Custom, Excise & Service Tax Tribunal
M/S Bird Travels (P) Limited vs Cce, Delhi-I on 28 July, 2016
CUSTOMS EXCISE & SERVICE TAX APPELLATE TRIBUNAL West Block No.2, R. K. Puram, New Delhi, Court No. 1 Date of hearing: 22.07.2016 Date of decision:28.7.2016 For Approval and Signature: Honble Justice (Dr.) Satish Chandra, President Honble Mr. B. Ravichandran, Member (Technical) 1 Whether Press Reporter may be allowed to see the Order for publication as per Rule 26 of the CESTAT (Procedure) Rules, 1982? No 2 Whether it should be released under Rule 26 of CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not? No 3 Whether their Lordships wish to see the fair copy of the Order? Seen 4 Whether Order is to be circulated to the Departmental authorities? Yes Service Tax Appeal No. 104 of 2010 (Arising out of order-in-original No. 48 PKJ/CCE/ADJ/09 dated 29.10.2009 passed by the Commissioner, Central Excise (Adj.), New Delhi). M/s Bird Travels (P) Limited Appellant Vs. CCE, Delhi-I Respondent
AND Service tax Appeal No. 55430 of 2013 (Arising out of order-in-appeal No. 316/ST/DLH/2012 dated 27.11.2012 passed by the Commissioner of Central Excise (Appeals), New Delhi.) M/s Bird Travels (P) Limited Appellant Vs. CST, Delhi-I Respondent AND Service tax Appeal No. 54736 of 2014 (Arising out of order-in-appeal No. 90/ST/DELHI/2014 dated 08.07.2014 passed by the Commissioner, Central Excise (Appeals), New Delhi.) M/s Bird Travels (P) Limited Appellant Vs. CST Delhi-I Respondent Appearance:
Rep. by Sh. J. M. Sharma, Advocate for the appellant Rep. By Sh. Yogesh Agarwal, DR for the Respondent AND Service tax Appeal No. 188 of 2010 & ST/C.O./ 70 of 2010 (Arising out of order-in-original No. 48/PKJ/CCEADJ/2009 dated 29.10.2009 passed by the Commissioner, Central Excise (Adj), New Delhi.) CST, Delhi Appellant (Rep. By Sh. Yogesh Agarwal, DR) Vs. M/s Bird Travels (P) Ltd., Respondent (Rep. by Sh. J. M. Sharma, Advocate) Coram:
Honble Mr. Justice (Dr.) Satish Chandra, President Honble Mr. B. Ravichandran, Member (Technical) Final Order Nos.52656 52659/2016 Per: B. Ravichandran:
There are four appeals, three by M/s Birds Travel Private Limited (BTPL) and one by Department involving the same issue of service tax liability on BTPL in respect of commissions received by them from various foreign airlines in their capacity as General Sales Agents (GSA).
2. The brief facts of the case are that BTPL are engaged in the business of providing travel related services. They are also functioning as GSA for various foreign airlines from whom they receive additional Over- riding Commission (ORC) and target incentives. The contention of the department is that BTPL were engaged in promoting and marketing the services of international airlines in India and as such are liable to tax under BAS. Proceedings initiated against the BTPL concluded in confirmation of demands and imposition of penalties. BTPL filed appeals against service tax demands. Revenue filed appeal against one of the impugned orders, aggrieved by the Commissioners finding to drop the demand for extended period.
3. We have heard both the sides and examined the appeal records. The main point for decision is whether or not BTPL are liable to service tax in respect of over-riding commission and target incentives received by them from airlines in their capacity as GSA. In this connection, it is necessary to note the nature of GSA agreements and the functions and responsibilities of BTPL in terms of such agreements. The main points of the agreements are reflected in the impugned order and are as below:
(i) Facilitating and promoting the expansion of PARENT AIRLINES services in the area operated by the GENERAL SALES AGENT in terms of, including but not limited to, acquiring traffic rights, over flight clearance, lobbying and networking with the appropriate governmental bodies or agencies including the airport, customs, immigration and civil aviation authorities for any rights, waiver or exemptions relating to PARENT AIRLINES services and operation in the area where the GENERAL SALES AGENT is appointed. Such efforts shall be on a continuous endeavour basis on the part of the GENERAL SALES AGENT.
(ii) Achievement of sales target in any given time frame assigned by PARENT AIRLINES. Any repetitive failure to meet the sales target shall be cause for termination.
