Custom, Excise & Service Tax Tribunal
Trinity Air Travel & Tours Pvt Ltd vs The Commissioner Cgst & Central ... on 26 June, 2024
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL
MUMBAI
REGIONAL BENCH - COURT NO. I
Service Tax Appeal No. 85331 of 2020
(Arising out of Order-in-Original No. 20 & 21/MRM- 8 & 9/MUMECGST-20 & 21/
2019-20 dated 14.11.2019 passed by the Commissioner of CGST & Central
Excise, Thane.)
Trinity Air Travel & Tours Pvt. Ltd. .... Appellants
2, Golden Arrow Apartment,
Kalina, Santacruz (East),
Mumbai- 400 029.
Versus
Commissioner of CGST & Central Excise, .... Respondent
Mumbai East 9th Floor, Lotus Infotech, Near Parel Station, Parel East, Mumbai- 400 012.
Appearance:
Shri J.C. Patel, Advocate for the Appellants Shri A.K. Shrivastava, Authorized Representative for the Respondent CORAM:
HON'BLE MR. S.K. MOHANTY, MEMBER (JUDICIAL) HON'BLE MR. M.M. PARTHIBAN, MEMBER (TECHNICAL) FINAL ORDER NO. A/85631/2024 Date of Hearing: 28.02.2024 Date of Decision: 26.06.2024 Per: S.K. MOHANTY Briefly stated, the facts of the case are that the appellants herein are engaged in providing the taxable service under the category of 'Air Travel Agent', defined under Section 65 (4) of the Finance Act, 1994. For providing such taxable service, they got themselves registered with the jurisdictional service tax authorities. On the basis of intelligence, investigation was carried out by the officers of the Directorate General of Central Excise Intelligent (DGCEI), Mumbai Zonal Unit against the appellants and relevant records were taken over from them and also statements of concerned persons were recorded. Consequent to the investigation, two show cause notices dated 22.04.2016 and 27.11.2018 Appeal No. ST/85331/2020 2 were issued by the department to the appellants, alleging therein that they had provided services and earned commission/ incentive from Global Distribution System (GDS) companies for visa and passport processing charges along with management fees, emigration charges, service charges, ORC (Over-Riding Commission) for booking of air- tickets, cancellation charges for cancellation of air tickets provided by them were classifiable as 'Business Auxiliary Service' (BAS) as per provisions of Section 65(19) ibid read with Section 65(105)(zzb) of the Finance Act, 1994 and these were taxable services as per provisions of Section 65B(44) ibid read with Section 65(51) ibid, but the appellant did not pay the service tax due thereon. It was also noticed by the revenue that the appellants had procured air tickets from the airlines/ consolidators and sold those to their customers at higher rate, on which they did not pay service tax under the category of air travel agent's service. It was also alleged that they had collected an amount of Rs. 5,11,69,227/- from their customers as being service tax, but had not deposited the same to the credit of the government. Both the SCNs issued by the department were adjudicated by the learned Commissioner of Central Excise & GST, Thane, Mumbai vide Order-in- Original No. 20 & 21/MRM-8&9/MUMCGST-20&21/ 2019-20 dated 14.11.2019 (for short, referred to as 'the impugned order'), wherein the proposed service tax demand along with interest was confirmed and penalties were imposed under Sections 76, 77 and 78 ibid on the appellants. Feeling aggrieved with the impugned order, the appellants has preferred this appeal before the Tribunal.
