Custom, Excise & Service Tax Tribunal
Kafila Hospitality And Travels Pvt Ltd vs Service Tax - Delhi on 17 September, 2021
Author: Dilip Gupta
Bench: Dilip Gupta
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CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL
NEW DELHI
PRINCIPAL BENCH
Service Tax Appeal No. 59716 of 2013
(Arising out of Order-in-Original No. 108/GB/2013 dated 20.05.2013 passed by
the Commissioner of Service Tax, New Delhi)
Kafila Hospitality And Travels Appellant
Private Limited
10185-C, Arya Samaj Road,
Karol Bagh, New Delhi--110005
VERSUS
Commissioner of Service Tax, Delhi Respondent
Appearance Ms. Madhumita Singh & Shri Sameer Sood, Advocates - for the appellant Dr. Radhe Tallo, Authorized Representative - for the Respondent CORAM : HON'BLE MR. JUSTICE DILIP GUPTA, PRESIDENT HON'BLE MR. P.V. SUBBA RAO, MEMBER (TECHNICAL) DATE OF HEARING/DECISION : 17/09/2021 Final Order No. 51831/2021 JUSTICE DILIP GUPTA :
This appeal seeks the quashing of the order dated May 20, 2013 passed by the Commissioner, Service Tax Commissionerate, 1 New Delhi , by which the demand of service tax has been confirmed by invoking the extended period of limitation contemplated under the proviso to section 73(1) of the Finance Act, 19942.
1. Commissioner
2. the Finance Act 2
2. A Division Bench of the Tribunal, while hearing this appeal expressed doubts on the view taken by another Division Bench of the Tribunal in D. Pauls Consumer Benefit Ltd. vs. Commissioner of Central Excise, New Delhi3 and accordingly, referred the matter to a Larger bench of the Tribunal for determination of the following six issues:
"(i) whether the Incentive received by service receiver from service provider, on appreciable performance, can be subjected to service tax?
(ii) whether a demand can be confirmed without specifying the sub clause of BAS under which the activities are covered?
(iii) whether demand of service tax can be confirmed under the taxable category of BAS in absence of three parties - service provider, service receiver and targeted audience?
(iv) whether in cases where value of service is fixed under an option provided under the Rules, such option having been exercised and not withdrawn, is it open for the authorities to demand service tax on other consideration or incentive received, be taxed under another category?
(v) Can service tax liability be fastened without specifying the consideration for service as provided under Section 67 of the Chapter V of Finance Act, 1994 as amended up to date?
(vi) Can service tax liability be fastened in absence of the relationship of service provider and service receiver?
3. Certain essential facts need to be stated for appreciating these issues. The appellant is an approved agent of International Air Ticketing Association 4 and is engaged in providing air tickets. The travel industry basically comprises of five key players namely airlines, travel agents, Central Reservation System 5 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 6 . The travel agents accredited by IATA are
3. 2017 (52) STR 429 (Tri. - Delhi)
4. IATA
5. CRS
6. Finance Act 3 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‟ 7 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.
4. 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.
5. 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
7. OIDAR 4 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, Interglobe Technology Quotient Pvt. Ltd. and Abacus India.
6. A show cause notice dated October 21, 2011 covering the period 2005-06 to 2009-10 was issued to the appellant as the Department sought to levy service tax on the following :-
(i) Target based incentives paid to the travel agents, under the category of „business auxiliary service‟ („BAS‟) by alleging that the travel agents are promoting and marketing the business of the airlines; and
(ii) CRS commission paid by the CRS Companies to travel agents under the category of BAS by alleging that the travel agents are promoting and marketing the business of the CRS Companies.
7. The Commissioner, while adjudicating the show cause notice, noted that two basic issues were involved, namely :-
"1. Whether the noticee has promoted the business of M/s Amadeus, Galileo & Abacus by using their CRS (Central Reservation System) and accordingly, the incentive/commission received against such activity are 5 taxable under "Business Auxiliary Services" as defined in Section 65(19)(ii) a "Promotion or marketing of service provided by the client; or" read with section 65(105)(zzb) of the Act.
