2014 (8) TMI 786 - AT - Service Tax

Classification of service - computerised reservation system - Business Auxiliary Service - air travel agent service - Held that - The reliance placed on the decisions of the hon ble Madras High Court and this Tribunal, those decisions were rendered in a different context altogether and the issue of transaction between CRS companies and air travel agent was not one of the issues therein. It is a settled position in law that when the facts are different and distinguishable, the ratio of a decision cannot be blindly applied. The decision of the hon ble apex Court in the case of Al Noori Tobacco products India Ltd. 2004 (7) TMI 91 - SUPREME COURT OF INDIA refers - Therefore, we are prima facie of the view that the services rendered by the appellant would merit classification under business auxiliary services as defined in law. As regards the question of time-bar, this is both a question of fact and law and has to be examined in depth after going through the documents available on record, which can be conveniently dealt with at the time of final hearing of the appeal. The demand for the normal period would be ₹ 5.8 crore approximately. The appellant does not plead any financial hardship. In the absence of a prima facie and financial hardship, balance of convenience lies in ordering pre-deposit - stay granted partly.

Summary

Issues:
- Classification of services rendered by the appellant to computerised reservation system (CRS) companies under taxable service category of 'Business Auxiliary Service'
- Imposition of penalties under Sections 76, 77, and 78 of the Finance Act, 1994
- Applicability of extended period of time for demand confirmation
- Dispute regarding classification of services and imposition of penalty
- Justification for invoking extended period of time for demand confirmation
- Necessity of pre-deposit by the appellant

Classification of Services:
The judgment revolves around the classification of services provided by the appellant to CRS companies under the taxable service category of 'Business Auxiliary Service.' The appellant argued that they are merely users of the software and not promoting the CRS companies' business. They contended that if the service involves booking air travel tickets, it should be classified as 'air travel agent service' and not 'business auxiliary service.' However, the tribunal found that the agreements between the appellant and CRS companies involved marketing and promotion of the CRS software, enhancing the saleability of the software. The tribunal emphasized that the substance of the agreement, not just its wording, is crucial in determining the nature of the service provided.

Imposition of Penalties:
Penalties under Sections 76, 77, and 78 of the Finance Act, 1994 were imposed by the adjudicating authority. The appellant disputed the imposition, arguing that the dispute related to service classification and the invocation of the extended period of time, which should not warrant penalties. The tribunal considered these arguments but ultimately upheld the penalties, emphasizing the need for pre-deposit by the appellant.

Extended Period of Time for Demand Confirmation:
The appellant contested the invocation of the extended period of time for demand confirmation, stating that the show cause notice sought to demand service tax beyond the normal one-year period. They argued that the department was aware of their activities, and thus, the extended period was not justified. However, the tribunal found that the appellant had not disclosed agreements with CRS companies and the consideration received, constituting suppression of facts and warranting the invocation of the extended period of time.

Necessity of Pre-Deposit:
The tribunal directed the appellant to make a pre-deposit of a specific amount within a designated period, with compliance required by a set date. The tribunal noted that the appellant did not claim financial hardship, and in the absence of prima facie financial hardship, ordered the pre-deposit. Compliance with the pre-deposit would waive the balance of dues and stay recovery during the appeal's pendency.

In conclusion, the judgment addressed the classification of services, imposition of penalties, extended period of time for demand confirmation, and the necessity of pre-deposit by the appellant, providing detailed analysis and reasoning for each issue involved.