2008 (8) TMI 187 - HC - Service Tax

Business of air travel agent - assessee had taken suo motu refund of service tax on account of service tax already paid in respect of the tickets which were cancelled - there is no material on record to show that the amount of service tax was charged from any customer contention of revenue that the case was of unjust enrichment is misconceived - no question arises for separate claim of refund of service tax action of assessee of taking suo motu refund is valid

Summary

Issues:
- Appeal against order of Customs, Excise & Service Tax Appellate Tribunal
- Interpretation of Rule 6(3) of the Service Tax Rules, 1994
- Refund of service tax on cancelled air travel tickets
- Application for refund and unjust enrichment

Appeal against Tribunal's Order:
The Revenue appealed against the Customs, Excise & Service Tax Appellate Tribunal's order, questioning if the order contradicted Rule 6(3) of the Service Tax Rules, 1994. The rule mandates specific conditions for adjusting excess service tax paid, including crediting the tax to the Central Government, non-provision of services to the client, and refunding the value of taxable service along with service tax to the person from whom it was collected.

Interpretation of Service Tax Rules:
The case involved a respondent-assessee operating as an air travel agent subject to service tax. Dispute arose when the assessee claimed a refund of service tax amounting to Rs. 3,17,661 for cancelled tickets. While the Commissioner (Appeals) supported the Assessing Officer's decision, the Tribunal ruled in favor of the assessee. The Tribunal referenced a circular by the Central Board of Excise and Customs stating that refund or adjustment of service tax on cancelled tickets is unnecessary due to the nature of the travel industry's ticket cancellations and commission adjustments.

Refund of Service Tax on Cancelled Tickets:
The Tribunal's decision was based on the circular's guidance, highlighting that the cancellation or modification of tickets is routine in air travel, with adjustments made through net commission payments by airlines to travel agents. The Tribunal found no need for a separate refund claim as the commission is adjusted without necessitating a refund of service tax. The Tribunal rejected the Revenue's argument that the assessee should have applied for a refund, noting the lack of evidence showing the service tax was charged to customers due to ticket cancellations.

Application for Refund and Unjust Enrichment:
The Tribunal dismissed the Revenue's claim of unjust enrichment, emphasizing the absence of proof that customers were charged the service tax for cancelled tickets. The Tribunal's decision aligned with the law, concluding that no substantial question of law arose in the appeal. Consequently, the appeal was dismissed, affirming the Tribunal's ruling in favor of the respondent-assessee.