2.1 Shri J.C. Patel, the learned Advocate appearing for the appellants submitted that the appellants as an Air Travel Agent had discharged the service tax liability in terms of the option provided under Rule 6(7) of the Service tax Rules, 1944 at the specified rate of the Basic Fare, and thus, any further demand for service tax on commission, incentives, cancellation charges etc. received by the appellants by treating the same as Business Auxiliary Service, is unsustainable in law. The taxable service provided by an Air Travel Agent is defined in Section 65(105) (l) ibid, as any service provided to any person by an Air Travel Agent in relation to the booking of passage for travel by air. The use of the words "any service connected with", "to any person" and "in relation to" gives very wide scope to the taxable service provided by the air travel agent Appeal No. ST/85331/2020 3 and accordingly, any service which is connected with or is in relation to booking of air ticket and is provided to any person is covered under air travel agent service. The scope of Air travel agent service is not restricted to mere booking of air tickets, but is expanded to cover any service in connection with booking of air tickets. Under Rule 6(7) ibid, air travel agent has been provided with an option, that instead of paying service tax at the rate of 12% under Section 66 ibid (prior to 01.07.2012) and 14% under Section 66B ibid (from 01.07.2012) on the value of the service under Section 67 ibid (i.e. gross amount charged), the air travel agent can pay service tax at the specified rate of the basic fare. He submitted that the Appellants had exercised the said option under Rule 6(7) ibid and the appellants were accordingly discharged the service tax in terms of Rule 6(7) ibid at the specified rate of the Basic Fare. He submitted that once the above position is admitted, and it is not in dispute, that the appellants has exercised the said option under Rule 6(7) ibid and that the appellants were paying service tax at the specified rate of the basic fare under Rule 6(7) ibid, that would amount to complete discharge of service tax liability on any service provided in connection with the booking of air tickets and there can be no further demand for service tax by treating any part of such service as BAS. To strengthen the above submission, the Learned Advocate has relied upon the following decisions rendered by the judicial forum:
(i) Modiline Travel Services Pvt. Ltd. Vs. CST -2023 (12) TMI-911- CESTAT New Delhi.
(ii) BCD Travels India Pvt. Ltd. Vs. CST-2023 (385) ELT 526 (Tri. Mad)
(iii) Akbar Travels of India Pvt. Ltd. Vs. CST -2019(22) GSTL 427
(iv) CCE Vs. Shabeer Travels -2010 (3) TMI 818-KERLA HIGH COURT
(v) Kafila Hospitality & Travels Pvt. Ltd. Vs. CST - 2021 (47) GSTL 140 (LB)
(vi) Akbar Travels India Pvt. Ltd. Vs. CCE - 2018 (14) GSTL 248.
2.2 He further submited that incentives/commission received by Air Travel Agent from GDS/CRS Companies and from Airlines is not liable to Service tax in view of the decision of Large Bench of the Tribunal in the case of Kafila Hospitality & Travel Pvt. Ltd. Vs. CST (supra).
2.3 As regards the demand for service tax on alleged overriding commission/ service charges charged from clients and ticket cancellation charges/ refund administration fees, learned Advocate Appeal No. ST/85331/2020 4 submitted that since the appellants were discharging the service tax by availing an option under Rule 6(7) ibid, by paying the service tax at the specified rate on basic fare, no further service tax can be demanded from them on any other charges. In this context, he has relied upon the judgments in the case of Global Forex and Travels Ltd. Vs. CCE - 2015 (37) STR 513 (Tri. - Del.) and British Airways PTC India Branch Vs. CST
-2018 (10) GSTL 561.
2.4 He further submitted that Service tax was not payable under BAS, on amount charged for arranging Visa and on statutory fees such as, Trade Test fees and Medical test fees paid to Consulates on behalf of customers, to whom the appellants assisted in completing Visa formalities, passport formalities and emigration formalities and merely claimed such amount by way of reimbursement. He placed reliance on the decisions of the Tribunal in Modiline Travel Services P. Ltd (supra) and Globe Forex and Travels Ltd. (supra).
2.5 He further submitted that where Air travel agent purchase tickets from a Consolidator/General Sales Agent/ another Agent at discounted price and sells the same at a higher price, the margin earned is not liable to Service tax inasmuch as the statutory liabilities on provision of various facilities have already been discharged. To support his stand, the learned Advocate has relied on the judgment of Tribunal in the case of CST Vs. Om Air Travels P. Ltd., reported in 2019 (25) GSTL 460.
2.6 Learned Advocate also submitted that in cases of purchase of tickets from a Consolidator and sale to customers, the Appellants had in fact discharged Service tax under Rule 6(7) ibid and the service tax was duly deposited with the Government. This is evident from the sample Invoices of purchase from Consolidators and appellant's Invoices of sale to passengers, which clearly show Service tax amount. Further, in his Statement dated 6-11-2015, the appellant's Managing Director, Shri Baby John, has stated that the appellants were charging Service tax from the passengers under Rule 6(7) ibid and the same was being credited to the government exchequer.
