2015 (7) TMI 857 - HC - Service Tax

Waiver of pre deposit - Business Auxiliary Service - services rendered to Computerized Reservation System (CRS) companies - Tribunal has found that prima facie the activity is taxable as BAS - Held that - It may be that the CRS companies receive huge amounts from the airlines so that they access their ticketing systems and to the maximum. Thereafter the system of CRS companies are accessed by these travel agents like the Assessee. The Tribunal will have to ultimately hold that such of the airlines which give incentive to the CRS companies allowing them to get the benefit of payment made to the CRS companies by them. Meaning thereby if travel agents access the system of CRS companies and in most cases to book tickets of the airlines the financial incentives to the CRS companies by the Airlines reveals the marketing and promotional agreement. Tribunal should not have directed that the entire amount which according to it is a demand within the period of limitation needs to be secured. If the Tribunal has to devote at least 5 to 6 paragraphs to find out what is the nature of the service allegedly provided and to whom and whether that falls within the definition, then, this was a imminently arguable case. It could not be termed as absence of a prima facie case in any event. In the circumstances, we think that the Tribunal should not have rendered any conclusion and particularly that the service rendered by the Assessee merits classification as business auxiliary service as defined in law - Patial stay granted.

Summary

Issues:
Challenge to order by Customs, Excise, and Service Tax Appellate Tribunal on application for stay and pre-deposit.

Analysis:
1. The order in question confirmed a service tax demand against the Assessee for the period from April 1, 2004, to March 31, 2012, classifying services to CRS companies under 'Business Auxiliary Service' and imposing penalties under Finance Act, 1994.

2. The Assessee contended that the incentives received from CRS companies were not for promoting or marketing the service provider's business but were a part of the CRS companies' incentive system, which was passed on to the Assessee. The Tribunal, however, directed a deposit of Rs. 5.8 crores, considering the services rendered by the Assessee under Business Auxiliary Services.

3. The Assessee argued that the Tribunal initially found a prima facie case in their favor but later ordered pre-deposit based on financial hardship, which, according to the Assessee, was not justified as they were not promoting or marketing the service provider's business.

4. The Respondent contended that the Tribunal's decision was interim and not arbitrary, urging that the Appeal raised no substantial legal questions and should be dismissed.

5. The High Court admitted the Appeal on the substantial question of law regarding the correctness of directing a pre-deposit of Rs. 5.8 crores. After hearing both sides, the Court decided to dispose of the Appeal finally, considering the nature of the order on the application for pre-deposit and stay.

6. The Court analyzed the definition of Business Auxiliary Services and emphasized that the Tribunal needed to probe the agreement between the parties to determine if the amounts received were for promoting or marketing the service. The Court found the Tribunal's conclusion premature and substituted the direction with a revised order, reducing the deposit amount to Rs. 1.5 crores.

7. The revised order stipulated conditions for the Assessee to comply with, ensuring that the balance sum need not be deposited if the initial condition was met. The Court clarified that its decision was not an expression of opinion on the merits of the case and should not bind the Tribunal during the Appeal hearing.

8. The Appeal was disposed of with no orders as to costs, keeping all contentions regarding the demands open for further proceedings.