TaxTMI 
TaxTMI 
2021 (11) TMI 176
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....nd, Seven Hundred and Eighty One only) (Inclusive of Education Cess and Secondary & Higher Education Cess) for the period from August 2007 to March 2011, under the category of "Business Auxiliary Services" service, under Section 73(2) of the Act. 5.2(b) I, order for payment of Interest under Section 75 of the Act, at the appropriate rates prevalent during the material period, on the delay in payment of service tax amounting to Rs. 2,51,89,781/-(Rupees Two Crores, Fifty one Lakhs, Eighty Nine Thousand, Seven Hundred and Eighty One only) confirmed at 5.2(a) above. 5.2(c) I, impose a penalty of Rs. 2,51,84,781/- (Rupees Two Crores, Fifty one Lakhs, Eighty Nine Thousand, Seven Hundred and Eighty One only)on the Noticee, under Section 78 of the Act. If the Noticee pays the Service tax confirmed, as mentioned in para 5.2(a) above, along with the Interest on delayed payment within 30 (thirty) days from the date of communication or this Order, the amount of penalty liable to be paid by the Noticee under Section 78 of the Act shall be twenty-five percent of the service tax payable/confirmed in para 5.3(a} above. However, the benefit o penalty under section 78 of the Act, shall be availa....
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....(2) of the Act. 5.4(b) I, order for payment of Interest under Section 75 of the Act, at the appropriate rates prevalent during the material period, on the delay in payment of service tax amounting to Rs. 51,42,432/- (Rs. Fifty One Lakhs, Forty Two Thousands, Four Hundred and Thirty Two only), (inclusive of Education Cess and Secondary & Higher Education Cess), confirmed at 5.4(a) above. 5.4(c) I, impose a penalty under Section 76 of the Act on the Noticee, which shall be Rs. 200/- (Rupees Two hundred only) for every day during which such failure to pay service tax continues or at the rate of two per cent (2%) of such tax, per month, whichever is higher, starting with the first day after the due date till the date of actual payment of the outstanding amount of service tax. The penalty shall, however, not exceed the service tax payable by them, as confirmed at para 5.4 (a) above. 5.4(d) I, impose a penalty of Rs. 10,000/- (Rupees Ten thousand only) on the Noticee, under Section 77 of the Act." 2.1 Investigations undertaken against the Appellants by DGCEI, Mumbai Zonal Units, revealed that * their major business relates to the sale of air tickets, for which they hold accr....
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....75 of the said Act, should not be demanded and recovered from them on the Service Tax that would be determined to be payable by them." 2.3 Since even in the subsequent period appellant did not discharged service tax due on these services provided by them demand notices * dated 20.09.2012 for period 2011-12, demanding service tax amounting to Rs. 1,82,86,264/- (inclusive of education cess and Secondary & Higher Education Cess) * dated 16.09.2013 for period 2012-13, demanding service tax amounting to Rs. 51,42,432/- (inclusive of education cess and Secondary & Higher Education Cess) were issued to them. 2.4 The show cause notice and demand notices as above were adjudicated by the Commissioner, by the impugned order, referred in para 1. 2.5 Aggrieved by the impugned order, the Appellant have filed this appeal. 3.1 We have heard Shri V Sridharan, Sr Advocate for the Appellant and Shri Nitin Ranjan, Deputy Commissioner, Authorized Representative for the revenue. 3.2 Arguing for the appellant learned Counsel submits that * issue involved in the appeal is no longer res-integra, and has been decided in the favour of appellants by the larger bench of....
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....the category of Business Auxiliary Services' defined under the said Act, and they appear liable to ST on the amounts so received from M/s Abacus in the course of booking of segments on the CRS. 4.4 Based on the above facts, it is clear that Noticee is the provider of 'Business Auxiliary services' to M/s Abacus and in turn receives the incentives from them." 4.3 CESTAT, Larger Bench has in the case of Kafila Hospitality referred by learned Counsel for appellant observes as follows: "10. At the time of hearing of the appeal before the Division Bench, the Learned Authorized Representative of the Department placed the decision rendered by a Division Bench of the Tribunal in D. Pauls. However, the Division Bench hearing this appeal expressed doubts on the proposition of law laid down in the earlier Division Bench decision of the Tribunal in D. Pauls and framed the following six issues to be decided by the Larger Bench :- "(i) Whether the Incentive received by service receiver from service provider, on appreciable performance, can be subjected to service tax? (ii) Whether a demand can be confirmed without specifying the sub clause of BAS under which....
