TaxTMI 
TaxTMI 
2024 (12) TMI 1244
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....r various domestic and international airlines through their branch offices; branch offices and the head office of the Appellant were separately registered with the jurisdictional service tax Commissionerates; appellant obtained centralized registration number at its head office with effect from April 1, 2013. On the basis of information received and investigations conducted, the officers of DGGI entertained an opinion that the Appellants had illegally collected an amount representing as service tax where it was not required to be collected from the sub-agent/customer of the airline under section 73A of the Finance Act, 1994; accordingly various Show Cause Notices were issued to the different branches of the appellants; vide a common impugned order as above, the proposals were confirmed. 3. Shri Arjun Raghavendra, Learned Counsel for the appellants explains the transactions involved in the provision of the Air Travel Agents Services by the appellants and submits that the nature of transaction is misunderstood both in the impugned SCN and OIO. He submits that theoretically, for accounting purposes, there are three transactions as below. (i). Transaction 1: This transaction is....
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.... the same invoice to account for the sharing of the tax too. Hence this amount is added in the invoice. He submits that the Service Tax shared between the agent and sub-agent gets shown on the invoice; no extra service tax is collected from sub-agent; there is no amount representing as service tax that is actually "collected and retained‖ by the appellants. 5. Learned Counsel submits that the invoice serves to capture two sets of transactions as a consolidated account adjustment document; one, the booking of the air ticket for which the entire booking amount (inclusive of service tax) is to be transferred from the sub-agent to the airline via the Appellant; two, the commission that the sub-agent is entitled for making this booking has to be retained since in effect the sub-agent has to receive such commission from the airline; the service tax indicated in this invoice is the service tax liability of the sub-agent for the services provided to the airline; as part of the contractual agreement, the liability to pay this ST to the exchequer is shifted to the Appellant; since the actual legal incidence is on the subagent, the accounting entry is made and adjusted so t....
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....agent, and this was not deposited with the government. He submits that while the first conclusion is true the second conclusion is factually wrong; SCN issued due to a misunderstanding of the business model of the Appellant was confirmed by the Adjudicating Authority, who has also failed to appreciate the actual nature of the transaction involved. 8. Learned Counsel submits further that it is to be appreciated that both the Agent and sub-agent collectively provide the service to the airline and therefore the gross commission received from the airline is nothing but the revenue earned by them collectively and shared between them respectively, as mutually agreed upon; once this revenue is earned, they have the legal obligation to discharge service tax as service providers; this legal obligation is by virtue of section 68(1) of the Finance Act, 1994 which mandates payment of service tax by the service provider; however, there is nothing in the Act which says how the legal obligation to pay service tax shall be carried out if a service is collectively provided by more than one person, leaving the service providers with two options i.e. either one of the service providers pays th....
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....Learned Counsel submits in addition that it should also be noted that the impugned order or the notice at no point claim that the service tax liability discharged on the commission received by the airlines is less than the amount demanded in the order indicating clearly that the amount that is being demanded is actually part of the amount that is paid as service tax by the agent; however, the impugned order has failed to appreciate the nuance of these three transactions; learned Adjudicating Authority is of the wrong notion that service tax has been collected illegally by the Appellant from the sub-agent; there is no collection or non-deposit of service tax; the service tax has been paid by the Appellant and then the revenue sharing with the sub-agent has been affected through accounting adjustment in the invoices by the Appellant in line with the agreement between the Appellant and the sub-agent. 11. Learned Counsel submits that the impugned order fails to appreciate that though theoretically there are transactions where consideration flows from agents to airlines (for air ticket) and then from airline to agents (for commission), in practice the actual flow of money b....
