2010 (3) TMI 818 - HC - Service Tax

Travel agency services - taxability - business auxiliary service u/s 65(105)(zzb) or travel agency service - respondent is engaged in booking tickets and making arrangements for travel of passengers under agreement - respondent is paid commission Held that - services can not be charged under business auxiliary services - decided in favor of assessee.

Summary

Issues:
Interpretation of service tax category for a business providing travel-related services.

Analysis:
The judgment revolves around the interpretation of the service tax category applicable to a business providing travel-related services. The appellant contended that the respondent should be assessed under the business auxiliary service category, as per Section 65(105)(zzb) of the Finance Act, 1994, effective from 1-7-2005. However, it was found that the respondent is primarily engaged in booking tickets and making travel arrangements for passengers under an agreement with a well-known travel agency. The Tribunal determined that the services provided by the respondent align more with a travel agency service, acting as agents for the main travel agency. Consequently, the Tribunal concluded that the respondent falls under the travel agency business category rather than the business auxiliary service category. The respondent had already paid excess tax for the travel agency service, which was refunded by the Department. Therefore, the appeal by the Department against the CESTAT's order was dismissed.

The judgment highlights the importance of accurately categorizing businesses for service tax assessment. The Tribunal's factual finding that the respondent's services are akin to a travel agency's operations was a crucial factor in determining the appropriate tax category. The appellant's argument regarding the business auxiliary service category was not upheld due to the nature of the services provided by the respondent. Additionally, the respondent's compliance with tax payments for the travel agency service was noted, further supporting the conclusion that the respondent should be assessed under the travel agency service category. The judgment emphasizes the need for proper assessment and levy of taxes based on the actual nature of services provided by businesses.

The judgment also addresses the appellant's claim that there is no evidence to support the respondent's position, as the respondent did not register or remit any tax. However, the responsibility for tax recovery was deemed to lie with the appellant, who had the authority to recover tax for the travel agency service. The Tribunal's decision to allow the appellant to recover tax from the respondent underscores the importance of proper record-keeping and compliance with tax obligations. Ultimately, the judgment clarifies the tax assessment framework for businesses offering travel-related services, emphasizing the need for accurate categorization and compliance with tax regulations.