2016 (8) TMI 89 - AT - Service Tax

Import of services or not - booking facility of online air tickets through CRS companies - online information and data base access or retrieval service - CRS companies facilitated the sale of products or services, appellant herein as to seat inventory in a specific flight by using an online computer system provided by these foreign based companies which are used by Travel Agents. Appellant s head offices entered into an agreement with the CRS companies for making payment to them on booking of tickets. The CRS companies raised invoice on the appellants for the tickets booked, based upon such agreement and bills are settled by head office of the appellants. Held that - the appellant had correctly relied upon the judgment of Tribunal in the case of British Airways (2014 (6) TMI 626 - CESTAT NEW DELHI (LB)), it is a case where identical issue was agitated before the Tribunal, wherein Hon ble Member (Judicial) held that services rendered by CRS companies for which payment made by head office is taxable, but Hon ble Member (Technical) held that such payment are not taxable as the Indian branch office cannot be treated as recipient of the service provided by the CRS companies under Section 66A of the Finance Act, 1994. The matter was referred to third Member. - It can be seen from the above reproduced majority order the issue is same as is in this case and is held in favour of the assessee. Demand set aside - Decided in favor of assessee.

Summary

Issues Involved:
1. Whether the appellants' branch offices in India are liable to discharge Service Tax under the reverse charge mechanism as per Section 66A of the Finance Act, 1994.
2. Whether the services provided by CRS companies to the appellants' head offices qualify as "online information and database access or retrieval service" under Section 65(75) read with Section 65(105)(zh) of the Finance Act, 1994.
3. Whether the demand for Service Tax is barred by limitation.

Issue-wise Detailed Analysis:

1. Service Tax Liability under Reverse Charge Mechanism:
The core issue is whether the appellants' branch offices in India are liable to pay Service Tax under the reverse charge mechanism as per Section 66A of the Finance Act, 1994. The appellants argued that the services provided by CRS companies to their head offices do not qualify as import of services, and the Indian branch offices do not "access or receive" data from CRS companies. The appellants cited the Tribunal's decision in the case of British Airways Vs. Commissioner of Central Excise, Delhi, where it was held that the Indian branch office cannot be treated as the recipient of the service provided by CRS companies under Section 66A. The Tribunal agreed with this argument, stating that the branch offices in India are separate legal entities and cannot be held liable for Service Tax on services provided to the head office.

2. Qualification of Services as "Online Information and Database Access or Retrieval Service":
The Department contended that the services provided by CRS companies fall under the category of "online information and database access or retrieval service" as per Section 65(75) of the Finance Act, 1994. They argued that the CRS companies provide a fully automated reservation and distribution system, which involves accessing and retrieving data from the appellants' computer systems. The Tribunal, however, found that the services are consumed by the head offices of the appellants, and the branch offices in India are not the recipients of these services. The Tribunal cited the British Airways case, where it was held that the service is consumed by the head office, and the Indian branch office is not liable for Service Tax.

3. Limitation:
The appellants also contested the demand on the grounds of limitation, arguing that the extended period of limitation was wrongly invoked. The Tribunal noted that the issue involved is a complex legal interpretation and not a settled law. The Tribunal found that the appellants had a bona fide belief that they were not liable to pay Service Tax, and the entire exercise was revenue-neutral as the appellants could have availed Cenvat credit. The Tribunal agreed with the appellants that the demand is barred by limitation and set aside the demand along with the penalties.

Conclusion:
The Tribunal concluded that the appellants' branch offices in India are not liable to discharge Service Tax under Section 66A of the Finance Act, 1994, for the services provided by CRS companies to the head offices. The services do not qualify as "online information and database access or retrieval service" for the branch offices in India. The demand for Service Tax was also found to be barred by limitation. Consequently, the impugned orders were set aside, and the appeals were allowed with consequential relief.