Custom, Excise & Service Tax Tribunal
Jet Lite India Ltd vs Delhi-Ii on 19 July, 2019
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CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL
NEW DELHI.
PRINCIPAL BENCH - COURT NO. II
Service Tax Appeal No. 51282 of 2015
(Arising out of order in original No. 01/AS/ST/2015 dated 09.01.2015 passed by the
Commissioner, Service Tax-II, New Delhi).
M/s Jet Lite India Limited Appellant
Jet Air House
13, Community Centre, 5th Floor
Yusuf Sarai, New Delhi-110049.
VERSUS
Commissioner, Service Tax-II Respondent
2nd Floor, Nehru Place New Delhi-110019.
APPEARANCE:
Shri Rahul Shah, Ms. Niyati Jigyasi & Ms. Divya Jaswant, Advocates for the appellant Shri Vivek Pandey, Authorised Representative for the respondent CORAM:
HON'BLE MR. ANIL CHOUDHARY, MEMBER (JUDICIAL) HON'BLE MR. BIJAY KUMAR, MEMBER (TECHNICAL) FINAL ORDER NO. 50917/2019 DATE OF HEARING: 18.01.2019 DATE OF DECISION: 19.07.2019 ANIL CHOUDHARY:
The appellant M/s JetLite (India) Limited (formerly known as M/s Sahara airlines Limited) is inter-alia engaged in the business of providing service of „transportation of passengers by air‟ and for this purpose they are registered with the Service Tax Department. For providing the aforesaid output service, the appellant inter-alia 2 receives services from Computer Reservation System (CRS companies), also known as Global Distribution Companies (GDS) which provide Online Computer System, which enables exchange of comprehensive information (on real time basis) between the airline/ assessee and the Air Travel Agents. Through the said system the availability of seats, reservation, ticketing, communication, distribution and other travel related information are made available on real time basis. The only requirement being that the airline network (computer system) should response on real time base with confirmation request made by the travel agency, assessing the data relating to the airlines, available in the data processing centre of CRS companies.
2. To enable this, the travel agents, in turn are provided with a computer by the CRS companies having suitable software and on line connectivity with their own data processing centre which in turn, is connected with the computer systems of airlines. The data processing centre, of the CRS companies makes available to the travel agents of the respective airlines, for ascertaining seat availability, the fare structure etc. and thereafter, enables booking of a seat on a particular flight of an airline.
3. The airline computer network in turn accesses and retrieves the data relating to booking of a seat by any travel agent from the database of the CRS server, on real time basis, for updation for its own travel related data.
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4. The payment for this service rendered by the CRS companies was made by the airlines (appellant), being the beneficiary, directly to the concerned CRS. Evidently, the airline specific CRS software and the data processing centre maintained by the CRS companies accessed and used by the airline and travel agents were for the sole benefit of the airlines, facilitating sale of their products and services. It was for this service that the airline paid to the CRS companies, which resulted in the booking of air tickets of the airline.
5. The manner in which on-line information and database access/ retrieval are generally made through CRS can be said to comprise of two elements.
5.1 First element resembles the service provided by the Internet Service Providers (ISPs). The CRS, like ISPs provide telecommunication network or gateways necessary to access on-line the messages and database and other information between the airlines and the air travel agents. This network is arranged by CRS companies with the help of separate organisation who are paid by CRS Companies for the service.
5.2 The second element relates to maintenance of an uploaded data base in respect of travel related data of airlines on real time basis by the data processing centre (DPC) or Master Computer System (MCS), as obtained from airlines computer system and then making provision for on-line data access or retrieval from data base of DPC or MCS by both airlines and the travel agents.
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6. Thus, the DPC or MCS of CRS established by these companies receives, processes, stores and disseminates data about flight schedules, room availability, bookings done, fare information etc. It is for this purpose that the CRS companies, maintain a huge Master Computing System (MCS), which is connected, on one hand with airlines‟ servers for updating of database of MCS with travel related data and on the other hand, with the computer terminals given to Air Travel Agents for updating of database of MCS with data relating of booking of seats on real time basis. This data base of MCS is parallel on real time basis, is available for access or retrieval of necessary travel related data by both airlines and the travel agents.
7. The issue in this appeal is
(i) Whether the service received by the Airlines/ assessee are covered under the tax entry „Online data base retrieval and access service‟ under Section 65(75) read with Section 65 (105) (zh) of the Finance Act, 1994, and whether appellant is liable to pay service tax.
(ii) Whether extended period of limitation have been rightly invoked particularly under the facts that the situation is wholly revenue neutral;
(iii) Whether penalty and interest have been rightly demanded.
8. The appellant was of the view that the aforesaid services received by the Appellant did not fall within the ambit of service category of "Online Information and Database Access or Retrieval Service" („OLIDAR Services‟) and accordingly, for the period prior to 5 01.07.2012, the appellant did not pay Service Tax on the consideration paid by the Appellant to the CRS Companies for the receipt of the said services.