2.7 He also submitted that whatever service tax was collected from customers was duly deposited with the Government. In spite of the Appeal No. ST/85331/2020 5 above, the revenue has proceeded on the totally erroneous basis, without any evidence, that the service tax deposited by the appellants was the service tax on commission/ discount received from Consolidators and on incentives received from the Airlines and not service tax collected from their customers. There is absolutely no evidence whatever in the SCNs that the commission/ discount received from Consolidators was inclusive of Service tax. On the contrary, in his statement dated 06-11-2015, the appellant's Managing Director, Shri Baby John has stated that the Consolidators were deducting Service Tax and paying the appellants net commission. There is no contrary evidence cited in the SCNs to this effect. Therefore, the presumption in the SCNs that what the appellants deposited with the Government was the Service tax collected by them from Consolidators in the commission and not the service tax collected from the appellant's customers is totally baseless and unsubstantiated. The demand therefore under Section 73A (3) ibid on the erroneous basis that service tax collected from customers was not deposited with the Government is ex-facie perverse and baseless. There are absolutely no figures mentioned in the SCNs with supporting evidence to show that the amount of service tax allegedly collected from the Consolidators and to match the same with the service tax deposited by the appellants with the Government, to warrant the conclusion that what was deposited with the Government was service tax collected from Consolidators and not the service tax collected from the customers. Further, as regards alleged incentives inclusive of Service tax collected from Airlines, there is absolutely no mention in the SCNs of the figures of alleged incentives received from Airlines nor any evidence of receipt of incentives from Airlines and the amount of service tax included therein. There is no evidence to match the alleged Service tax included in the Incentives received from Airlines with the Service tax deposited by the appellants with the Government so as to warrant the conclusion that what was deposited with the Government was service tax collected from Airlines and not the service tax collected from the customers. The SCNs have merely proceeded on the basis that as per the agreement with one airline viz. Jet Airways, the incentive was inclusive of service tax. Firstly, there is no mention in the SCNs of the figures of incentive received by the appellants from Jet airways and to match the alleged service tax included therein with the service tax deposited by the appellants with the Government. In fact, Appeal No. ST/85331/2020 6 when the Incentive paid by the said Airlines is alleged to be inclusive of Service tax, it could only mean service tax, if any, leviable in law. As is evident from the judgments referred to above, no service tax was leviable on incentives received from Airlines and therefore incentive, if any, received from Airline would be inclusive of 'Nil' service tax. On the other hand, the amounts of service tax deposited with the Government clearly match with the figures of service tax collected from customers. Therefore, the question of again depositing the said service tax under Section 73A (2) ibid does not arise at all. The demand on this count is therefore clearly perverse and unsustainable in law and liable to be set aside.
2.8 Learned Advocate further submitted that the proceedings initiated by the Department is barred by limitation of time as the present case is not one of fraud, collusion, willful mis-statement or suppression of facts or contravention with intent to evade payment of service tax. Since the appellants had exercised option under Rule 6(7) ibid and had paid the service tax at the specified rate of basic fare, the same was complete discharge of service tax liability and no further service tax was payable. This was the prevalent view amongst the air travel agents generally and the fact that such a view was a bona fide one, stands vindicated by the various decisions rendered by the High Court and Tribunal as referred to herein above in the case of leading air travel agents. Further, it has also been contended that the appellants had maintained complete records and accounts of their activities and there was no clandestine activity or deliberate concealment. Where complete records have been maintained and the issue involved is one of legal interpretation, the longer period of limitation cannot apply. In this context, he relied on the following judgments.
(i) Steelcast Ltd v CCE - 2009 (14) STR 129 (upheld in 2011 (21) STR 500)
(ii) Religare Securities Ltd v CST - 2014 (36) STR 937
(iii) Lanxess Abs Ltd v CCE - 2011 (22) STR 587
(iv) K.K. Appachan v CCE - 2007 (7) STR 230.
2.9 He also submitted that in any event, when SCN dated 22.04.2016 had been issued for earlier period, the longer period of limitation under the proviso to Section 73(1) ibid cannot be applied for the subsequent Appeal No. ST/85331/2020 7 period covered under the SCN dated 27.11.2018. In this context he relied upon the following judgements.
(i) Nizam Sugar Factory v CCE - 2006 (197) ELT 465 (SC)
(ii) ECE Industries Ltd v CCE - 2004 (164) ELT 236 (SC)
(iii) Bhagwati Spherocast P. Ltd v CCE - 2019 (368) ELT 308 (Guj).