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....at the commission is not to be treated as inclusive of Service Tax is a wrong observation because nowhere in the notice has it been contended that the value is not cum-duty; notwithstanding that fact, even if it be assumed for a moment that the value of commission is not cum-duty, in that case, the demand for duty, if any that was short paid, had to be made under section 73 or 74 of the Finance Act, 1994 as applicable and subjecting the cum-duty value to tax on the entire cum-duty value is equivalent to imposing tax on tax. 14. Learned counsel submits further that the Service Tax liability has already been discharged in the instant matter by the Appellant before the commission earned is shared with the sub-agents; Therefore, to again demand service tax on the same transaction is improper and amounts to asking for payment of Service Tax twice; the Appellant as a service provider has collected the tax from the airline who is the service recipient and has deposited such tax to the Department; however, while transferring the share of the commission to the subagents, the Appellant has transferred their share post tax since the tax stands paid by the Appellant; therefore, the Appellant ....
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....ax paid under reverse charge mechanism on commission paid to the agents and recovered part of service tax from the agents who are actually the service providers in the case. 16. Learned Authorized Representative submits on the contention of the appellant that the proceedings are based on incorrect perception of the business of the appellant which was just cash flow adjustment/accounting and that the law does not debar for transferring/shifting tax incidence of tax liability basis the legally entered contractual terms, that during the period 2010-11 to 2011-12, the appellants were discharging their Service Tax liability by exercising the option available under Rule 6(7) of the Service Tax Rules, 1994and with effect from 01.04.2012, they have been paying Service Tax under Commission Model. 16.1 . He submits that all the airlines, to whom M/s TSIYPL were providing their services, were members of IATA who entered into an agreement titled "Passenger Sales Agency Agreement" with the appellants; in pursuance of the above agreement with airlines (IATA), the appellants were providing their services for the sale of air transportation services to be provided by the airlines; All monie....
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....rs for the tickets; for example in invoice No. ZXJ8XF dated 17.09.2011, issued by the New Delhi Branch Office of M/s TSIYPL, to the customer Mr. Alain Passagne, the appellants paid Service Tax of Rs. 342/-@ 1.236% on Rs. 27,630/- (Base Fare of the ticket) and they collected an equivalent amount from the customer. 16.4 . He submits that the appellants, while working under the commission model, were to pay Service Tax at full rate on the commission received by them from the airlines; they paid the same by treating the commission received from the airlines as inclusive of Service Tax; the appellants also collected an amount as representing Service Tax from the sub-agents/customers, which was calculated at the applicable rate of Service Tax on the commission paid to the sub- agent or discount given to other customers and the amount so collected was also shown as Service Tax in the invoices issued by the appellants; for example, in Invoice No. Al/13-14/B2659006 dated 26.03.2014, issued, by the Head Office of the appellants, to M/s Mahabir Travel & Tours, the appellants paid Service Tax on the taxable value arrived at by reverse calculation, from the gross commission receive....
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....inguished the case law relied upon by the appellants; Hon'ble Supreme Court, in the case of Dilip Kumar & Company, held that the Taxing Statute has to be interpreted strictly, without looking into its consequences. He submits that once statutory provisions are there, no tribunal can go beyond the statutory provisions, as held by Hon'ble Apex Court in the case of UOI Vs Willo wood Chemicals Pvt Ltd. -2022 (60) GSTL 3 (SC); Larger Bench of this Tribunal in case of Veer Overseas-2015 (18) GSTL 59 (Tr. LB) has also held that CESTAT being the creature of statute itself cannot go beyond the statutory provisions. 18. Learned Authorized Representative submits also that the appellant's contention that even if it is assumed that the appellant has collected service tax from sub agents/customers, still 73A(2) is not applicable as the entire amount stands paid to the Central Government, is not sustainable; the adjudicating authority rightly held that the appellant have deposited only that amount of Service Tax, which they have collected from the airlines by considering the commission, received from the airlines, as inclusive of Service Tax and not the service tax recovered fr....
