Custom, Excise & Service Tax Tribunal
International Travel House Limited vs Service Tax - Chennai on 22 July, 2024
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL
CHENNAI
REGIONAL BENCH - COURT No. III
Service Tax Appeal No. 363 & 364 of 2010
(Arising out of Order-in-Original No.3 & 4 / 2010 dated 29.01.2010
passed by Commissioner of Central Excise & ST, Chennai)
International Travel House Limited ..... Appellant
Tarapore Towers, No.826, Anna Salai,
Chennai 600 002.
VERSUS
The Commissioner of CGST & Central Excise ...Respondent
Chennai North Commissionerate No.26/1, Mahathma Gandhi Road, Nungambakkam, Chennai 600 034.
APPEARANCE :
Ms. Radhika Chandrasekhar, Advocate - for the Appellant Shri M. Selvakumar, Authorised Representative for the Respondent CORAM :
HON'BLE MS. SULEKHA BEEVI.C.S., MEMBER (JUDICIAL) HON'BLE MR. VASA SESHAGIRI RAO, MEMBER (TECHNICAL) FINAL ORDER No.40914-40915/2024 DATE OF HEARING : 12.07.2024 DATE OF DECISION :22.07.2024 Per Ms. Sulekha Beevi. C.S The issue involved in both these appeals being common, the appeals were heard together and are disposed of by this common order.
2. Brief facts are that the appellants are engaged in providing Tour Operator Service and have obtained service tax registration for providing such services. The officers attached to the internal audit of the Service Tax Commissionerate, Chennai, conducted audit of the accounts of the appellant and noted that appellant undertakes outbound tours, i.e. tour to foreign countries for which they received service charges from their clients / 2 customers. Further appellant promoted software M/s. Amadeus India Ltd., and received charges from them. The Department was of the view that, appellant is liable to pay service tax on the amounts received for outbound tours under 'Tour Operator Service'. It was also noted that, appellant has to pay service tax on the charges received from M/s. Amadeus India Limited under 'Business Auxiliary Services'. Show cause notice dated 07.10.2008 was issued for the period 10.09.2004 to 31.12.2007 proposing to demand service tax under Tour Operator Service for the period 01.07.2003 to 31.03.2008.
3. Another show cause notice dated 28.08.2009 was issued for the period 01.04.2008 to 31.03.2009 proposing to demand service tax under Business Auxiliary Services. After due process of law, the original authority vide common order dated 29.01.2010 confirmed the demand, interest raised in the show cause notices and also imposed penalties. Aggrieved by such order, the appellant has filed the above appeals.
4. The Ld. Counsel Ms. Radhika Chandrasekhar, appeared and argued for the appellant. It is submitted that the appellant conducts outbound tours. These package tours (outbound tours) are arrangement for tours outside India. The appellant has divisions which include tour division, ticketing division, foreign exchange division, visa division and miscellaneous division. With respect to outbound tours, when the client contacts the tour division of appellant, the client is given a quotation for the package. Once the quotation is accepted by the client, the tour division on behalf of the appellant raises an invoice on the client for the complete package. This 3 includes ticket, tour arrangement abroad, visa and forex, on the basis of the requirement of the client. The service charges are received by appellant in Indian currency.
5. The ticketing division raises an inter-division invoice on its tour division for the purpose of booking air tickets with applicable service tax. The appellant has duly discharged the service tax on booking of air tickets. The tour division coordinates with persons located abroad for the purpose of making arrangements of accommodation, sightseeing, guide, transport etc. Further, based on the requirements of the client, the forex division of the appellant issues foreign currency in the name of the client which is reflected in the basic travel quota of the client. The payments made to the foreign persons (suppliers of the various services) are corresponding to the foreign currency available in the basic travel quota of the client.
6. On receiving the show cause notice, the appellant filed a detailed reply. It was submitted in the reply that in respect of outbound tours, the entire tour begins and terminates in the foreign country. The tour begins only when the passenger lands in the foreign country and therefore, there cannot be liability to pay service tax for outbound tours.
