2007 (8) TMI 72 - AT - Service Tax

Appellant (Air travel agent) demand for the adjustment of service tax paid on the ticket later which is being cancelled but such adjustment is disallowed by the department Held that disallowance is contrary to the Board circular dated 26-06-97 and allowed appellant appeal

Summary

Issues:
1. Taxability of commission received on the sale of air tickets under service tax.
2. Disallowance of adjustments made by the appellant on tax paid for cancelled tickets.
3. Contradiction between the impugned order and circular dated 26-6-1997 of the Board.
4. Revenue's appeal seeking enhancement of penalty.

Analysis:

1. The appellant, an Air Travel Agent, was discharging the tax liability on the commission received for air ticket sales. Adjustments were made for cancelled tickets towards subsequent tax liabilities. However, under the impugned order, these adjustments were disallowed, resulting in a tax demand of approximately Rs.3 lakhs along with penalties imposed.

2. The appellant argued that the order contradicted the circular dated 26-6-1997 of the Board, which permitted such adjustments. Reference was also made to a similar view taken in the appellant's own case in the jurisdiction of Jaipur. The circular clarified the tax collection responsibility of air travel agents based on the commission received from airlines for ticket bookings, allowing for adjustments for cancelled or modified tickets.

3. The Tribunal found the order to be contrary to the provisions of the circular. It acknowledged that the tax payments made by the appellant, after adjustments, were correct. Consequently, the appeal of the assessee was allowed with consequential relief. The Revenue's appeal seeking penalty enhancement was rejected since the demand itself was set aside.

4. Both appeals were ordered accordingly, with the Tribunal emphasizing the alignment of the impugned order with the circular's guidelines. The judgment highlighted the importance of adhering to established regulations and circulars in determining tax liabilities for service providers like Air Travel Agents.