Custom, Excise & Service Tax Tribunal
M/S.Kafila Hospitality & Travels Ltd vs Cst, Delhi on 14 October, 2014
IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL, NEW DELHI, PRINCIPAL BENCH NEW DELHI
Date of Hearing/decision:14.10.2014
Service Tax Misc. No.614542013, Stay No.60420/2013
along with Appeal No.59715/2013
[Arising out of Order-in-Original No.109/GB/2013 dated 20.05.2013 passed by the Commissioner of Service Tax, New Delhi.].
M/s.Kafila Hospitality & Travels Ltd. Appellant
Vs.
CST, Delhi Respondent
For approval and signature:
Honble Smt. Archana Wadhwa, Member (Judicial) Honble Shri Rakesh Kumar, Member (Technical) 1 Whether Press Reporters may be allowed to see the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982?2
Whether it should be released under Rule 27 of the CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?3
Whether Their Lordships wish to see the fair copy of the Order?4
Whether Order is to be circulated to the Departmental authorities?
Appearance:
Rep. by Shri N. Venkataraman, Sr. Advocate and Shri Anil Sood, Advocate and Ms. Rajeshwari K.G., Advocate for the appellant.
Rep. by Shri Amresh Jain, DR for the respondent.
Coram:
Honble Smt. Archana Wadhwa, Member (Judicial) Honble Shri Rakesh Kumar, Member (Technical) Order No54843/ 2014/Dated:14.10.2014 Per Rakesh Kumar The facts leading to filing of this appeal along with stay application and misc. Application for admission of additional documents are, in brief, as under:-
1.1. The appellant is an approved agent of International Air Ticketing Association (IATA)) and Service Tax Registration No.AAA CD385 3FST001 with the Service Tax Commissionerate, Delhi under the category of Air Travel Agent Service. He is engaged in providing air tickets to the clients both as an IATA agent and also by way of purchasing tickets from other IATA Agents on principal to principal basis. The Appellant as Air Travel Agent is required to pay service tax on the amount of gross commission received from the Airlines. However, under Rule 6(7) of the Service Tax Rules, 1994, there is an option for him to pay service tax @ 0.6% of the basic fare in case of domestic bookings and @ 1.2% of the basic fare in case of international bookings. In terms of the explanation to Rule 6(7) of the Service Tax Rules, 1994, for the purpose of this sub-rule, the expression basic fare means part of the air fare on which the commission is normally paid to the Air Travel Agent by the Airline. In this case the objection of the department is that during the period of dispute i.e. during the period from 2008-2009 to 2010-2011, the appellant were receiving commission on the airfare including the fuel surcharges and thus it is the airfare including the fuel surcharge, which was to be adopted as the basic fare for the purpose of Rule 6(7) of the Service Tax Rules, 1944 and while the appellant had opted to discharge his service tax liability under Rule 6(7), he paid service tax at the rate specified in this sub-rule only on the fare excluding fuel surcharge. Accordingly, the department has calculated service tax liability of the appellant on the basis of the gross amount of commission received by them and has demanded differential service tax of Rs.3,54,81,558/-. Besides this above, it was also found that during the above mentioned period, the Appellant had taken the cenvat credit of Rs.1,40,375/- on the basis of the invoices issued to their Bombay office while the Bombay office was not mentioned in the central excise registration obtained by him and the department was of the view that this amount of the cenvat credit would not be admissible to him.
1.2. It is in view of the above facts that the show cause notice dated 5.7.2012 was issued to them for
(a) recovery of service tax of Rs.3,54,81,558/-under proviso to Section 73(1) of the Finance Act, 1994 along with interest thereon under Section 75 ibid;
(b) recovery of cenvat credit amounting to Rs.1,40,735/- under Rule 14 of the Cenvat Credit Rules, 2004 read with proviso to Section 73(1) of the Finance Act, 1994 along with interest on it under Section 75 ibid; and
(c) imposition of penalty on the appellant under Section 76, 77 and 78 of the Finance Act, 1994 and also under Rule 15 (2) of the Cenvat Credit Rules, 2004.
1.3. The above show cause notice was adjudicated by the Commissioner vide order-in-original dated 20.05.2013 by which he confirmed the service tax demand of Rs. 3,44,48,113/- along with interest, but dropped the cenvat credit demand of Rs.1,40,735/-. He also imposed penalty of Rs.3,44,48,.113/- on the appellant under Section 78 and penalty of Rs.10,000/- under Section 77.
1.4. Against this order of the Commissioner, this appeal has been filed along with stay application.
1.5. The misc. application has been filed for adding certain additional grounds and adducing some additional evidences.
2. Heard both the sides.
3. Though the matter was listed for hearing of the stay application and misc. application only, after hearing this matter for sometime, the Bench was of the view that the matter can be taken up for final disposal. Accordingly the requirement of pre-deposit is waived and with the consent of both the sides, the matter was heard for final disposal.