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....of CENVAT credit is misplaced; Apex Court decision in the case of Northern Operating Systems Pvt. Ltd. that the incidence of taxation, is entirely removed from whether, when and to what extent, Parliament chooses to recover the amount; Larger Bench of the Tribunal also held in the case of Melange Developers Pvt. Ltd. that A sub-contractor has to discharge the Service Tax liability when he renders taxable service. The contractor can, as noticed above, take credit in the manner provided for in the CENVAT Credit Rules of 2004. 22. Rebutting the appellants plea that no interest is payable, Learned authorised Representative, takes us through the provisions of Section 73 B and submits that the provisions are very clear and unambiguous on the issue; the person liable to pay the amount determined under sub-section (4) of section 73A, shall also be liable to pay interest at applicable rate. Learned authorised Representative submits on the issue of time bar that Section 73A deals with cases where an amount representing as Service Tax has been collected and the where no such Service Tax was actually leviable under the Act; time limit is only applicable to demands under Section 73....
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....why the said amount, as specified in the notice, should not be paid by him to the credit of the Central Government. (4) The Central Excise Officer shall, after considering the representation, if any, made by the person on whom the notice is served under sub-section (3), determine the amount due from such person, not being in excess of the amount specified in the notice, and thereupon such person shall pay the amount so determined. (5) The amount paid to the credit of the Central Government under sub-section (1) or sub-section (2) or sub-section (4), shall be adjusted against the service tax payable by the person on finalisation of assessment or any other proceeding for determination of service tax relating to the taxable service referred to in sub-section (1). (6) Where any surplus amount is left after the adjustment under sub-section (5), such amount shall either be credited to the Consumer Welfare Fund referred to in section 12C of the Central Excise Act, 1944 (1 of 1944) or, as the case may be, refunded to the person who has borne the incidence of such amount, in accordance with the provisions of section 11B of the said Act and such person may make an application under tha....
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....ion; Since the agent is sharing the commission with the sub-agent, they are also collecting the portion of the service tax that is payable by the subagent. Revenue wants to interpret this transaction to be the service tax collected by the appellants from the sub-agent and as the service tax stands already paid, on receipt of the commission from Airlines, the appellants are again collecting the same from the sub-agents and are not depositing the same with exchequer. 27. Learned counsel for the appellants presents thematic diagrams of the theoretical as well as practical transactions to make it understand in a better perspective as below. Theoretical Transaction Actual Transaction 28. Learned Counsel submits that the transaction under question is the sharing of revenue between the Agent and the sub-agent after the agent has received the revenue (commission inclusive of service tax) from the airlines; such gross commission received is cum-duty i.e., it is inclusive of the service tax component. Learned counsel explains the revenue sharing, payment of Tax etc, assuming that such gross commission is Rs.500, in the following thematic diagram. He explains that if service t....
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....t transfers the money after retaining his part of the commission and transfers the balance money. Airlines, pay commission to the Appellant Agent; appellant pays service tax on the entire commission; issues invoice to the subagents showing the share of his commission already retained and the service tax portion which he has to bear for the same. 31. We find that in the entire transaction there is nothing to indicate that an amount representing as service tax that is collected and retained by the appellants. We find that due to an understanding between the appellant and the sub-agent, the liability of the the subagentto pay this Service Tax to the exchequer, is shifted to the Appellant and an accounting entry is made as the liability stands discharged at the hands of the Appellant. We find that effectively, the service tax on the portion of the amount of commission paid to the sub-agent is discharged first by the appellant and thereafter recovered. His portion of the commission (net of service tax) is already withheld by the sub-agent. Therefore, it cannot be said that the appellants have recovered service Tax from their agents and have not paid it. It can also be seen that t....
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....the impugned show cause notice refers to. We find that the Chartered Accountant certified the truthfulness of the transaction and the averments of the appellants, after going through the said invoice and corresponding sale & purchase vouchers. It is certified that the first transaction contained in this invoice is for booking two international air tickets from Dacca to Kolkata for total flight ticket prices of Rs. 4782.00 and 615.00 (totaling INR 5397 as per the Sales Voucher); the second transaction contained in this invoice is the commission that M/s Mahabir Travel & Tours (as sub-agent) is withholding i.e. Rs. 82.18 (IATA discount of Rs. 33.67 and PLB (Performance Linked Bonus) of Rs. 48.51); on this commission of Rs.82.18, ST @ 12,36% is Rs. 10 which stands paid by M/s TSIYPL to the govt (on behalf of the sub-agent) upon receiving the commission from the airlines; this Service Tax component paid on behalf of the sub-agent by the agent is now shown in the same invoice to account for the sharing of the tax component; hence this amount is added in the invoice. 34. We find that the Service tax shared between the agent and subagent gets shown on the invoice; it is not actually extr....