9. However, the said position adopted by the appellant was disputed by the department and accordingly, the appellant was issued the following two show cause notices demanding payment of service tax on the amount paid to the CRS Companies for receipt of the aforesaid services, under the taxable service category of OLIDAR Services:
Sl. SCN No. and data Period of dispute
No.
1 DZU/INV/ST/E/025/07/Pt./1832 dt. 01.10.2003 to
22.04.2009 (SCN dated 22.04.2009). 30.04.2008
2 C. No. 1-26(494) ST/Audit/AMR-227/Gr. 01.05.2008 to
B-7/Jetlite/2012-12/51503 dated 31.03.2013
23.10.2012. (SCN dt. 23.10.2013).
10. With respect to the SCN dt. 22.04.2009, even though the personal hearing was held on 07.10.2015, no order has been received by the appellant till data adjudicating the said SCN. The second SCN i.e. SCN dated 23.10.2013 which is the subject matter of the present dispute was adjudicated vide Order-in-Original No. 01/AS/ST/2015 dated 09.01.2015 (impugned order) wherein the demand amounting to Rs. 30,09,43,355/- was confirmed along with interest and penalty on the basis of the ground that the appellant is liable to pay service tax, as a service recipient, under reverse charge mechanism, on the services received from the CRS Companies, located outside India as the said services are classifiable under the taxing entry of OLIDAR Service. Being aggrieved, the appellant is in appeal before this Tribunal.
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11. At the outset, learned Counsel for the appellant submits that the issue in the present case with respect to the classification of the services received from the CRS Companies by the appellant has been settled by Hon‟ble Supreme Court in the case of Jet Airways (India) Ltd. Vs. Commissioner of Service Tax, Mumbai-I vide order dt. 17.04.2017 wherein the appeal filed by Jet Airways (India) Ltd. („Jet Airways‟) against the CESTAT Order No. A/88840-88844/16/STB dt. 29.07.2016 read with CESTAT rectification Order No. M/94128- 84137/16/STB dt. 02.12.2016 (Jet Airways CESTAT Order) was dismissed. The CESTAT, Mumbai in the Jet Airways Order held in favour of Jet Airways on the ground of revenue neutrality and limitation, and accordingly, set aside the entire demand alonwith interest and penalty. However, on merits, this Tribunal held that the activities of the CRS Companies are correctly classifiable under the taxing entry of OLIDAR Services.
12. Thus, by virtue of the Jet Airways CESTAT order, as upheld by the Hon‟ble Supreme Court, the services received by the appellant from the CRS Companies have been held to be OLIDAR Services. Accordingly, on merits the classification of the services received by the appellant from the CRS Companies is settled to be OLIDAR Services, as alleged by the Department in the show cause notice.
13. On the issue of „Revenue Neutrality‟, reliance is placed upon the following judgements, wherein it has been categorically held that had the airline Companies/appellant paid service tax under reverse charge mechanism on the receipt of services from the CRS companies, then 7 they would have been eligible to claim Cenvat credit of the said taxes paid, making the entire situation revenue neutral and hence, the demand raised for payment of said tax alongwith interest and penalty is fit to be set aside.
Jet Airways CESTAT (Final) order: The relevant extract of the said judgment is reproduced below for ease of reference:
"10.1 We find that the arguments putforth by learned Sr. Counsel on the Revenue neutrality may merit acceptance for more than one reason.
10.2 Firstly, it is undisputed that the service tax liability on the payments made by the appellant to CRS companies is on reverse charge mechanism as if the appellant is a service provider. The said service tax liability has arisen on the tickets issued by the CRS Companies to various customers of appellant. It is also undisputed that the appellant herein has discharged the service tax liability as an output service provider in respect of the services rendered by the appellant under the category of "transport of passenger by air and other services".
If that be so, appellant is eligible to avail the CENVAT credit on all the services on which service tax is paid and utilised for rendering such output service.
10.3 Secondly, it is nobody‟s case that the service tax liability on "online information and database access or retrieval service"
is paid by the appellant in respect of the tickets issued which are directly linkable to the output services provided by the appellant.
10.4 In our considered view the appellant could have availed CENVAT credit of the service tax paid on reverse charge mechanism as they are liable to pay tax on output service hence Revenue neutral situation arises wherein the appellant pays the tax and takes the credit. We note that the issue as to confirmation of service tax liability arose on the payment made to CRS company, as decided by majority decisions in three cases namely British Airways, Thai International Public Co. Ltd., and Austrian Airways wherein the question of revenue neutrality arose, which was answered in favour of assesses therein. It is trite law that question of Revenue neutrality is a good ground, more so when the tax liability is being discharged under reverse charge mechanism. This very plea of revenue neutrality in an identical issue was raised in British Airways case and decided also. It is settled law when an issue is raised and decided in a judgment, the ratio applies.8
10.7 In our considered view, we have to read the order holistically, i.e. British Airways case; on merits is against the appellant in this case while on the issue of revenue neutrality the order of British Airways supports the appellant‟s case. The ratio of the Bench applied clearly to the case in hand accordingly respectfully following the ratio we have to hold that the appellant has made out a case in their favour on the question of revenue neutrality".
