andhra Pradesh High Court in Visakhapatnam Port Trust case fully stands satisfied. Not only the Buddh International Circuit is a fixed place where the commercial/economic activity of conducting F-1 Championship was carried out, one could clearly discern that it was a virtual projection of the foreign enterprise, namely, Formula-1 (i.e. FOWC) on the soil of this country. It is already noted above that as per Philip Baker[27], a PE must have three characteristics: stability, productivity and dependence. All characteristics are present in this case. Fixed place of business in the form of physical location, i.e. Buddh International Circuit, was at the disposal of FOWC through which it conducted business. Aesthetics of law and taxation jurisprudence leave no doubt in our mind that taxable event has taken place in India and non-resident FOWC is liable to pay tax in India on the income it has earned on this soil. We are now left with two other incidental issues which were raised by ....
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....have given the schematic diagram showing the provision of service which is reproduced below: From the chart depicting the relationships as provided by the appellant, it is clear that the CRS Companies are provider of the service through their data processing centres located outside India and the services provided by the CRS Companies are used by the Cathay Pacific Airlines for booking the tickets for customers located in India through the travel agents located in India. In respect of the tickets booked for customers in India through the travel agents located in India, the place of business for the Cathay Pacific Airlines, is located in India as per the principles laid down by the Apex Court in cases referred above. For determination of the place of business, the issue such as whether the payments for the service provided are made by the Head Office located in Hong Kong or Branch Office located in India is irrelevant. Hon'ble Supreme Court has in series of decisions starting from that in case of Toshoku Ltd., Guntur & Ors [(1980) Supp SCC 614] GE India Technology Centre Private Limited v. Commissioner of Income Tax & Anr. [(2010) 10 SCC 29] and the decisions referred above in para....
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....e statute. Pp. 10-13. (c) In an effort to find a single, more uniform interpretation of the statutory phrase, this Court returns to the "nerve center" approach: "[P]rincipal place of business" is best read as referring to the place where a corporation's officers direct, control, and coordinate the corporation's activities. In practice it should normally be the place where the corporation maintains its headquarters-provided that the headquarters is the actual center of direction, control, and coordination, i.e., the "nerve center," and not simply an office where the corporation holds its board meetings. Pp. 13-19. (i) Three sets of considerations, taken together, convince the Court that the "nerve center" approach, while imperfect, is superior to other possibilities. First, Service Tax 30 Appeal No.88653 of 2013 §1332(c)(1)'s language supports the approach. The statute's word "place" is singular, not plural. Its word "principal" requires that the main, prominent, or most important place be chosen. Cf., e.g., Commissioner v. Soliman, 506 U. S. 168, 174. And the fact that the word "place" follows the words "State where" means that the "place" is a place within a State, not ....
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....." Thus in our view the Head office of Cathay Pacific Located at Hong Kong is the "principal place of business" for the said airlines, and the branch offices located elsewhere viz one located in India is "place of business". Appellants also do not dispute that the said services have been provided by the CRS companies to the head office, and for the provision of said services the payment have also been made by the head office. However for purpose of the determination of liability under Section 66A what needs to be determined is the "place of business" which in terms of the decisions referred above is in India, and the branch office located in India permanent establishment for the business in India. 5.12 In view of our discussions as above we are not in agreement with the decisions rendered by the tribunal in case of British Airways and subsequently followed in cases referred below: i. British Airways dated 23/05/2014 reported as TIOL979- CESTAT- DEL. ii. Final Order in the case of KLM Royal Dutch Airlines dated 01/07/2014 iii. Final Order in the case of Qatar Airways and Emirates 2016-TIOL- 1263-CESTAT-MUM iv. Korean Air 2017-TIOL-3332-CESTAT Mumbai v. Air France ....
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....Service provider and Service receiver relationship exists only between the Head Office of the appellant and CRS Companies. For such an agreement between these two parties the consideration was paid by the Head Office to CRS Companies. Since the Head Office as well as the Indian office of the appellant are to be considered as two distinct legal persons, even if a debit has been raised against the Indian Office, the same cannot be considered as a consideration liable to payment of Service Tax. 10. The demand for Service Tax has been raised on Reverse Charge Basis under Section 66A of Finance Act, 1994 on the service received by the appellants under the category of 'Online Information and Data Base Access or Retrieval Service'. Such service has been received by the appellant in India from foreign based CRS Service provider. Such services were received on the basis of agreements executed by the Head Office of the appellant with the respective CRS Companies. The appellant has strongly contented that the issue has been settled by the Tribunal in their favour in several cases including that of Air France (supra). We have perused the cited decisions. The demand for Service Tax for such ....