3. On the other hand, Shri A.K. Shrivastava, learned Authorized Representative (AR) appearing for the Revenue, reiterated the findings recorded in the impugned order in support of confirmation of the adjudged demands on the appellants.
4. Heard both sides and examined the case records.
5.1 The first issue that arises for consideration is, whether the GDS Commission, incentive, cancellation charges etc., received by the appellants is subject to service tax under the category of Business Auxiliary Services or not. The contention of the Department is that the said amounts are leviable to service tax under the category of BAS. Section 65(19) ibid defines BAS as under :-
"65(19) "business auxiliary service" means any service in relation to :-
(i) promotion or marketing or sale of goods produced or provided by or belonging to the client; or
(ii) promoting or marketing of service provided by the client; or
(iii) any customer care service provided on behalf of the client; or
(iv) procurement of goods or services, which are inputs for the client; or
(v) production or processing of goods for, on behalf of, the client;
(vi) provisions of the services on behalf of client; or
(vii) a service incidental or auxiliary to any activity specified in sub-clauses (i) to (vi), such as billing, issue or collection or recovery of cheques, payments, maintenance of accounts and remittance, inventory management, evaluation or development of prospective customer or vendor, public relation services, management or supervision, and includes services as a commission agent, but does not include any information technology service and any activity that amounts to "manufacture" within the meaning of the clause (f) of section 2 of the Central Excise Act, 1944 (1 of 1944)"
Appeal No. ST/85331/2020 8 5.2 Further, the definition of taxable service provided under Section 65(105)(zzb) ibid is quoted below :-
"65(105)(zzb) "taxable service" means any service provided or to be provided to a client, by any person in relation to business auxiliary service."
5.3 "Air travel agent" has been defined in Section 65(4) of the Finance Act and the relevant portion is reproduced below:-
"65(4) "air travel agent" means any person engaged in providing any service connected with the booking of passage for travel by air."
5.4 Further the taxable service under Section 65(105)(l) ibid 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"
6. We find that the Air Travel Agents are using the portals of the same CRS service providers for booking of air tickets. The CRS is computerized system used to store and retrieve information and conduct transaction related to Air Travel. Major CRS operators that book and sell tickets for multiple Airlines are known as Global Distribution Systems (GDS). On perusal of the statutory provisions vis-à-vis the activities undertaken by the appellants, we find that the appellants is not an agent, working on behalf of the customers for facilitating purchase of tickets from the CRS. The customers approaching the appellants for booking of tickets are not aware about the particular CRS, who issues the ticket through the appellants. In order to fall under the purview of BAS, there must be involvement of three parties namely, the service provider, service receiver and the agent facilitating procurement of service for and on behalf of the service provider. In other words, all the three parties involved in the contract must be known to each other, in order to be classifiable under such head of service. It is an admitted fact on record that for booking of ticket, the passenger only approached the appellants and not the CRS. Verifying the economic aspect, the sub- agent, like the appellants approaches a particular CRS for booking of tickets. Thus, in absence of any connection between the CRS, the Appeal No. ST/85331/2020 9 appellants and its customers, the activities cannot be considered as a service, exigible to service tax under the taxable category of BAS. Further, there is no difference between the nature of services provided by the CRS and the appellants inasmuch as both of them are confined to cater to the requirement of booking of tickets, for the benefit of both the airlines and the customers. It is seen that the CRS commission /incentive is paid to the appellants, if they are able to attain an agreed level of segments to be booked. A passenger is not aware of the CRS Company being utilized by the travel agent for booking the segment nor can a passenger influence appellants /travel agent to avail the services of a particular CRS Company. The passenger cannot directly use the CRS software provided by the Company to book an airline ticket. It cannot, therefore, be said that the appellants are promoting any activity for the passenger or they are providing services on behalf of CRS.
7. Further, it would be seen from the definition of "air travel agent"
that it includes all services connected with, or in relation to the booking of passage for travel by air. The services in question are booking of airlines tickets and for achieving a pre-determined target. The air travel agent also receives an additional 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. Whether the ticket is bought directly from the airline or through the CRS, the same would not make any difference. Thus, in our view, the commission, incentives, cancellation charges etc., received by the appellants cannot be subjected to levy of service tax under BAS. Moreover, it is on record that during the disputed period, the appellants were paying service tax under Rule 6(7) ibid and since, payment of service tax under air travel service was accepted by the department, contrary stand cannot be taken to fasten the tax liability on the appellants under a different category of service namely, BAS.