(iii) To provide sales and marketing reports, business plans and other relevant reports as and when directed by PARENT AIRLINES.
(iv) Efforts in the area to obtain traffic for the services of PARENT AIRLINES, such efforts to include:-
(a) Provision of and efficient operation of suitable Enquiry, Sales Reservations and Ticketing Offices (in accordance with PARENT AIRLINES requirements) adequately equipped for the sales of transportation for passengers.
(b) Sales promotion including the development of specific markets for transportation by personal and regular contact with actual and prospective passengers and with commercial houses and Sales Agents.
(c) Undertaking of special publicity when so requested by PARENT AIRLINES.
(d) Prominent display of PARENT AIRLINES advertising publicity and display material in windows and interiors of all the GENERAL SALES AGENTS offices in the area and such advertising publicity and display material are to be based on PARENT AIRLINES standards.
(e) To notify the GENERAL SALES AGENTS reservations and ticketing staff and to Sales Agents in the area, instructions, special advices and sales points sent to the GENERAL SALES AGENT by PARENT AIRLINES.
(v) Hiring adequate and suitably qualified personnel for various positions in the areas of reservations, ticketing, sales, accounts, administration and so forth. Unless otherwise stated, PARENT AIRLINES approval must be obtained prior to hiring of staff. The number of staff hired aimed at providing efficient customer service and coverage of sales territory must be agreed upon by PARENT AIRLINES.
(vi) To open sales offices to service the market within the territory within a stipulated time frame as may be directed by PARENT AIRLINES to the GENERAL SALES AGENT from time to time.
(vii) Issue in accordance with the agreements, Passenger Tickets, Miscellaneous Charges Orders or any other appropriate documents in connection with all sales made on behalf of PARENT AIRLINES, providing service of manual ticket booking to the sales agents who are not authorised by IATA.
(viii) Advice to passengers concerning passport, health, currency immigration and other regulations in force in countries to any through which they are to travel and ensuring that such regulations are observed by all such passengers.
(ix) The GENERAL SALES AGENT will not appoint any Sales Agent who is not duly approved by IATA and/ or unrecognized by the local travel and trade authorities or associations. Approval from PARENT AIRLINES may be obtained prior to appointing a sales agent.
(x) Supervision of Sales Agents appointed by the GENERAL SALES AGENT in the area and distribution to such agents of publicity matters as provided by PARENT AIRLINES and ensuring that display facilities are being provided to them.
(xi) Liaising with the BSP Manager in the Area and keeping the clients informed of all the activities of the BSP which affect the client Airlines.
(xii) Supervision of ground handling agents.
(xiii) To assist and facilitate PARENT AIRLINES and its staff in all manner for any functions such as business events, seminars, familiarization trips and duty travel including, but not limited to, in getting the best deal and rate for hotel accommodation, hotel catering, transportation and governmental networking.
(xiv) To make payments for and on behalf of PARENT AIRLINES.
(xv) To provide additional or other services as may be indicated, specified, detailed or outlined by PARENT AIRLINES in any Service Level Agreement.
4. BTPL are eligible for commissions from the airlines for their activities as below:
(i) Normal commission or IATA commission payable in accordance with International Air Transport Association (IATA) resolution.
(ii) Over-riding commission, which is commission payable over and above the normal commission referred to at (i) above.
5. The main contention of BTPL is that the travel agents are discharging service tax @ 0.5% (now 1.2%) of the base fair in the case of international tickets. The department cannot subject the same transaction to another service tax under the category of BAS. We find that this particular argument of BTPL is misleading and erroneous. The air travel agents as well as BTPL when issuing tickets for international travel are discharging service tax as air travel agents as per the rate mentioned above. However, in addition to the commission on tickets sold by the air travel agents, BTPL by their status as GSA also received over riding commission / target incentives in respect of airlines ticket sold by agents in the earmarked territory on flown basis. We find that this commission / incentives is directly attributable to the performance of BTPL as GSA for a particular airlines. In other words selling tickets and getting commission is an activity relating to air travel agency which is simply only on sale of tickets whereas as GSA BTPL are involved in various activities which are not simply sale of tickets. These activities are generally aimed at promotion of business of foreign airlines. We find the original authority has examined this issue in detail and made the correct distinction between the ticket booking activity of air travel agent and the functions and responsibilities of a GSA. We find that BTPLs claim, that the ticketing charges including commission on such ticketing has suffered service tax and hence there can be no additional service tax on ORC/ target incentives, is not correct. As clearly mentioned above the present levy against GSA if not on the sale of tickets but on the promotion of business and other performances as listed above in terms of the agreement and the consideration in the form of ORC / target incentives has not suffered service tax in any manner at the hands of air travel agents. We find similar set of facts were for consideration before the Tribunal in ETA Travel Agency Pvt. Limited 2007 (7) STR 454 (Tri. Bang.) and in Trans Lanka Air Travel Pvt. Ltd. 2007 (7) STR 476 (Tri. Chenn.). The Tribunal held that these ORC/ target incentives are liable to service tax under BAS.