7. The appellant has been discharging service tax with respect to tours conducted within India. In respect of outbound tours, since the entire service is provided outside India, i.e.; consumed by service recipient outside India, there is no question of paying of service tax.
8. The Ld. Counsel referred to the definition of tour operator under section 65 (115) which reads as below:-
4
"Tour operator means any person engaged in the business of planning, scheduling, organizing, or arranging tours (which may include arrangements for accommodation, sightseeing or other similar services) by any mode of transport and includes any person engaged in the business of operating tours in a tourist vehicle or a contract carriage by whatever name called, covered by a permit other than carriage permit, granted under the Motor Vehicles Act, 1988 (59 of 1988) or the Rules made there under:-
Explanation:
For the purposes of this clause, the expression tour does not include a journey organized or arranged for use by an educational body, other than a commercial training or coaching centre, imparting skill or knowledge or lessons on any subject or field".
9. It is submitted that Section 65 (113) of the Finance Act. Defines 'tour' as under:-
"Tour means a journey from one place to another irrespective of the distance between such places".
The taxable service of tour operator given under Section 65 (105) (n) reads as under:
"to any person, by a tour operator in relation to a tour".
10. As per the above definition, in the case of outbound tours, even though planning, scheduling takes place in India, the entire activity of tour having been provided outside India and consumed outside India, the outbound tours cannot be subject to levy of service tax within India. This 5 aspect was also clarified by various Circulars/Trade Notices issued by various Commissionerates which are detailed below:-
(a) Trade Notice issued by Delhi Commissionerate in Trade Notice No.71- CE (Service Tax) / 97 dated 29.08.97.
Paragraph 3.6 Trade Notice reads as under:
"3.6 service tax on services rendered by tour operators is only on services rendered in India in respect of a tour within Indian territory. Services rendered by tour operators in respect of outbound tourism i.e. for tours abroad, do not attract service tax. In case of a composite tour which combines tour within India and also outside India, service tax will be leviable only on services rendered for tours within India provided, separate billing has been done by the tour operator for services provided in respect of tours within India".
(b) Trade Notice No.1/2000 dated 27.04.2000 by Pune Commissionerate.
(c) Trade Notice No.110/97 dated 28.08.1997 by Madurai Commissionerate.
Notification No.38/2007-ST dated 23.08.2007 which provides for abatement percentage for package tour increased to 75% (Notification No.1/2006-ST amended). The relevant part reads as under: -
38/2007-S.T. Tour operator service -- Abatement percentage for package tour increased to 75% -- Notification No. 1/2006-S.T. amended In exercise of the powers conferred by sub-section (1) of section 93 of the Finance Act, 1994 (32 of 1994), the Central Government, on being satisfied that it is necessary in the public interest so to do, hereby makes the following further amendment in the notification of the Government of India in the Ministry of Finance (Department of Revenue), No. 1/2006-Service Tax, dated the 1st March, 2006, vide number G.S.R. 115 (E), dated the 1st March, 2006, namely :-6
In the said notification, in the Table, for S.No. 2 and the entries relating thereto, the following shall be substituted, namely :-
(1) (2) (3) (4) (5)
"2. (n) (i) Services provided or to The bill issued for this 25
be provided to any person, purpose indicates that it
by a tour operator in is inclusive of charges for
relation to a package tour. such a tour.
Explanation. - The
expression "package tour"
means a tour wherein
transportation,
accommodation for stay,
food, tourist guide, entry to
monuments and other
similar services in relation
to tour are provided by the
tour operator as part of the
package tour to the person
undertaking the tour.
(ii) Services provided or to (a) The invoice, bill or 10
be provided to any person, challan issued indicates
by a tour operator in that it is towards charges
relation to a tour, if the tour for such accommodation,
operator is providing and
services solely of arranging (b) this exemption shall
or booking accommodation not apply in such cases
for any person in relation to where the invoice, bill or
a tour. challan issued by the tour
operator, in relation to a
tour, only includes the
service charges for
arranging or booking
accommodation for any
person and does not
include the cost of such
accommodation.