8. We also find the subject disputed issue herein is squarely covered by the ruling of Larger Bench of Tribunal in the case of Kafila Hospitality & Travels Pvt. Ltd. (supra). It has been held that the incentive/commission is not subject to levy of service tax. The relevant paragraphs in the said order are reproduced as under :-
Appeal No. ST/85331/2020 10 "2. Certain essential facts need to be stated for appreciating these issues. The appellants is an approved agent of International Air Ticketing Association [IATA] and is engaged in providing air tickets. The travel industry basically comprises of five key players namely airlines, travel agents, Central Reservation System [CRS] Companies, sub-agents and passengers. The airlines provide air transport services to passengers and discharge their service tax liability in terms of Section 65(3b) read with Section 65(105)(zzzo) of the Finance Act, 1994 [Finance Act]. The travel agents accredited by IATA are authorized to sell the air travel services provided by airlines to customers/sub-agents in the form of airline tickets. CRS Companies provide an online portal for booking of tickets offered by various airlines. They enter into agreements with airlines for rendering 'Online Information Data Access and Retrieval' [OIDAR] services, wherein they collate data such as ticket availability, price, duration of journey, etc., for access by subscribers. CRS Companies also enter into subscriber agreements with IATA agents wherein the IATA Agents are permitted to use the data base available on the portal for booking of airline tickets for passengers/sub-agents. Sub-agents can also purchase airline tickets from the IATA agents for their customers (passengers). The passengers are the ultimate recipient of air travel services.
3. IATA agents are persons who have been authorized to sell airline tickets directly from the airlines to passengers/sub-agents.
For sale of tickets, the IATA agents receive commission from the airlines. In addition to the said commission received for booking of airline tickets, the airlines also incentivize IATA agents by paying target-based incentives, which are linked to guaranteed booking of a minimum number of airline tickets. In certain cases, sub- agents also book airline tickets through IATA agents. In a situation where a sub-agent achieves a pre-determined target of bookings through a particular IATA agent, the IATA agent pays an incentive to the sub-agent.
4. The CRS Companies provide OIDAR services to airlines. In lieu of these services, the airlines pay consideration to the CRS Companies in the form of 'charges/commission'. The CRS Companies also allow IATA agents to subscribe to their portals for booking tickets for the passengers/sub-agents. Earlier, the IATA agents were charged by the CRS Companies for access to the portals. However, due to increasing competition in the market, the CRS Companies stopped charging the agents for booking through the portal and instead, in order to increase the flow of business, the CRS Companies started to part with a portion of their consideration (charges/commission) and paid the same to the IATA agents when the agents achieve a minimum quantum of bookings through the concerned CRS portal. This incentive is normally termed as 'CRS commission'. The three CRS Companies involved are Amadeus India Private Limited [Amadeus], Interglobe Technology Quotient Pvt. Ltd. [Galileo] and Abacus India [Abacus].
xx xx xx
Appeal No. ST/85331/2020
11
41. On a consideration of the entire matter it transpires that the following two main issues arise for determination :-
(a) Whether service tax can be levied under the category of 'business auxiliary service' on target based incentives paid to the travel agents by airlines by alleging that the travel agents are promoting and marketing the business of the airlines; and
(b) Whether the commission paid by CRS Companies to travel agents can be subjected to service tax under the category of 'business auxiliary service' by alleging that the travel agents are promoting and marketing the business of such companies.
xx xx xx
58. Thus, by rendering of services connected to travel by air, a travel agent would render "air travel agent" services, which services cannot be said to be for 'promotion or marketing' for the airlines.
Whether the air travel agent is promoting the business of CRS companies xx xx xx
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.
xx xx xx
80. It, therefore, clearly transpires from the aforesaid decisions that incentives paid for achieving targets cannot termed as "consideration" and, therefore, are not leviable to service tax under Section 67 of the Finance Act.
xx xx xx
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 business of the CRS Companies;
(iii) in any view of the matter, the classification of the service would fall under "air travel agent" service and not "BAS" in terms of the provisions of Section 65A of the Finance Act; and
(iv) the incentives paid for achieving the targets are not leviable to service tax."
Appeal No. ST/85331/2020 12 Following the above said decision, we are also of the considered opinion that the demand cannot be sustained in the present disputed matter.