Para 11 as amended by the Rectification order-
11. In view of the foregoing we hold in favour of appellant on the revenue neutrality situation. With regard to service tax liability, interest thereof and penalty, we hold in favour of the appellant and set aside the demands, interest and penalties imposed and allow the appeals.
-M/s British airways vs. CCE, Delhi [2014 (36) STR 598 (Tri. Del)]: the relevant extract of the said judgement is reproduced below for ease of reference.
"51. I also find favour with the appellant‟s contention that the entire situation is Revenue neutral. Admittedly British Airways, India is discharging its service tax liability in respect of air transportation tickets sold by them. The present demand confirmed against them, was admissible to them as cenvat credit, which could have been further utilised for discharge of their service tax liabilities. I do not agree with the reasoning adopted by Ld. Judicial Member that in as much as the tax has not been paid by them, the credit would not be available. The said finding is contrary to the law laid down by various Courts, including the Hon‟ble Supreme Court. Admittedly, the demands stand raised by invoking longer period of limitation and during the relevant period, there was no service tax being paid by M/s British Airways, India and as such the question of availability of credit of the same would become relevant only once the demands stand raised subsequently on a disputed issue. Had they been paying the service tax during the relevant period, they would have been availing the credit of the same and utilising the same for discharge of admitted service tax liability, leading to Revenue neutral situation. The question of availability of credit in a subsequently raised confirmed demand would arise only at the time of finalisation of the demand itself. Reference in this regard can be made to the Hon‟ble Supreme Court‟s decision in the case of Formica India - 1995 (77) ELT 511 (SC) wherein the Hon‟ble Supreme Court has held that when an assessee is contesting the correctness of the demand, he could not have followed the procedure of Rule 56A (erstwhile) for the claim of set-off, which has to be extended, if the demand is ultimately upheld. It is only when after the demand stands confirmed, against an assessee, who is even challenging the same on merits, he can always take an alternative plea of availability of the demand as cenvat credit to 9 him leading to Revenue neutral situation. As such, even on this count, the appellant is bound to succeed.
52. I am also of the view that the demand, having been raised by invoking the longer period of limitation is hit by the provisions of Section 11A of the Act. My ld. Brother Shri D. N. Panda in his proposed order has held that in as much as the appellant was not registered under the Act and failed to file return periodically their plea of bona fide belief does not arise and there was a deliberate breach of law to cause evasion. I am afraid that I do not find myself in agreement with the said observations made by my brother. If non-registration and non- filing of returns is the criteria for rejecting the appellant‟s plea of bona fide belief and holding against them, the plea of limitation would not be available to any assessee, in as much as the service tax liabilities would arise only in those cases where the appellants are not registered and are not filing the returns.
Coming to the bona fide belief of the assessee, there are number of factors which are required to be considered. The issue involved is a complicated issue of legal interpretation and cannot be held to be a settled law. The fact that there is difference of opinion between two Members of the original Bench, itself establishes the fact that the legal issue is complex issue requiring legal expertise to settle the same. In such a scenario, if an assessee entertained a bonafide belief that in as much as the service is not being received by him, and he is not required to pay any tax, he cannot be blamed for the same. Further, the fact that the entire exercise was Revenue neutral is also one of the factors to be considered in support of appellant‟s plea of bona fide belief. If the appellant would have paid the said tax, they would have been entitled to the credit of the same and would have been in a position to use the same in discharge of their admitted service tax liabilities. In such a scenario, there are plethora of judgements by various Courts that no mala fide can be attributed to an assessee so as to invoke the longer period of limitation. Accordingly, I agree with the ld. Member (Technical) that the demand is barred by limitation and is required to be set aside along with setting aside of penalty.
14. In light of the aforesaid judgements, it is submitted that the issue in the present case with respect to revenue neutrality is also settled by the aforesaid judgments. Therefore, the entire demand in the present case alongwith interest and penalty is liable to be set aside on the basis of the ratio of the above mentioned judgements.10
15. At this juncture, it is also submitted that the aforesaid judgements have merely reiterated the well settled principle of law that in a completely revenue neutral situation, the entire demand alongwith interest and penalty is set aside. In this regard, reliance is placed upon the decision of Hon‟ble Supreme Court in the case of Commissioner of Central Excise vs. Angadpal Indl. P. Ltd.