(iii) Services, other than The bill issued indicates 40"
services specified in (i) and that the amount charged
(ii) above, provided or to in the bill is the gross be provided to any person, amount charged for such by a tour operator in a tour.
relation to a tour.
[Notification No. 38/2007-S.T., dated 23-8-2007] 7 1/2006-S.T. Effective rate of Service tax for specified services -- Percentage of abatements In exercise of the powers conferred by sub-section (1) of section 93 of the Finance Act, 1994 (32 of 1994) (hereinafter referred to as the Finance Act), the Central Government, on being satisfied that it is necessary in the public interest so to do, hereby exempts the taxable service of the description specified in column (3) of the Table below and specified in the relevant sub-clauses of clause (105) of section 65 of the Finance Act, specified in the corresponding entry in column (2) of the said Table, from so much of the service tax leviable thereon under section 66 of the said Finance Act, as is in excess of the service tax calculated on a value which is equivalent to a percentage specified in the corresponding entry in column (5) of the said Table, of the gross amount charged by such service provider for providing the said taxable service, subject to the relevant conditions specified in the corresponding entry in column (4) of the Table aforesaid :
S. Sub-clause of Description of taxable service Conditions Percentage clause (105) No. of Section 65
2. (n) (a) Services provided in relation The bill issued for this 40 to a tour, by a tour operator, - purpose indicates that it is inclusive of charges (1) where the tour operator for such a tour.
provides a package tour;
The bill issued (2) where the services provided indicates that the are other than in relation to a amount charged in the package tour. bill is the gross amount charged for such a tour.
Explanation.- The expression "package tour" means a tour in which the provisions for transportation and accommodation for stay of the person undertaking the tour has been afforded by the tour operator.
(b) Services provided in relation (i) The invoice, bill or 10 to a tour, if the tour operator is challan issued indicates providing services solely of that it is towards arranging or booking charges for such accommodation for any person in accommodation, and relation to a tour.
(ii) this exemption shall not apply in such cases where the invoice, bill or challan issued by the tour operator to the client only includes the service charges for arranging or booking accommodation for any person in relation to a tour and does not include the cost of such accommodation.
8Circular No.117/11/2009- ST dated 30.10.2009:-
This circular clarifies the leviability of service tax on tour operator service in connection with Hajj and Umrah pilgrimage. It is clarified that as the tour takes place outside India it shall be treated as a service performed outside India. It is clarified by the board that the services provided in respect of tour undertaken for carrying out Hajj and Umrah pilgrimage in Saudi Arabia by Indian pilgrims would not be subject to levy of service tax.
11. The Export of Service Rules 2005 (Notification No.9/2005-ST dated 03.03.2005) was also referred to by the Ld. Counsel. Rule 3 provides as under:-
Export of taxable service. -
3 (1) The export of taxable service shall in relation to taxable services:-
(i) specified in sub-clauses (d), 24[(m)], (p), (q), (v), (zzq), (zzza), (zzzb), (zzzc), '[(zzzh), (zzzr), (zzzy), 3[(zzzz), (zzzza) 3b, (zzzzm), (zzzzu) (zzzzv) and (zzzzw)]]] of clause (105) of section 65 of the Act, be provision of such services as are provided in relation to an immovable property situated outside India;
(ii) specified in sub-clauses (a), (f), (h), (i), (j), (1), (n) (o), (w), (z), (zb), (zc), (zi), (zj), (zn), (zo), (zq), (zr), (zt), (zu), (zv), (zw), (zz), (zza), (zzc), (zzd), (zzf), (zzg), (zzi), (zzl), (zzm), (zzo), (zzt), (zzv), (zzw), (zzx), (zzy), (zzzd), (zzze), (zzzf), (zzzzg), (zzzzh), (zzzzi), (zzzzk), (zzzzl) and (zzzzo) of clause (105) of section 65 of the Act, be provision of such services as are performed outside India:] Provided that where such taxable service is partly performed outside India, it shall be treated as performed outside India:
(emphasis supplied)
12. It is submitted by the Ld. Counsel from clause (ii) of Rule 3 it can be seen that tour operator service when partly performed outside India it shall be treated as performed outside India. In the present case, though the customer might have made payments in Indian currency since the "tour"9
happens entirely outside India, the said services are not subject to levy of service tax within India.