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....ending appeals and in any view of the matter, the parties would have an opportunity to raise all the issues before the Division Benches at the time when these appeals are heard. Learned Authorized Representatives also pointed out that there is no procedure prescribed for intervention before a Larger Bench of the Tribunal and in support of this contention reliance has been placed upon the decision of a Larger Bench of the Tribunal in Subhash Projects & Marketing Ltd. v. Commissioner of Customs, Cochin [2009 (239) E.L.T. 440 (Tri. - LB)]. 14. Shri J.P. Singh, Shri Vivek Pandey and Shri R.K. Maji, Learned Authorized Representatives of the Department at Delhi have raised a preliminary objection regarding the admissibility of the reference to the Larger Bench. It has been pointed out that though the Division Bench hearing this appeal may have expressed doubts about the law laid down by the earlier Division Bench of the Tribunal in D. Pauls, but the records would indicate that not only had the appellant therein filed a Civil Appeal before the Supreme Court against the decision of the Tribunal, but the Supreme Court had also disposed of the Civil Appeal on February 12, 2018. The c....
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....sion of the Larger Bench on these issues. This will, therefore, not be a good reason to deny an opportunity to the applicants to make submissions before the Larger Bench. 18. The second objection raised by the Learned Authorized Representatives of the Department is that the Customs, Excise and Service Tax Appellate Tribunal (Procedure) Rules, 1982 do not provide for moving an intervention application. As noticed above, any decision taken by the Larger Bench on the issues referred to it would bind the Division Benches when the appeals filed by the applicants are heard. Rule 41 of the aforesaid 1982 Rules confers power on the Tribunal to make such orders or such direction as may be necessary to secure the ends of justice. Justice, in the present case, requires that the applicants be heard, otherwise they would have a complaint that the issues involved in their appeals have been decided by the Larger Bench of the Tribunal without hearing them. 19. The Larger Bench decision of the Tribunal in Subhash Projects & Marketing Ltd. will not help the Department. The applicants therein who had filed the intervention applications were not parties in any appeal pending before the....
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....liance has been placed upon a decision of this Tribunal in M/s. Rohan Motors Limited v. Commissioner of Central Excise, Dehradun [2020 (12) TMI 1014-CESTAT New Delhi]; (ii) Once an option under Rule 6(7) of the Service Tax Rules, 1994 [1994 Rules] is exercised, no further liability arises; (iii) Any activity in relation to booking of passes by air travel agents would be covered under "air travel agency" services as defined under Section 65(4) of the Finance Act; and (iv) The decision in D. Pauls did not render any finding as what would be the gross value of service charged from the CRS service provider and did not even specify the sub-category of BAS under which the demand was confirmed. 43. Shri Badri Narayan, Learned Counsel for the interveners made the following submissions :- (i) The air travel agents are not promoting or marketing the services of airlines/CRS Companies; (ii) The air travel agent is promoting its own business and not to business of the airlines. In support of this contention reliance has been placed upon the decision of the Madras High Court in Airlines Agents Association v. Union of India [2003-TIOL-143- HC-MAD-S....
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..... In fact, the transaction of a single ticket for a particular passenger and for a particular airline, becomes an incidental activity to the main activity of subscribing and owing allegiance to a particular reservation functionally. This is promoting the business of CRS software companies and, therefore, classifiable under sub-clause (ii) of the definition or BAS; and (iii) Rule 6(7) of the 1994 Rules is an option available only to an air travel agent. By the essential character test, the role of the appellant is not that of an air travel agent, but of a subscriber, who exercises his choice for a preferred software system. If the appellant is not acting as "air travel agent" under the contracts, then option of Rule 6(7) of the 1994 Rules is not available for this transaction. 45. The submissions advanced by the Learned Counsel for the appellant, Learned Counsel appearing for the interveners and the Learned Authorized Representative for the Department have been considered. 46. To appreciate the submissions advanced on behalf of the parties, it would be appropriate to reproduce a chart that has been enclosed by the interveners in their written submissi....