2. Whether the Air Tickets purchased through other IATA Air Travel Agents is an activity of promoting the business activity of said Air Travel Agent and accordingly commission received for such activity from the said IATA Air Travel Agents are also taxable under "Business Auxiliary Services"
as defined in Section 65(19)(ii) as "Promotion or marketing of service provided by the client; or" read with section 65(105)(zzb) of the Act."
8. In respect of the first issue, the finding recorded by the Commissioner is as follows :-
"18. In view of the abovementioned facts it is clear in its prestine form that all the three Software companies has provided their CRS to the notice as a marketing or sales strategy sole motive of increasing their business and market share with the increased usage of Amadeus & Galileo CRS and so all these Software companies give incentive/commission to the noticee in order to increase the use of Amadeus & Galileo CRS and thereby augmenting their own revenue. The facts that the CRS is being used by the noticee themselves does not alter the situation for M/s Amadeus & Galileo M/s Abacus as by increased use of CRS in booking the air tickets etc., the interest of M/s Amadeus & Galileo are also promoted. Therefore, there is no iota of doubt that the notice has promoted the business of M/s Amadeus. Galileo and M/s Abacus by using their CRS & received the commission against such promotional activity during the period under dispute which is appropriately covered and taxable under "Business Auxiliary Serices" as defined in Section 65(19)(ii) as "Promotion or marketing of service provided by the client; or" read with section 65(105)(zzb) of the Act and I hold it accordingly."
9. In regard to the second issue, the Commissioner recorded the following findings :-
"23. In this regard I find that there is no dispute that the noticee has purchased Air Ticket for its clients from the other IATA agents who for booking the tickets gets commission from the concerned Airlines. I observe that on each and every purchase of Air Tickets the ratio of the commission of the other IATA agents does increase and so the interest of the other IATA agents are also promoted and that is why the other IATA agents share the said commission with the noticee. Therefore, there remains no iota of doubt that the noticee has promoted the business of other IATA agents and received the commission against such promotional activity during the period under dispute which is appropriately covered and taxable under "Business Auxiliary Services" as defined in Section 65(19)(ii) as "Promotion or marketing of service provided by the client; or"
read with section 65(105)(zzb) of the Act and I hold it accordingly."
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10. The Commissioner, thereafter, by order dated May 16, 2013, confirmed the demand of service tax by invoking the extended period of limitation contemplated under the proviso to section 73(1) of the Finance Act.
11. The aforesaid reference was answered by the Larger Bench of the Tribunal by order dated March 18, 2021.
12. The Larger Bench, in paragraph 84, observed as follows:
"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."
13. Thereafter, in paragraph 86, the answer to the six issues has been given in the following manner:
"86. In the light of the aforesaid discussion and findings, the answers to the six issues that have been referred to the Larger Bench are as follows:
First issue : the incentives received by a service recipient from a service provider cannot be subjected to levy of service tax;
Second issue : This issue does not arise for consideration in this appeal as the show cause notice and the adjudicating order had confirmed the demand under section 65(19)(ii) of the Finance Act;
Third issue : A passenger cannot be deemed to be an audience for the promotion of the business of CRS Companies; and Fourth, Fifth and Sixth issues : In view of the discussion and findings these issues do not arise for consideration and are, therefore, not being answered.7
14. In view of the discussion, the findings and the answers given by the Larger Bench on the six issues, the impugned order dated May 20, 2015 passed by the Commissioner cannot be sustained and is set aside. The appeal is accordingly, allowed.
(Dictated & pronounced in open Court) (JUSTICE DILIP GUPTA) PRESIDENT (P.V. SUBBA RAO) MEMBER (TECHNICAL) RM,Shreya