13. The decision of the Hon'ble Supreme Court in the case of All India Federation of Tax Practitioners versus Union Of India (2007) 7 S.T.R. 625 (S.C.) at para 7 and para 20 was referred to by the Ld. Counsel. The Hon'ble Apex Court observed that the service tax is a destination based consumption tax. The Tribunal in the case of M/s. Cox & Kings India Limited 2014 (35) S.T.R 817 (Tribunal-Delhi) considered the issue as to whether outbound tours would be subject to levy of service tax under Tour Operator Services. It was held that the consideration received for operating and arranging outbound tours (provided by the appellant and consumed by the tourist beyond the territory of India) is not liable to levy and collection of service tax under the Finance Act 1994, since the taxable event is the provision of a taxable service. The Tribunal held that when there is planning and scheduling of outbound tours, it would be an incidental activity undertaken as a prelude to providing tours outside India and thus the service if at all provided, is to the service provider itself.
14. In the case of Commissioner of Service Tax, Delhi versus Paras Holidays Pvt Limited 2016 (44) S.T.R. 257 (Tribunal-Delhi) the Tribunal followed the decision in the case of M/s. Cox & Kings India Limited, holding that outbound tours are not subject to levy of service tax since these tours take place beyond the territory of India. The said decision was appealed by the department before the Hon'ble Apex Court. The appeal is admitted and pending as reported in 2016 (44) S.T.R. J 138 (S.C) 10
15. Later, the Division Bench of the Tribunal at Mumbai while hearing an appeal filed by M/s. Cox & Kings Limited, Mumbai expressed doubts on the decision rendered by the Division Bench of the Principal Bench of the Tribunal at New Delhi in the case of M/s. Cox & Kings Limited 2014 (35) S.T.R. 817 (Tribunal-Delhi). The matter was placed before the Larger Bench. As per Interim Order No.104/2023 dated 19.10.2023 the Larger Bench answered the reference in para 49 as below:-
(i) The taxability of activity undertaken by the appellant will have to be decided on the facts peculiar to the case and in accordance with intent of Section 65, Section 66 and section 67 of the Finance Act;
(ii) The dispute in this appeal i.e. from 01.04.2005 to 31.03.2011 pertaining to the period prior to the negative list regime does not have to consider taxable territory as affecting the decision thereof.
16. The Ld. Counsel pointed out that in para 47 the larger bench observed that the earlier decision in M/s. Cox & Kings 2014 (35) S.T.R. 817 (Tri.- Del.) had not determined the issue on given sets of facts and that the Division Bench is to decide the case without placing reliance on the interpretation in the case of earlier decision in M/s. Cox & Kings (2014).
17. In para 48 the discussion with regard to the issue of taxable territory after 01.07.2012 has been discussed. The relevant paragraph at 47 and 48 of the Larger Bench decision in M/s. Cox & Kings dated 19.10.2023 is reproduced as under:-
11
47.The earlier decision in Cox & Kings had not determined its decision on the given set of facts but on restricted interpretation of the definition of „tour operator‟ as prevailing then. The stated interpretation of the definition is not consistent with the revision in the definition. Hence, the division bench assigned to dispose off this appeal will have to decide the outcome without placing reliance on the interpretation of the Principal Bench relied upon by the appellant. All the issues in the appeal as well as the order impugned therein will have to be decided on merits.
48.The referral bench at Mumbai also sought opinion of larger bench on the provision of service by appellant within the taxable territory. As seen from the facts of the case, the dispute in its entirety pertains to the period prior to April 2011. The then prevailing regime of tax on services was limited to enumerated activities rendered to a person (or designated recipient) by a person and there was no requirement for determining „taxable territory‟ for levy of tax; as long as both receiver and provider were in India, such services were taxable. With the transition in July 2012 to „negative list‟, lacking identifiable activities to be taxed, the framework of levy was to be expressed as provision of service for another within „taxable territory‟ for default liability in the hands of provider of service. Therefore, in the dispute before the division bench, geographical significance was not „taxable territory‟, which could be situated anywhere in the world according to the nature of activity undertaken, but within „whole of India...‟ without having to look for any other framework.