9. Now we are addressing the second issue that arises for consideration is, whether the appellants are liable to pay service tax on collection of certain amounts from the clients for Visa/Passport Processing charges with management fees, emigration charges collection etc. In this context, we find that the CBEC vide Circular No. 137/6/2011-ST dated 20.04.2011, has clarified that the assistance provided by visa facilitation directly for processing of visa application, does not fall under any of the taxable services under Section 65(105) ibid. Hence, levy of Service tax on that count is not attracted. The learned adjudicating authority has also considered the said Circular in the impugned order, but has held that activity of providing assistance is a 'service'; but such service was neither covered under negative list, services as per Section 66D ibid, nor exempted under Mega Exemption Notification No. 25/2012-ST dated 20.06.2012. On such interpretation, he has opined that Service tax is required to be paid on such services after 01.07.2012. Accordingly, learned adjudicating authority found that demand for the period 01.04.2010 to 30.06.2012 is not maintainable, but confirmed the demand for the period 01.07.2012 to 30.09.2015 and from October 2015 to Mach 2016. We find that learned adjudicating authority in the present case, has wrongly conceived the CBEC circular dated 20.04.2011, inasmuch as all the taxable services are defined in sub-clauses of clause 105 of the Section 65 ibid at that relevant point of time. This statutory provision is still existing even from 01.07.2012 onwards. The CBEC Circular clarifies that the assistance for processing of visa application does not fall within the scope of services defined under Section 65(105) (k) ibid, 65(105) (zzb) ibid and Section (105) (zzzq) ibid. In both the SCNs, the demand on this count was raised covering the service under BAS. However, it is not classifiable as per CBEC clarification under this category. We also notice that learned adjudicating authority has not categorized this service under any definition of service provided in clause (105) of Section 65 ibid for the confirmation of demand. Further, the impugned order does not mention as to under which clause of the definition of BAS under Section 65(19) Appeal No. ST/85331/2020 13 ibid, this activity of the appellants would be covered. When the learned adjudicating authority could not determine the nature of taxable service provided by the appellants in this case, it is absolutely improper on the part of the department to confirm the service tax demand on such ground. It is well settled position of law that lack of clarity in the show cause notice/order and omission to indicate the specific category of service, under which the tax is proposed to be demanded will vitiate the proceedings ab initio. In such circumstances, the demand of service tax cannot survive.
10. As regard the demand of Service tax on amount collected/retained/received by the Appellants as ORC (Over Riding Commission)/ RAF (Retaining Refund Administrative Fees), we find that the learned adjudicating authority has dropped the demand on ORC/RAF upto the period 30.06.2012, following the decision of the Tribunal in case of Globe Farex & Travels Ltd. (Supra). However, he did not apply the same principle on the demand proposed for recovery for the period 01.07.2012 to March 2016, owing to the reason that the 'ORC/RAF' is not covered in exemption Notification No. 25/2012-ST dated 20.06.2012 or in the negative list of services prescribed in 66D ibid (came into effect from 01.07.2012). In this context, we notice that the appellants were charging 'ORC' in lieu of their overheads or cost of booking tickets, from their clients. They are also charging & recovering/ retaining Refund Administrate Fees (RAF) from their clients against cancellation of Air Tickets. Appellants render the services of Air Travel Agent by booking of passage for travel by air for the clients/ customers. If the Airlines do not provide any commission to them, they recover the cancellation charges/booking overhead charges/ cost of booking tickets in the name of ORC/RAF from their customers. On the said ORC/RAF amount, the impugned SCNs had proposed for demand of service tax under the head BAS. However, we find that neither the SCNs nor the impugned order have specified under which clause of the definition of BAS the said activity of appellants would be covered. Appellants render the services of Air Travel Agent by booking of passage for travel by air for the clients/ customers and not provided any Business Auxiliary Service to them. We also find that this activity is not covered by any of the specific clauses of the definition of BAS as provided in Section 65(19) ibid. These charges are collected from the persons booking the air ticket and Appeal No. ST/85331/2020 14 this is not the amount received from the appellant's clients i.e., the airlines/CRS. It is not disputed that in respect of cancelled tickets, the airlines/CRS do not give any commission whatsoever to the appellants. In view of this, we are of the considered opinion that no service tax would be payable under Section 65(105)(l) ibid on the said charges, which are a part of the airfare received by the appellants from the persons booking the air ticket(s); who, subsequently, had cancelled the same. Therefore, we hold that this activity is not taxable under BAS during the period of dispute and thus, the said disputed charges which are recovered/ retained by the appellants are not liable to Service tax under BAS.
