2018 (11) TMI 1804 - AT - Service Tax

Classification of services - Business Auxiliary Services or not - rendering of services as an air travel agent - HELD THAT - On perusal of the statutory provisions vis-a-vis the activities undertaken by the appellant, we find that the appellant is not an agent, working on behalf of the customers for facilitating purchase of tickets from the GSAs. The customers approaching the appellant for booking of tickets are not aware about the particular GSA, who issues the ticket through the appellant. In order to fall under the purview of business auxiliary service, there must be involvement of three parties namely, the service provider, service receiver and the agent facilitating procurement of service for and on behalf of the service provider. In other words, all the three parties involved in the contract must be known to each other, in order to be classifiable under such head of service. It is an admitted fact on record that for booking of ticket, the passenger only approached the appellant and not the GSA. Verifying the economic aspect, the sub-agent, like the appellant approaches a particular GSA for booking of tickets. Thus, in absence of any connection between the GSA, the appellant and its customer, the activities cannot be considered as a service, exigable to service tax under the taxable category of business auxiliary service. Since, GSA s payment of service tax under air travel service was accepted by the department, contrary stand cannot be taken to fasten the tax liability on the appellant under a different category of service namely, business auxiliary service - there are no reason to sustain the adjudged demands confirmed on the appellant. Appeal allowed - decided in favor of appellant-assessee.

Summary

Issues:
1. Taxability of commission amount received by the appellant from General Sales Agents (GSAs) for booking air tickets under the category of Business Auxiliary Service.
2. Taxability of commission amount received by the appellant from branch offices for booking air tickets under the category of Business Auxiliary Service.

Analysis:

Issue 1:
The appellant, engaged in booking air tickets, received commission from GSAs for ticket bookings. The department sought recovery of service tax on this commission under Business Auxiliary Service. The adjudicating authority partly confirmed the demand. The appellant contended that their services fall under Air Travel Agent Service, not Business Auxiliary Service. The Tribunal analyzed the transactions and found that the appellant acted as a sub-agent between GSAs and customers, not as a direct agent. For Business Auxiliary Service taxability, involvement of three parties is required, which was lacking in this case. Customers approached the appellant, not the GSAs directly, and there was no direct connection between the GSA, appellant, and customers. As GSAs paid service tax under air travel service, imposing a different tax liability on the appellant was deemed unjustified. Thus, the demands confirmed on the appellant were not sustained.

Issue 2:
Regarding the appeal by Revenue on the commission amount received by the appellant from branch offices, the Tribunal noted that the head office and branch offices operated under the same corporate entity. As there was no distinct provider-receiver relationship between them, the commission shared between the branch office and the head office could not be taxed under Business Auxiliary Service. The Tribunal found no valid reason to support Revenue's appeal. Consequently, the appeal by the appellant was allowed, and Revenue's appeal was dismissed. Cross objection was disposed of accordingly.

In conclusion, the Tribunal ruled in favor of the assessee-appellant, disallowing the service tax demands on the commission amounts received from GSAs and branch offices. The judgment highlighted the importance of the nature of transactions and the parties involved in determining the taxability under specific service categories, ultimately providing clarity on the tax liabilities in the context of booking air tickets.