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....lect Service Tax from them; M/s TSIYPL did not deposit the amount collected by them as representing Service Tax, with the Government exchequer. During investigations, M/s TSIYPL failed to provide any legal justifications/statutory authority under which Service Tax was collected by them from their sub-agents/customers of the airlines. We do not any evidence in the Notice to allege that the appellants impressed upon their sub-agents that they were providing certain services and therefore, are eligible to collect some service tax from them. 38. However, the impugned Show Cause Notice alleges and the OIO affirms that that the appellants have collected Service Tax from their sub-agents and have not deposited to the exchequer and therefore, such amount representing the service tax is recoverable under the provisions of Section 73A; Both the impugned order and the OIO do not specify as to what service was being rendered by the appellants to their sub-agents. In view of our discussion above and the Chartered Accountants Certificate, it is clear that the appellants have not collected any Service Tax form the sub-agents over and above the Service Tax they have paid on receipt of the c....
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....nciple in Delhi Transport Corporation Vs CST 2015 (38) STR 673 (Del) upheld by 2016 (45) STR J53 (SC) and held that: 18. The service tax liability in Rashtriya Ispat Nigam Limited (supra) arose out of contract given out for transportation of goods. The contractor engaged had undertaken to "bear and pay all taxes, duties and other liabilities in connection with discharge of his obligation‖. The contractor had invoked the arbitration clause for raising a dispute as to its liability to pay service tax. The claim petition was dismissed by the arbitrator which award was challenged by a petition under Section 34 of Arbitration and Conciliation Act before a Single Judge of Bombay High Court. The Learned Judge held that insofar as the service liability is concerned, the appellant (RashtriyaIspat Nigam Limited) which had given the contract was the assessee and liable to tax. The appeal preferred against the said order on the petition was dismissed by the Division Bench of the High Court. 19. Against the backdrop of the above-noted facts in civil appeal carried to Supreme Court, it was observed as under: - "37. As far as the submission of shifting of tax liability is concer....
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....parties, the tax burden can be shifted or shared between parties. The appellants and their sub-agents were following this pattern for years and therefore, it has to be interpreted that there was a contract between the Appellant and their sub-agents for such an arrangement. The contract could be written or oral or it can be an understanding. As long as there is no dispute raised by either of the parties, it can be implied that there is a contract. If it was the case of the Revenue that the appellants have rendered some service to their sub-agents and have received some consideration and hence are liable to pay service Tax, department was free to raise a demand on them under the other provisions and not certainly under Section 73A. 42. It is to be borne in mind that the appellants are not rendering any service to their sub-agents.it is incorrect to allege that the appellants are rendering some service to their sub agents; they are collecting service Tax from them and are not depositing the same with the exchequer. It is apparent that though the show Cause Notice stated that the appellants are rendering some service to the and they can collect service tax from the agents and the same....
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....sited directly with the department by themselves or is deposited with the Revenue by the contractor being the job worker for the appellant is immaterial as long as Service Tax so collected is deposited. The Revenue cannot be allowed to receive Service Tax twice in respect of same construction activities, once from the contractor and the second time from the person who has collected the same. As such, we do not agree with the adjudicating authority that the appellant was required to deposit the Service Tax collected by him from his customers, once again in terms of provisions of Section 73A, even though the same stand already deposited with the Revenue, through the contractors. 45. We find that the impugned order confirms the duty demanded under the provisions of Section 73A (2). In order to conclude that there was a violation of Section 73A (2), three questions have to be satisfied i.e. (i). Whether any amount was collected as representing service tax that was not required to be collected? (ii). Whether such amount collected was retained? And (iii). If not retained, whether it was not deposited with the exchequer? We find, in view of the above discussion that no amount was actuall....