11. Moreover, when the learned adjudicating authority has dropped the demand on this account prior to the period 01.07.2012, he could not apply a different parameter for the subsequent period, when the circumstances are identical and remained the same. Therefore, in our view, the confirmation of demand as regards to ORC/RAF amount collected from the buyers for the Air Ticket is not legally sustainable.
12. Another issue that arises for consideration is whether, in respect of the Air Ticket purchased by the appellants from Airline consolidators and sold to customers at higher price, the appellants are liable to pay service tax. We find that the appellants are purchasing ticket from Consolidator/General Sale Agents/other agents on discounted price and thereafter, they are selling at a higher price to the customers. The trade margin earned for such purpose is not taxable as held by the Tribunal in the case of Commissioner of Service tax, Ahmedabad Vs. Om Air Travels Pvt. Ltd (supra) as under :
"4. Heard both the sides and perused the records. We find that the Ld. Commissioner (Appeals) while dropping the demand held that purchasing a ticket on discounted price and selling them to customer is a trading activity hence the trade margin will not be taxable. In the fact that the appellants is purchasing the ticket on discounted price and selling the same at higher price to the customer, the difference, in our view, is a trade margin during the process of sale and purchase of the tickets. Therefore, we do agree with the contention given by the Ld. Commissioner (Appeals). Accordingly, the demand raised on trade margin of purchase and sale of the tickets shall not be taxable. Hence the impugned order is upheld, Revenue's appeal is dismissed."
Appeal No. ST/85331/2020 15
13. We also find that where air tickets were procured by appellants from the consolidators, service tax was paid by the consolidators. In these cases, the consolidators had opted under Rule 6(7) ibid and paid the Service tax at the specified percentage of basic fare. As such, there cannot be levy of Service tax under Rule 6(7) ibid again for the same Air ticket dealt with by the appellants. However, from the documentary evidences provided by the appellants, we find that wherever tickets were purchased from consolidators, they had started paying Service tax on the basic fare from 01.04.2014. In these circumstances, the service tax demand confirmed against ticket booked through consolidators, is legally not correct and we do not find any merits in the impugned order, insofar as it has confirmed the adjudged demands on the appellants.
14. As regards the dispute of present matter we find that allegation was made in the demand notices that the appellants were recovering the amount representing Service tax from their sub-agent but the same was not deposited to the Government exchequer. Section 73A of the Act, 1994 provide as under :
(1) Any person who is liable to pay service tax under the provisions of this Chapter or the rules made thereunder, and has collected any amount in excess of the service tax assessed or determined and paid on any taxable service under the provisions of this Chapter or the rules made thereunder from the recipient of taxable service in any manner as representing service tax, shall forthwith pay the amount so collected to the credit of the Central Government.
(2) Where any person who has collected any amount, which is not required to be collected, from any other person, in any manner as representing service tax, such person shall forthwith pay the amount so collected to the credit of the Central Government.
(3) Where any amount is required to be paid to the credit of the Central Government under sub-section (1) or sub-section (2) and the same has not been so paid, the amount, a notice requiring him to show cause why the said amount, as specified in the notice, should not be paid by him to the credit of the Central Government.
