TaxTMI 
TaxTMI 
2024 (3) TMI 596
X X X X Extracts X X X X
X X X X Extracts X X X X
....om the airline companies under the category of "Business Auxiliary Service". The department has filed the cross appeal on the bifurcation of the income under the category as 'Commission' and 'Incentive' and further the bifurcation of incentives to 'incentive', 'discount' and 'market price adjustments' on which demand has been dropped. 2. Show cause notice dated 13.10.2015 was issued as the department compared the ST-3 returns, 26AS statements and the balance sheets of the appellant and concluded that they had under reported their taxable values and paid less service tax on the various services under the category of "Clearing and Forwarding Agent" (CFA) and "Business, Auxiliary Service" (BAS). Accordingly, demand towards differential amou....
X X X X Extracts X X X X
X X X X Extracts X X X X
....r booking of space for transportation of goods which is paid by the assessee to the airlines and hence cannot be attributed to the services of Clearing and Forwarding Agent and therefore, dropped the demand of Rs. 7,72,79,839/- on this account. On the second aspect of "Business Auxiliary Service", which is the subject matter of dispute both by the appellant and the Revenue, the adjudicating authority considered the two elements as "commission" and "incentive" separately but as the appellant had paid the service tax on "commission", there was no dispute. The liability of service tax on "incentive", was considered by the adjudicating authority taking into account the different terminology used in the Cargo Sales Report (CSR) Sheets i.e., 'inc....
X X X X Extracts X X X X
X X X X Extracts X X X X
....incentive are very much in the nature of payment for services rendered in promoting such business and are therefore taxable. In support of the appeal filed by the revenue, it has been submitted that bifurcation of 'incentives' and holding the value of 'discount' and 'market price adjustment' as not taxable is not legally tenable and the entire amount towards 'Commission' and 'Incentive' are taxable. 7. Before proceeding further, it is necessary to examine the provisions of section 65(19) defining the category of service under "Business Auxiliary Service" (BAS) and the "taxable service" under section 65(105)(zzb) : 5 "65(19) -"Business Auxiliary Service" means any service in relation to, - (i) promotion or marketing or s....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Hospitality & Travels Pvt. Ltd. - 2021 (47) GSTL 140 (Tri.-LB) observed that for an activity to be considered as promotional, it is necessary that a service provider must "promote" or "endorse" the service of the client and since the appellant / travel agent was merely providing the options to the passengers it was held that the appellant travel agent was not promoting the services of any airline, maybe incidentally the airlines benefit by the purchase of more tickets but that would not mean that the travel agent is providing a service for promoting the airlines. The same analogy would apply in the present case as the appellant negotiates with the airlines for booking of space or slots in their aircrafts on behalf of their client/exporters....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... service tax. We are guided by the observations of the Larger Bench that incentives are not to be construed as 'consideration' and applying the said logic, the inevitable conclusion is that no service tax can be levied on incentives received by the appellant, coupled with the fact that incentive in the present case is a form of profit earned by the appellant as a result of a trading activity. The findings of the adjudicating authority that 'incentive' received by the appellant is also another form of 'consideration' given by the airlines for providing the service for promotion of their business needs to be set aside in view of the decision of the Larger Bench, where it was specifically concluded that by booking air tickets the air travel ag....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d the airlines for the said period including "incentive" ↓ The "incentive" is reflected in the CSR sheet as a deduction from the total amount of freight payable to the airlines by the assessee." 11. From the aforesaid description as well as the discussion in the light of the judicial pronouncement, we are of the considered opinion that no service tax can be levied on 'incentive'. In so far as the appeal filed by the revenue against the demand being dropped on 'discount' and 'market price adjustment' is concerned the same has been dropped as they are directly linked to freight which has been held to be non-taxable by the adjudicating authority and the same has not been challenged by the Revenue. 12. The learned Authori....