TaxTMI 
TaxTMI 
2019 (10) TMI 890
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.... 5.2 I confirm the demand of Service Tax amounting 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 Seve....
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....r action that may be initiated against M/s Cathay Pacific Airways Ltd. Under the provisions of the Finance Act, 1994 or 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 o....
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....en when they had neither received any services nor had entered into an agreement with the CRS Companies. • They could not be liable for any default of 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 com....
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....3.1976. The said license was renewed vide letter dated 11.03.1991 upto 30.09.1993. • They are not incorporated in India and has a place of business in India and is registered with the Registrar of Companies u/s 594 of the Companies Act. • Appellant is a member of BSP and the travel agents, which sell 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 u....
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....n Singh [2016 (46) STR 297 (T-Del)] 4.4 Appellants filed additional written submissions on 24.05.2019, after conclusion of hearing on 02.05.2019, commenting on the submissions made by the revenue during the course of hearing. In the additional submissions made thy have countered the arguments made by the revenue in respect of decision of tribunal in case of British Airways and stated that decision decides 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 ....
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.... of the Finance Act, 1994. 39. Both the Members have agreed that the services in dispute are covered by the definition of "Online Data Based Access and/or retrieval service as defined in Section 65(75) read with Section 65(36) of the Finance Act, 1994, and attracts service under Section 65(105)(zh). The point of difference is relatable to the fact as to whether British Airways, India, has received the service 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 ....
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.... the tickets in respect of a particular flight." 5.4 Section 66A of Finance Act, 1994 as it stood at material time is reproduced below: 66A. Charge of service tax on services received from outside India: (1) Where any service specified in clause (105) of section 65 is,- (a) provided or to be provided by a person who has established a business or has a fixed establishment from which the service is provided or to be 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....
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.... is apparent that there was no authority vested by law in the Respondents to levy service tax on a person who is resident in India, but who receives services outside India. In that case till Section 66A was enacted a person liable was the one who rendered the services. In other words, it is only after enactment of Section 66A that taxable services received from abroad by a person belonging to India are taxed in the hands of the Indian residents. In such cases, the Indian recipient of the taxable 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 branc....
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....y or partly carried on. Some examples of fixed place are given in Article 5(2), by way of an inclusion. Article 5(3), on the other hand, excludes certain places which would not be treated as PE, i.e. what is mentioned in clauses (a) to (f) as the 'negative list'. A combined reading of sub-articles (1), (2) and (3) of Article 5 would clearly show that only certain forms of establishment are excluded as mentioned in Article 5(3), which would not be PEs. Otherwise, sub-article (2) uses the word 'include' which means 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 ....
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....tle sponsorship, to Beta Prema 2 and paddock rights to Allsports. FOAM is engaged to generate TV Feed. All the revenues from the aforesaid activities are to go to the said companies, namely, Beta Prema 2, Allsports and FOAM respectively. These three companies are admittedly affiliates to FOWC. Though Beta Prema 2 is given media rights, etc., on September 13, 2011, it had entered into title sponsorship agreement dated August 16, 2011 with Bharti Airtel (i.e. more than a month before getting these rights from Jaypee) whereby it transferred 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 ....
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.... terms as well as the other terms contained in the agreement between the Jaypee on the one hand and Allsports, Beta Prema 2 as well as FOAM show that Jaypee's capacity to act - though it promoted the event, was extremely restricted. At all material times, FOWC had access - exclusively, to the circuit, and all the spaces where the teams were located. Jaypee created the circuit for the purposes of the event and other events; yet, during the event, i.e. the F1 Championship, no other event was possible. 53. Having regard to the nature of the preceding discussion, it is 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 simila....
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....ted States tax resident individual who used to visit and sell his wares in a camper trailer, in fairs, for a number of years had a fixed place of business in Canada. The fairs used to be once a year, approximately for three weeks each. The court observed that the nature of the individual's business was such that he held sales in similar fares, for duration of two or three weeks, in two other locales in the United States. The court held that conceptually, the place was one of business, notwithstanding the short duration, because it amounted to a place of management or a branch having regard to peculiarities 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 re....