A plain reading of the provisions contained in Section 73A(2) and (3) ibid, which have been invoked by the Revenue, it is clear that any person who has collected any amount, which is not required to be Appeal No. ST/85331/2020 16 collected, from any other person, in any manner as representing service tax, shall forthwith pay the amount so collected to the credit of the Central Government. A correct reading of the provisions indicates that the amount representing service tax would necessarily mean the service Tax not paid. There is no provision to say that service tax which has already been paid should not be recovered from anyone. Such an understanding is contrary to the principles of indirect taxation. The provisions would apply only in cases where service tax is recovered, by the person liable to pay tax from their customers and is not paid to the Government. The incidence of an indirect tax is bound to be passed on. If the person liable to pay tax, having paid the tax liable, has an understanding/agreement with his customers to recover such tax from them. Then in such event, the provisions of the above Section cannot be invoked. In the present disputed matter, the appellants strongly argued that being an air travel agent, they had opted to pay Service tax on percentage of basic fare specified in sub-rule (7) of Rule 6 ibid. The explanation there under has clarified that 'basic fare' means that part of the air fare on which commission is normally paid to the air travel agent by the airline. From the contention of the demand notice, it is apparent that except commission (if any) all the payment collected by the appellants (as IATA) which includes all taxes (Service tax also), on behalf of the airlines are transferred to airlines through Billing Settlement Plan (BSP). As such, the amount of Service tax collected from the clients/sub-agents has already been paid to the Government exchequer on monthly basis, when transferring the amount of Service tax along with fuel charges to the airlines through billing settlement process (BSP). It is only a presumption of the departmental officers that the commission/discount received by the appellants from the consolidators is inclusive of Service tax, without placing any evidence in this regard. We notice that as an IATA, the appellants have transferred the amount of Service tax to the account of Airlines, through BSP, while opting for payment of Service tax as per Rule 6(7) ibid. The applicable Service tax was only collected/recovered by the appellants from the customers/sub-agents and same was deposited to the government account. We also find that the appellant's Managing Director Shri Baby John in his statement dated 06.11.2015 had stated that the appellants were charging service tax from the clients/customers under Rule 6(7) ibid and the same was being credited to the government exchequer.
Appeal No. ST/85331/2020 17 Therefore, the allegation of the department that what the appellants deposited with the government was the Service tax collected by them from consolidators in the commission and not the Service tax collected from the Appellant's customers is factually incorrect and without any evidences. Hence, there is no question of depositing the same amount again to the government under Section 73(2) ibid.
15. We also find that the appellants in support of their submission that the service tax collected by them from the customers has been deposited with Government exchequer, had submitted the ST-3 return for the period October 2015 to March 2016, which would show that Service tax plus SBC payable for the said period was Rs. 1,14,08,404/-, which was paid by the appellants along with interest under different challans. It therefore, implies that whatever amount collected as Service tax has been paid to the Government and no amount representing Service tax remained with the appellants. We find that the learned adjudicating authority has not properly examined the documentary evidences and simply confirmed the Service tax demand on this account, which is legally not sustainable.
16. Learned Counsel for the appellants also contended that the extended period of limitation could not have been invoked in the facts and circumstances of the present case. The first show cause notice was issued on 22.04.2016 for the period October 2010 to September 2015 and second show cause notice was issued on 27.11.2018 for the period October 2015 to March 2016. The submissions advanced by the Learned Counsel for the appellants deserves to be accepted. The appellants had paid the Service tax on the part of basic fare and filed the ST-3 returns regularly. It is an admitted and undisputed fact that the appellants are registered service provider of "Air Travel Agent" service. It is also an admitted fact that they had filed returns for the relevant period. We find force in the argument of the appellants that they were in bona fide belief and understanding that the incentives/ commission/ cancellation charges/ amount charged for arranging visa etc. would not be subjected to payment of service tax under BAS. Hence, they had not reported the same in the ST3 return. The Department had alleged that the fact of receipt of said amount/charges was not disclosed in any manner. To this effect, we find that all the disputed amounts/charges received by them Appeal No. ST/85331/2020 18 are duly accounted for in their books of accounts and also disclosed in Annual Report viz. Profit and loss account and the Balance Sheet, which is a public document and also known to the Department. Having disclosed the receipts of said disputed amount in the Annual Report coupled with the bona fide belief of the appellants, we find that there is no suppression of facts in the instant case with an intention to evade payment of Service tax. Hence, we hold that the proviso to section 73(1) ibid i.e., extended period of time cannot be invoked in this case and the demand of service tax is hit by limitation of time.
17. We also find force in argument of the Ld. Advocate that when Show Cause Notice dated 22.04.2016 had been issued for earlier period, the longer period of limitation under the proviso to Section 73(1) cannot apply for the subsequent Notice dated 27.11.2018, in view of the decision of Hon'ble Apex Court in case of Nizam Sugar Factory v. CCE - 2008 (9) S.T.R. 314 (S.C.).
18. In view of the foregoing discussions and analysis, we do not find any merits in the impugned order, in so far as it has confirmed the adjudged demands on the appellants. Therefore, the impugned order is set aside and the appeal is allowed in favour of the appellants, with consequential relief, if any, as per law.
(Order pronounced in open court on 26.06.2024) (S.K. Mohanty) Member (Judicial) (M.M. Parthiban) Member (Technical) SM