6. Considering the above position, we find that the service tax liability on BTPL has been correctly held by the original authority in the impugned order dated 19.10.2009.
7. Regarding departments appeal against the impugned order dated 19.10.2009, it is seen that the same is against dropping of demand for the extended period. We have perused the impugned order. Para 27 discusses at length the question of time bar. The revenue pleaded that intimation given by BTPL to the department in 1997 to the effect that they are operating as GSA for airlines will not absolve them from the requirement of not following the registration and payment of tax w.e.f. 01.07.2003 as service tax under BAS was introduced on that date. The case of the Revenue is that intimation given to the department prior to the introduction of new levy is of no consequence. We find that there is no sufficient justifiable ground to overturn the detailed finding given by the original authority on the question of time bar. The admitted fact is that BTPL had intimated their activities to the department. Secondly, it can fairly be conceded that when the travel agents paid service tax on ticketing charges on fixed percentage, there could be a bonafide belief that there is no additional service tax on that portion of commission received by GSA over and above the commission on ticketing given to the travel agents. The question involved is one of close interpretation of the legal provisions and there is nothing on record to show that there is a positive act of suppression or wilful mis-statement of any relevant facts by BTPL to enable the department to sustain the demand for longer period. We do not find any justifiable reason to interfere with the findings of the lower authority on the question of time bar.
8. In respect of two appeals by BTPL against the impugned orders dated 27.11.2012 and 08.07.2014, BTPL strongly contended that in respect of three foreign airlines, Hann Air, S. N. Brussels and Iceland Air, the services provided as GSA are to be treated as export of services. It is the case of BTPL that these airlines do not have any office in India and as such based on the decision of the Tribunal in Paul Merchants 2013 (29) STR 257 there is no service tax liability on export of services. We find that in the impugned order dated 27.11.2012 the ld. Commissioner (Appeals) categorically recorded that benefit of services have accrued outside India. However, he held that services have been provided and used in India and cannot said to be fulfilling the condition of service used outside India in terms of Board clarification dated 13.05.2011. We find that the admitted facts that these airlines do not have any office or branch in India and BTPL are providing service to these airlines in terms of GSA agreement. The period involved is from April 2008 to September 2010. In Microsoft Corporation (I) Pvt. Ltd. 2014 (36) STR 766 (Tri. Del.) it was held that there is no ambiguity that legislature in terms of Export of Services Rules, 2005 intended that services consumed outside India shall be exported. It was further held that service that is sought to be taxed is the service provided to the person paying for the service and not the service which is provided to a person in India who is not paying for the service thought he may be beneficiary of such arrangement. Here, in the present case the admitted facts are that the business of foreign airlines are promoted by BTPL. If such airlines do not have any office / establishment in India and consideration is paid in convertible foreign currency we find BTPL are not liable to service tax under BAS as services are covered by export. Reference can also be made to Tribunals decision in GAP International Sourcing (India) Pvt. Ltd. 2015 (37) STR 757 (Tri. Del.). It was held that service tax, though levied on commercial activities, is a destination based consumption tax and that it is not a charge on business but on the consumer.
9. Considering the discussion and analysis as above both the appeals (ST/104/2010 & ST/188/2010) against the impugned order dated 19.10.2009 are rejected. The C.O. filed also disposed of. Appeals filed by BTPL (ST/55430/2013 & ST/54736/2014) are disposed of in view of above findings on export of services. The tax liability, if any, is upheld only where the conditions are not fulfilled.
(Pronounced on 28.7. 2016).
(Justice (Dr.) Satish Chandra) President (B. Ravichandran) Member (Technical) Pant 8