18. After the decision of the Larger Bench was rendered on 19.10.2023 a similar issue came up for consideration before the Principal Bench in the case of M/s Weldon Tours & Travels Pvt. Limited. The Division Bench of the Principal Bench vide Final Order No.55723/2024 dated 02.05.2024 held that the consideration received for operating and arranging outbound tours is not liable to levy and collection of service tax within India. The Tribunal set aside the demand on outbound tours. The Ld. Counsel prayed that the demand in respect of outbound tours for the period 10.09.2004 to 12 31.12.2007 therefore, cannot sustain and prayed that the same may be set aside. It is submitted that from 2008 onwards the appellant is discharging service tax on outbound tours also.
19. The second issue is with regard to the demand of service tax under Business Auxiliary Service for the period from 01.07.2003 to 31.03.2008 and from 01.04.2008 to 31.03.2009. It is submitted that the demand is raised on the incentives received by the appellant from M/s. Amadeus India Pvt. Limited for booking air tickets using their software. It is submitted that the appellant does not provide any service to Amadeus. They merely use the software/hardware to book air tickets for which the appellant is given loyalty incentive by Amadeus. It is not a consideration which can be subject to levy of service tax. The activity of booking air ticket is covered under air travel agent services and there is no further activity carried out by the appellant to classify the same under Business Auxiliary Services. The decision of the Larger Bench of the Tribunal in the case of Khafila Hospitality and Travels Pvt Ltd versus CST (2021) 47 GSTL 140 (Tri.LB) has decided the issue whether air travel agent who uses the online portal of CRS companies to book air tickets is liable to pay service tax on the incentives received. The Tribunal held that the incentives received cannot be subject to levy of service tax. It was observed that mere selection of software or exercising a choice of software would not result in any promotional activity. This decision was followed by the Tribunal in the case of Asveen Air Travels (P) Ltd versus Commissioner of GST & C. Ex, Chennai 2022 (64) G.S.T.L. 551 (Tri. Mad) (21.04.2022). In the appellant's own case the Tribunal vide Final Order No.51822/2021 dated 17.09.2021 has set aside the demand. It 13 is prayed that the demand raised under Business Auxiliary Services may be set aside.
20. The Ld. Counsel argued on the grounds of limitation also. It is submitted that the show cause notice dated 07.10.2008 has been issued invoking the extended period pursuant to the audit conducted by the department for the period 10.09.2004 to 31.12.2007 under Tour Operator Services and for the period 01.07.2003 to 31.03.2008 under Business Auxiliary Services. The department has not alleged any specific act of suppression with intend to evade payment of service tax against appellant. None of the ingredients under proviso to Section 73 of the Finance Act 1994 has been stated in show cause notice. Moreover, the show cause notice has been issued as a culmination of audit wherein the liability has been arrived on the basis of bank statement, books of accounts maintained by the appellant. The figures for raising the entire demand has been taken from the book maintained by the appellant. Therefore, no suppression can be alleged.
21. Both the issues are interpretational in nature as there was confusion/divergent views. The taxability of outbound tours and taxability of incentives received from Amadeus were referred to Larger Bench. This itself shows that the issue is interpretational in nature. On this ground also, the invocation of extended period cannot sustain. The Ld. Counsel prayed that the demand may be set aside as time barred. It is prayed that the appeal may be allowed.