4. Shri N. Venkataraman, Sr. Advocate, Shri Anil Sood, Advocate and Rajeshwari K.G., Advocate, the ld. Counsels for the appellant, pleaded that the appellant during the period of dispute had opted to discharge service tax liability in terms of Rule 6(7) of the Service Tax Rules, 1994, that in terms of this sub-rule, the person liable for paying service tax on the services provided as Air Travel Agent shall have option to pay tax at the rate of 0.6% of the basic fare in case of domestic booking and at the rate of 1.2% of the basic fare in case of international booking, that in terms of explanation to this sub-rule, the expression basic fare is the part of the fare on which commission is normally paid to the Air Travel Agent by the Airlines, that from the explanation, it is very clear that the service tax at the rate specified in sub-rule is not chargeable on the gross basic fare but is chargeable only on that part of the basic fare, on which the commission is normally payable to the Air Travel Agent, that the appellant have evidence to show that the appellant have paid service tax under Rule 6(7) only on that portion of the fare on which the commission was being paid to them by the Airlines, that they have never received commission on the fuel surcharge part of the fare, that the appellant had provided copies of the IATA BSP Agent billing statement for the billing period 16.12.2008 to 31.12.2008 to the Audit Team and had explained the manner in which the billing is done, that this statement shows that most of the Airlines do not pay commission on the basic fare mentioned in the air tickets, but this plea of the appellant was ignored, that the appellant seeks to produce these documents for which they have filed a misc. application, that on the basis of the documents, the appellant can prove that they have paid service tax under Rule 6(7) only on the portion of the fare on which they had received the commission i.e. the basic fare in terms of its definition in Rule 6(7), that the contention of the department that the appellant were required to pay service tax, on the gross amount of fare including fuel surcharge is totally incorrect and there is no legal basis for the same and that in view of the above, the impugned order is not sustainable. Shri Venkataraman also pleaded that the additional evidence for introduction of certain documents may also be admitted.
5. Shri Amresh Jain, ld. DR defended the impugned order by reiterating the findings of the Commissioner in the impugned order and emphasized that the Audit Team as well as the departmental officers had repeatedly asked the appellant to give the break-up of the gross fare into the basic fare and fuel surcharge but since this information was not provided, the department has no option but to determine the Appellant service tax liability on the basis of the gross commission. He emphasized that the appellant while opting to discharge service tax liability under Rule 6(7) of the Service Tax Rules has not paid service tax, on the portion of the airfare on which the commission was being received by them, as if this had been done, there would not have been such a big difference between the service tax liability determined on the basis of the gross commission and the service tax liability determined under Rule 6(7) of the Service Tax Rules.
6. We have considered the submissions from both the sides and perused the records.
7. The appellant as IATA Agent have two options to discharge service tax liability. The first option is to pay service tax on the gross amount of commission received. However, Rule 6(7) provides another option to them to pay service tax @ 0.6% of the basic fare in respect of domestic bookings and @ 1.2% of the basic fare in respect of the international booking. The word, basic fare is defined in the sub-rule as the part of the airfare on which the commission is normally paid to the Air Travel Agent by the Airlines. The explanation to Rule 6(7) defining the term basic fare clearly indicates that the basic fare for the purpose of this sub-rule is not the gross fare but is the part of the gross airfare charged from the passengers on which the Airlines normally pay commission to the Air Travel Agent. The expression air fare on which the commission is normally paid means the portion of air fare, whether 100% or a lesser percentage; on which most of the Airlines pay the commission ignoring the stray cases in which commission is paid on a different part of air fare. The appellants plea is that they have discharged service tax liability under Rule 6(7), only on that part of the gross airfare on which the commission was paid to them by the Airlines and most of the Airlines pay commission only on that portion of fare. In other words, the Appellant plea is that they have paid service tax on the basic fare as defined in the sub-rule. The departments contention, however, is that since the Appellant have not given the break-up of the gross fare into basic fare and the fuel surcharge to enable the department to determine the basic fare component, for the purpose of Rule 6(7), they would not be eligible for the facility of discharge of service tax under Rule 6(7) of the Service Tax Rules and accordingly, the department has determined the service tax liability on the basis of the gross commission. In our view, the term basic fare, in terms of its definition in Rule 6(7), is not the gross fare including fuel surcharge, but is that part of the gross airfare on which the concerned Airlines normally pay the commission to the Air Travel Agent. Therefore, what is relevant for the purpose of Section 6(7) is as to on which part of the airfare, the commission was being normally paid by the Airlines to the Air Travel Agents. According to the appellant, the have evidence to prove that they have discharged the service tax liability under Rule 6(7) only on that part of the fare on which the commission was being paid, but this plea has not been considered by the Commissioner. In view of this, the impugned order is set aside and the matter is remanded to the Commissioner for de novo decision after considering the Appellants plea and also our observations in this order. Misc. application for additional evidence is also allowed. In course of de novo proceedings, the Commissioner shall consider the documents produced by the appellant in support of their plea that they have paid service tax on that part of the airfare on which the commission is normally paid by the Airlines. The appeal, stay application as well as misc. application stand disposed of as above.
( Archana Wadhwa ) Member (Judicial) (Rakesh Kumar ) Member (Technical) ckp 1