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....hose relating to paddock entry, ticketing, hospitality at the venue and a restricted class of advertising), all commercial exploitation rights vest exclusively with FOWC. FOWC did accept them and was entitled to charge fees or such other consideration as it deemed appropriate for the recording, telecasting, broadcasting and creation of internet and media rights, including data transmission, and all other such commercially exploitable rights. In addition, FOWC charged, by Clause 24 of RPC-2011, a fee of US$ 40 million annually from Jaypee, in relation to the race event or FIA F1 Championship event conducted on the circuit 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 i....
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....laborated above and which FOWC and Jaypee unsuccessfully endeavoured to ignore, has in fact turned the table against them. It is also difficult to accept their submission that FOWC had no role in the conduct of the Championship and its role came to an end with granting permission to host the Event as a round of the championship. We also reject the argument of the appellants that the Buddh International Circuit was not under the control and at the disposal of FOWC. No doubt, FOWC, as CRH of these events, is in the business of exploiting these rights, including intellectual property rights. However, these became possible, in the instant 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....
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....e was bona fide. We make it clear that we have not expressed any opinion either way." 5.9 In view of the principles laid down by the Hon'ble Apex Court in the above stated cases, there can be no dispute about the fact, that branch office of Cathay Pacific located in India, is place of business for the Cathay Pacific Airlines having its head quarters at Hong Kong. That being so the services received by the branch office from the CRS companies for facilitating the booking of tickets through travel agents in India are services received in India and appellants will be liable to pay service tax in terms of Section 66A of Finance Act, 1994. 5.10 Appellants 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 t....
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....ous. Under these circumstances, for corporations with "far-flung" business activities, numerous Circuits have looked to a corporation's "nerve center," from which the corporation radiates out to its constituent parts and from which its officers direct, control, and coordinate the corporation's activities. However, this test did not go far enough, for it did not answer what courts should do when a corporation's operations are not farflung but rather limited to only a few States. When faced with this question, various courts have focused more heavily on where a corporation's actual business activities are located, adopting divergent and increasingly complex tests to interpret the 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 coordinat....
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....t the basic rationale of diversity jurisdiction, accepting occasionally counterintuitive results is the price the legal system must Service Tax 31 Appeal No.88653 of 2013 pay to avoid overly complex jurisdictional administration while producing the benefits that accompany a more uniform legal system. Pp. 17-18. (iii) If the record reveals attempts at jurisdictional manipulation-for example, that the alleged "nerve center" is nothing more than a mail drop box, a bare office with a computer, or the location of an annual executive retreat- the courts should instead take as the "nerve center" the place of actual direction, control, and coordination, in the absence of such manipulation. Pp. 18-19." 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 unde....
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....as the Indian office are different establishments, and hence the liability for Service Tax does not arise on the Indian office. 6. The Ld. DR brought to our notice the findings of the Adjudicating Authority in para 26 of the impugned order. He highlighted the fact that the Head Office of the appellant has been debiting the Indian Office of the appellant for the consideration equivalent to the amount paid by the Head Office to the CRS Service Provider. On this ground, he submitted that the user of the service is the appellant in India and the consideration for such service has been paid by the Indian office and hence he justified the levy of Service Tax on the appellant. 7. Opposing the arguments of Ld. DR, Ld. Advocate submitted that the 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 c....
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....ervice Tax on similar arrangements of various Foreign Airlines have been held to be not liable to payment of Service Tax on Reverse Charge Basis. Such decisions have settled the matter for the period upto 30/06/2006. From the observations of the Adjudicating Authority in para 26, it appears that the facts of the present case are different from those in the other cases. But the Ld. Advocate has asserted the Adjudicating Authority has recorded facts incorrectly. 14. In the facts and circumstances of the present case, we set aside the impugned order and remand the matter to the Adjudicating Authority for de novo decision of the matter in the light of the various decisions on the matter. But before deciding the issue he will extended an opportunity to the appellant to produce documents in support of his assertion that the observations in para 26 are erroneous." In case of Air Canada referred above tribunal has stated the decisions referred by counsel i.e. British airways etc. have decided the issue upto 30.06.2006, and have remanded the matter back to the adjudicating authority for determination of the facts with regards to manner of payment, made by the service recipient t....