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....)"air travel agent" means any person engaged in providing any service connected with the booking of passage for travel by air." 52. It is taxable under Section 65(105)(l) of the Finance Act and it is reproduced below :- "65(105)(l)"taxable service" means any service provided or to be provided to any person by an air travel agent in relation to the booking of passage for travel by air" 53. The issues shall now be considered separately. Whether the air travel agent is promoting it own business and not the business of the airlines 54. According to the appellant/interveners, the air travel agents are rendering services to passengers by providing options relating to travel routes, accommodation, booking of tickets and so any increase in the number of bookings would automatically result in an increase in the business of the air travel agents. It is their submission that this may also incidentally result in the increase in the business of the airlines, but it cannot be treated as promotion and marketing services. 55. For an activity to be considered as promotional, it is necessary that a service provider must "promote" or "endorse" the service of the cl....
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....that unless the air travel agents provide a service to the customers, there would be no question of their getting a commission from the airlines. It is not as if the air travel agents get a fixed commission or income from the airlines irrespective of the passages booked by them in favour of the customers in the nature of a "retainer fee" or "guarantee money", at least that is not the case pleaded before us. Therefore, unless the air travel agents book the tickets and thereby unless they provide the services to the customers, they do not become entitled to any commission. Their commission is entirely depended on and connected with the passage they book for the customers. It cannot, therefore, be said that the commission that the air travel agents get from the airlines is independent of and distinct from the services that they provide to the air-travellers and are relatable to the business that they provide to the airlines. On the other hand, since there is no guarantee money given or no fixed commission given, which has no nexus with the bookings that an air travel agent achieves for the airlines, it has to be said that the air travel agent's commission is integrally connected with ....
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....ortion of the judgment is reproduced below :- 2. The order under challenge is one issued by CESTAT holding that the respondent is engaged in travel agency business, which was brought under service tax net with effect from 10-9-2004. The respondent can be assessed for the service charges under the category, travel agency service. However according to the appellant, the respondent is engaged in business auxiliary service falling under Section 65(105)(zzb) of the Finance Act, 1994 with effect from 1-7-2005 and so much so, demand of tax under this head is tenable. We are unable to uphold the appellant's contention, because, admittedly, the respondent is engaged in booking tickets and making arrangements for travel of passengers under agreement with a well-known travel agency, M/s. Akbar Travels. For services rendered, respondent is paid commission, mainly by Akbar Travels. The Tribunal on facts, found that the service rendered by the respondent is essentially travel agency service as agents of the main travel agency, M/s. Akbar Travels. In the eye of the Tribunal, the respondent assessee is engaged in travel agency business. We do not think that the respondent could be assessed under....
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.... a system to book the tickets. A travel agent is free to choose any CRS system. A passenger would never request a travel agent to book his ticket only through Amadeus/Galileo/Abacus system. Can it, therefore, be said that the travel agent is engaged in the promotion of a particular CRS system. 62. In this connection reliance has been placed by the Learned Counsel for the appellant/interveners upon a Circular dated April 16, 2010 issued by Central Board of Excise and Customs relating to service tax on reinsurance commission. The relevant portion of the Circular is reproduced below :- "In terms of Section 101A (Part IV-A) of the Insurance Act, 1938, every insurer dealing in insurance business is required to reinsure a specified percentage of sum assured with another insurance Company. 2. The Insurance Company pays premium to the reinsuring Company for this service. However, a part of such premium is deducted and kept by the insurance Company for meeting the administrative expenditure. In other words, the insurance Company and the reinsurance Company jointly bear the expenses for running the insurance/reinsurance business. This shared expense is commonly known as 'co....
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....o have been provided. 64. Learned Authorized Representative of the Department, however, submitted that the promotion of "reservation functionality" of a particular CRS Company is not an activity which is connected to the booking of air ticket per se, because the consideration received in the form of commission is not dependent on booking of ticket but dependent upon particular functionality of a particular CRS Company which has been used to book the ticket. Thus, the service cannot fall under "air travel agent" service but would be an activity of promotion of the services provided by CRS Company. The contention, therefore, of the Learned Authorized Representative is that an air travel agent has an option to choose amongst the various CRS Companies and the exercise of such choice is the occurrence of the event of promotion. 65. Mere selection of software or exercising of a choice would not result in any promotional activity. The Department has not pointed out at any 'activity' undertaken by an air travel agent that promotes the business of the CRS Company. 66. The Department has also contended that in the present case, the demand under BAS is justified as thr....