14
22. The Ld. AR Shri M. Selvakumar, appeared and argued for the department. The findings in the impugned order was reiterated. It is emphasized by the Ld. AR that the planning, scheduling, organizing of the tour takes place within India. So also, arrangement of tickets are made in India. The customers pay to the appellant in Indian currency. Although the tour happens outside India, since part of the activities happen within India, the activity is subject to levy of service tax under Tour Operator Service as defined under Section 65 (115) of the Finance Act 1994. The Commissioner has discussed in para 6 of the impugned order with regard to the contention put forward by the appellant that outbound tours happen in foreign country and therefore, not subject to levy of service tax. The Trade Notices issued by various Commissionerates, and Circulars have been referred to in this paragraph. Since the planning of foreign tours as per the requirement of the customer is an essential ingredient of tour which happens within India, it cannot be said that outbound tours are not subject to levy within India. It is too farfetched argument to submit that the tour begins in foreign country and ends in foreign country and therefore, not subject to levy of service tax. Since the planning and scheduling and organizing happens in India, the levy and demand of service tax is legal and proper.
23. With regard to the demand under Business Auxiliary Services, the findings in the impugned order was reiterated.
24. It is submitted that the non-payment of service tax would not have come to light, but for the audit conducted by the officers of the department. The appellant had not informed that they had received incentives from M/s 15 Amadeus India Limited and also had not informed that they have received charges towards outbound tours from their customers. These acts are suppression of facts with intent to evade payment of duty. The invocation of extended period and the penalties imposed are therefore, legal and proper. It is prayed that appeals may be dismissed.
25. Heard both sides.
26. The issues to be decided are:-
(i) Whether the appellant is liable to pay service tax under Tour Operator Services on charges received for outbound tours?
(ii) Whether the appellant is liable to pay service tax under Business Auxiliary Services on incentives received for use of Amadeus software?
27. The relevant statutory definitions of 'tour', 'tour operator service' has been reproduced earlier. As per the definition, tour means, a journey from one place to another, irrespective of the distance between such places. In the present case, undisputedly, the tour has taken place outside India. The main contention put forward by the Ld. AR is that, since the planning, scheduling, organizing of the foreign tour happens within India, the activity is subject to levy of service tax within India. We have to say that the customer does not approach the appellant for mere planning, scheduling or organizing. He wants a tour in a foreign place. This means, the service provided is a tour outside India.
16
28. The Ld. Counsel for appellant has adverted to the decision in the case of All India Federation of Tax Practitioners (supra). It was observed in the said case that service tax is a destination-based consumption tax. In the present case, the performance of the service is the tour. The planning, scheduling, organizing, etc., is an internal activity done by the appellant within their office. Though such activities may have taken place before the tour, the customer is interested only in the tour that is happening outside India. The consideration is received for the entire activities, which according to the customer is paid for a tour outside India. This means, the consumption of service is happening outside India.
29. The Larger Bench in the case of M/s. Cox & Kings Limited, vide Interim Order No.104/2023, dated 19.10.2023 has observed that the decision has to be made without relying on the earlier decision in M/s. Cox & Kings. In para 48, the doubts put forward by the Mumbai Bench while referring the matter to the Larger Bench was noted. The said para 48 has already been reproduced. Prior to the negative regime, there was no requirement for determining taxable territory on levy of tax, as long as both service recipient and service provider is within India, such services are taxable. It was decided by the Larger Bench that the taxability has to be looked into on the facts of each case. In the present case, the entire tour has happened outside India. When the word 'tour' is defined in the Act, the said meaning has to be applied to interpret tour operators service also.
30. The Division Bench of the Tribunal, in the case of M/s Weldon Tours & Travels Pvt. Ltd. had occasion to consider the demand of service tax raised 17 on outbound tours for the period prior to 01.07.2012. After considering the observations made by the Hon'ble Apex Court, in the case of All India Federation of Tax Practitioners (supra) and also the decision of the Larger Bench dated 19.10.2023. It was observed that since the tour is happening outside India, the charges received for operating and arranging outbound tours is not subject to levy and collection of service tax. The Coordinate Bench of the Tribunal set aside the demand raised on outbound tours. By judicial discipline, following the decision in the case of M/s Weldon Tours & Travels Pvt. Ltd. dated 02.05.2024, we hold that the demand of service tax for the disputed period on outbound tours cannot sustain and requires to be set aside.