[2015 (325) ELT 228 (SC)] wherein it has been held that where situation is revenue neutral no demand can sustain.
16. Opposing the contention, ld. Authorised Representative for the Revenue states that appellant have conceded on merits in view of the ruling of this Tribunal of coordinate Bench in the case of Jet Airways (India) Ltd. (supra) which have been confirmed by the Apex court.
No service tax is payable on OLIDAR services for the period post July 2012, as the place of provision of service after July 2012, in terms of rule 9 of Place of Provision Rules, falls outside India. The party also claimed that realising this fact, Department in a U-turn, demanded reversal of cenvat credit availed by the appellant for the tax paid post July, 2012, vide another SCN F. No. 1- 26(232)GST/Adt.I/C-6/Gr.51/Jetlite/2017-18/440 dated 17.07.2018 issued by GST Audit-I Delhi Commissionerate.
17. Learned Authorised Representative further submits, in case the Hon‟ble Tribunal in the present case concludes against Revenue‟s invocation of the extended period, it is further prayed that demand may be upheld for the normal period in terms of the Hon‟ble CESTAT judgment in the case of Shree Ranie Gums & Chemicals Pvt. Ltd. Vs. Commr. of C.Ex. Jaipur-II [2017 (4) GSTL 340 (Tri. Del.)], 11 wherein it has been held that the right of the Revenue to recover service tax not paid or short paid is a substantive right in terms of Section 73(1). The said provision is invoked by Central Excise officer to demand service tax, not paid or short paid. The period of limitation being procedural has to be examined in this context. It was accordingly held that when the demand for longer period was held to be not sustainable, then the whole demand will not fall and the demand for normal period will sustain.
18. Learned Authorised Representative further draws attention to sub-section 2A of Section 73 of the Finance Act, 1994 (FA 94 in short), inserted w.e.f. 10.05.2013 by the Finance Act, 2013, which states that where any appellate authority or tribunal or court concludes that the notice issued under the proviso to sub-section (1) is not sustainable for the reason that the charge of,-
a) Fraud; or b) Collusion; or c) Wilful mis-statement; or d) Suppression of facts; or e) Contravention of any of the provisions of this Chapter or the
rules made thereunder with intent to evade payment of service tax, has not been established against the person chargeable with the service tax, to whom the notice was issued, the Central Excise Officer shall determine the service tax payable by such person for the period of thirty months, as if the notice was issued for the offences for which limitation of thirty months applies under sub-section (1). 12
19. The thirty months period need to be established clearly. Show cause notice in the present case was issued on 23.10.2013 demanding service tax for the period 01.04.08 to 31.03.2013. Hence, in this case, the thirty month period will be from 01.10.2010 to 31.03.2013, as the due date of filing return for the six month period starting from 01.10.2010 falls on 25.04.2011 and the show cause notice has been issued on 23.10.2013, which is within 30 months period from 25.04.2011. However, due to coming into play of Rule 9 of the Place of Provision of Service Rules, 2012 w.e.f. 01.07.2012, it has been admitted by the Department that the said transaction between CRS Companies and Airlines has become non-taxable from 01.07.2012. Hence, the period from July, 2012 needs to be deducted from the normal period.
20. Regarding the appellant‟s reliance on the Hon‟ble Supreme Court judgement in the Angadpal Industries Pvt. Ltd. Case [2015 (325) ELT 228 (SC)] to claim that Revenue neutrality, implies that no duty has been paid, it is submitted that the claim of the appellant is wrong as facts of the Angadpal case are completely different and no such ratio was laid down by the Apex Court.
21. Having considered the rival contentions, we find that admittedly the impugned order-in-original arose from the subsequent show cause notice dated 23.10.2013 and admittedly an earlier show cause notice was issued dated 22.04.2009. Thus, the Revenue was aware of the facts of the appellant case. Thus, there is no justification for invocation of extended period as held by Hon‟ble Supreme Court in the case of Nizam Sugar Factory vs. CC - 2006 (197) ELT 465 13 (SC). Secondly, the issue is wholly Revenue neutral as the said input service was directly relatable to rendering of output service by the appellant. It is admitted fact that the appellant has discharged service liability on the output service - transportation of passengers by air service. Thus, there is no case of any constumuous conduct or malafide on the part of appellant. Further, the admitted fact is that the appellant has filed their ST-3 returns from time to time and have maintained proper record of their transaction in the ordinary course of business. Thus, we hold that the appellant has made out case both on the question of Revenue neutrality and also as to non-applicability of extended period of limitation. Accordingly, we allow the appeal and set aside the impugned order. The appellant shall be entitled to consequential relief, in accordance with law.
(Pronounced on 19.07.2019).
(Anil Choudhary) Member (Judicial) (Bijay Kumar) Member (Technical) Pant