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....itional amount in the form of incentives/commission from the airlines or the CRS Companies. The receipt of incentives/commission would not change the nature of the services rendered by the travel agent. 71. This apart, the definition of BAS would also reveal that the service provider must promote or market the service of a client. As noticed above, it is not a case where the air travel agent is promoting the service of airlines/CRS Companies. The air travel agent is, by sale of airlines ticket, ensuring the promotion of its own business even though this may lead to incidental promotion of the business of the airlines/CRS Companies. Thus, in terms of the provision of Section 65A(2)(a) of the Finance Act, the classification of the service would fall under "air travel agent" services and not BAS. Whether incentives paid for achieving targets are taxable? 72. The contention advanced by Learned Counsel of the interveners is that incentives cannot be construed as "consideration" and if it is so, no service tax can be levied on this amount because under Section 67 of the Finance Act, service tax is leviable on "consideration", which is the gross amount charged by the ser....
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.... purpose of calculating the service tax. It is for this reason that the expression "such" occurring in Section 67 of the Act assumes importance. The Supreme Court, therefore, observed that the authority has to find what is the gross amount charged for providing "such" taxable services and so any other amount which is calculated not for providing such taxable service cannot be a part of that valuation as the amount is not calculated for providing "such taxable service." This, according to the Supreme Court, is the plain meaning attached to Section 67, either prior to its amendment on 1 May, 2006 or after this amendment. 77. Consideration, which is taxable under Section 67 of the Finance Act, should be transaction specific. Incentives, on the other hand, are based on general performance of the service provider and are not to be related to any particular transaction of service. It needs to be noted that commission, on the other hand, is dependent on each booking and not on the target. If the air travel agent does not achieve the predetermined target, incentives will not be paid to the travel agents. 78. In this connection it will be appropriate to take note of the deci....
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....of maximizing their respective commercial positions. As the AP Group put it, the overall relationship contemplates a continuing dialogue between wholesaler and retailer in which promises are routinely exchanged, but to characterize this dialogue as involving supply after supply is unrealistic and impractical. To characterize the payment of the incentives intended to encourage the overall relationship to operate efficiently as involving supplies for consideration equally unpersuasive. A dealer will always wish to sell as many cars as practicable and to move old stock to make way for new stock. So too a dealer will always wish its ordering arrangements to be the most efficient and economically beneficial to it. The manufacture will have the same objectives. It is this context which underpins the Tribunal's conclusion that the payments are not for the supply of anything by the dealer. As the Tribunal said at [86] the dealer (which must be inferred to act in an economically rational manner in the ordinary course) will always want to run the business in this way. The fact that the dealer receives a payment as an incentive when certain thresholds associated with running the business in t....
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.... had submitted that the services were covered under "BAS". The Division Bench hearing the appeal observed that the services provided by the appellant were rightly covered under that heading of "BAS" as defined in Section 65(19) of the Finance Act. The relevant portion of the decision is reproduced below :- "2. The brief facts of the case are that, the assessee-appellants are registered under the category of "Air Travel Agent's Services" and they have been issuing air tickets of various airlines and paying Service Tax on the amount of basic fare. For the purpose, the assessee-appellants used Computer Reservation System (CRS) of M/s. Galileo India, Amadeus India and Calleo Distribution to encourage their business, for which they have been paying the incentives against the segment booked by the assessee-appellants during the disputed period from 1st October, 2003 to 31st December, 2008. The lower authorities has observed that the services provided by the assessee-appellants fall under the category of "Tour Operator's Services" as defined under Section 65(11)(o) of the Act. Being aggrieved, the assessee-appellants have filed the present appeal. 3. xxxxxxxxxx 4.&....
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....e noted that on behalf of the appellant it was contented that no marketing or promotion was conducted by the appellant since it is the choice of the appellant to choose a particular CRS Company and that the customer also does not even know under which CRS system the ticket was booked, but there is no discussion on this aspect nor is there any discussion on the submission of the appellant that the amount received from the CRS Companies cannot be treated as deemed commission since it was merely an incentive and did not attract service tax. 83. These contentions as to whether the air travel agent is promoting the business of the airlines or the CRS Companies have been dealt with in the earlier portion of this order. The order also discusses whether the classification of service would fall under "air travel agents" services or under "BAS" and whether incentives paid for achieving the targets are taxable. 84. The inevitable conclusion, therefore, that follows from the above discussion is as follows :- (i) the air travel agent is promoting its own business and is not promoting the business of the airlines; (ii) the air travel agent is not promoting the bus....