31. The second issue is with regard to the demand of service tax on incentives received by the appellant for use of Amadeus software. The said issue is settled by the Lager Bench in the case of M/s. Kafila, Hospitality & Travels Pvt. Ltd.,(supra). The relevant para reads as under:-
72. The contention advanced by Learned Counsel of the interveners is that incentives cannot be construed as "consideration" and if it is so, no service tax can be levied on this amount because under Section 67 of the Finance Act, service tax is leviable on "consideration", which is the gross amount charged by the service provider for rendering a particular taxable service.
73. It would, therefore, be appropriate to examine the scope of the term "incentives". Incentives are generally given to encourage performance of a party.
The factual position described above, reveals that incentives have been paid by the airlines or CRS Companies to travel agents when they achieve a pre- determined target of sales.
74. The relevant portion of Section 67 of the Finance Act, on which reliance has been placed by Learned Counsel for the appellant, is reproduced below :- 18
"67. (1) Subject to the provisions of this Chapter, where service tax is chargeable on any taxable service with reference to its value, then such value shall, -
(i) in a case where the provision of service is for a consideration in money, be the gross amount charged by the service provider for such service provided or to be provided by him;
(ii) in a case where the provision of service is for a consideration not wholly or partly consisting of money, be such amount in money as, with the addition of service tax charged, is equivalent to the consideration;
(iii) in a case where the provision of service is for a consideration which is not ascertainable, be the amount as may be determined in the prescribed manner."
(emphasis supplied)
75. Section 67 of the Act deals with valuation of taxable services for charging service tax. Sub-section (1) of Section 67 provides that where service tax is chargeable on any taxable service with reference to its value, then such value shall, where the provision of service is for a consideration in money, be the gross amount charged by the service provider for such service provided or to be provided by the service provider. It is, therefore, clear that only such amount is subject to service tax which represents consideration for provision of service and any other amount which is not a consideration for provision of service cannot be subjected to service tax.
76. In this connection, it would be appropriate to refer to the decision of the Supreme Court in Union of India v. Intercontinental Consultancy and Technocrats [2018 (10) G.S.T.L. 401 (S.C.)]. The Supreme Court observed that service tax is on the "value of taxable services" and, therefore, it is the value of the services which are actually rendered which has to be ascertained for the purpose of calculating the service tax. It is for this reason that the expression "such" occurring in Section 67 of the Act assumes importance. The Supreme Court, therefore, observed that the authority has to find what is the gross amount charged for providing "such" taxable services and so any other amount which is calculated not for providing such taxable service cannot be a part of that valuation as the amount is not calculated for providing "such taxable service." This, according to the Supreme Court, is the plain meaning attached to Section 67, either prior to its amendment on 1 May, 2006 or after this amendment.
77. Consideration, which is taxable under Section 67 of the Finance Act, should be transaction specific. Incentives, on the other hand, are based on general performance of the service provider and are not to be related to any particular transaction of service. It needs to be noted that commission, on the other hand, is 19 dependent on each booking and not on the target. If the air travel agent does not achieve the predetermined target, incentives will not be paid to the travel agents.
32. The decision in the case of M/s. Kafila, Hospitality & Travels Pvt. Ltd., was followed by the Tribunal in the case of Asveen Air Travel (P) Ltd., versus Commissioner of GST & CE, Chennai 2022 (64) G.S.T.L. 551 (Tribunal - Chennai). After appreciating the facts and following the decision of the Larger Bench in the case of M/s. Kafila, Hospitality & Travels Pvt. Ltd., we are of the considered opinion that the demand of service tax on incentives/charges for use of Amadeus Software for booking air tickets cannot sustain under Business Auxiliary Services, and requires to be set aside. Ordered accordingly.
33. In the result, the impugned orders are set aside. The appeals are allowed with consequential reliefs, if any.
(Order pronounced in the open court on 22.07.2024) (VASA SESHAGIRI RAO) (SULEKHA BEEVI. C.S) Member (Technical) Member (Judicial) psd