2012 (9) TMI 301 - AT - Service Tax

Demand in respect of commission from the company providing computer reservation system - appellants contended that CRS is being used by them for their own conducting business and cannot be held to be a service to others Held that - Travel Agents are promoting the business of CCRS who is providing service to the Airlines and the payment received by the Travel Agent from CRRS is in consideration for such service - service provided by CRRS is to the Airlines and the Air Travel agent is promoting the service provided to Airlines - service provided by the Appellants to CRRS is business auxiliary service and service tax is payable on the same. Valuation - It is not clear whether tax is paid on the basis of basic fare as claimed by the Appellant and the Revenue is again demanding tax on the commission received for booking ticket without considering the tax already paid as per provisions of Rule of 6(7) of Service Tax Rules. Such demand cannot be justified at this stage. - Stay granted.

Summary

Issues:
1. Demand of service tax on commissions from companies providing computer reservation system and other services.
2. Dispute over payment of service tax by air travel agents on commission earned.
3. Validity of tax liability calculation under Rule 6(7) of the Service Tax Rules.
4. Time limitation for raising demands and recovery of dues.

Analysis:
1. The appellants, engaged as air travel agents, faced proceedings for service tax demand on commissions from companies providing computer reservation system and other services. The impugned order confirmed a service tax demand of Rs. 12,94,443/- along with penalties and interest. The appellants had deposited a portion of the demanded tax and interest. The main contention was regarding the nature of commission earned from the computer reservation system company, with the Revenue arguing it was for marketing services. The appellants argued that the system was used for their own business and not for providing services to others. The Revenue also disputed the payment of service tax on income from domestic and international tickets, while the appellants claimed they were duly registered and paying taxes as per Rule 6(7) of the Service Tax Rules.

2. The Commissioner (Appeals) observed that once the appellants had discharged their service tax liability as per Rule 6(7), they were not required to pay additional tax. However, the lack of details regarding the basic fare for tickets led to a dispute. The appellants submitted the required evidence, and the Tribunal found no justifiable reason to extend the limitation period for demands. The Tribunal ordered the balance amount of duty to be stayed during the appeal's pendency.

3. Another member's analysis focused on the service provided by air travel agents to the computer reservation system company. The member disagreed with the appellants' argument that no service was provided to the company, asserting that the agents promoted the business of the system provider. The issue of correct valuation for service tax payment was also addressed, highlighting the importance of disclosing the basic fare for tax calculation. The member noted discrepancies in the demand calculation but agreed with the waiver of dues for appeal admission and stay on collection during the appeal.

4. The judgment emphasized the need for clarity on the services provided by each entity involved, including airlines, computer reservation system companies, and air travel agents. The dispute over tax liability calculation and time limitations for demands were thoroughly examined, leading to decisions favoring the appellants' arguments in certain aspects while upholding the need for proper documentation and disclosure for tax compliance.