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2016 (8) TMI 720 - AT - Service TaxPromoting and marketing services for international airlines in India - Business Auxiliary services (BAS) - receipt of additional Overriding Commission (ORC) and target incentives - BTPL are engaged in the business of providing travel related services. - Extended period of limitation - Held that - there is no ambiguity that legislature in terms of Export of Services Rules, 2005 intended that services consumed outside India shall be exported. It was further held that service that is sought to be taxed is the service provided to the person paying for the service and not the service which is provided to a person in India who is not paying for the service thought he may be beneficiary of such arrangement. Here, in the present case the admitted facts are that the business of foreign airlines are promoted by BTPL. If such airlines do not have any office / establishment in India and consideration is paid in convertible foreign currency we find BTPL are not liable to service tax under BAS as services are covered by export. The question involved is one of close interpretation of the legal provisions and there is nothing on record to show that there is a positive act of suppression or wilful mis-statement of any relevant facts by BTPL to enable the department to sustain the demand for longer period. We do not find any justifiable reason to interfere with the findings of the lower authority on the question of time bar. The tax liability, if any, is upheld only where the conditions are not fulfilled. - Decided in substantially in favor of assessee.
Issues:
1. Service tax liability on commissions received by M/s Birds Travel Private Limited (BTPL) from foreign airlines as General Sales Agents (GSA). 2. Whether BTPL is liable to service tax on over-riding commission and target incentives. 3. Applicability of service tax under Business Auxiliary Services (BAS) on BTPL's activities. 4. Time bar for demanding service tax from BTPL. 5. Treatment of services provided by BTPL to foreign airlines without offices in India as export of services. Analysis: 1. The case involved four appeals, three by BTPL and one by the Department, concerning service tax liability on commissions received by BTPL from foreign airlines as GSA. The Department contended that BTPL's activities as GSA for promoting and marketing international airlines' services in India fall under BAS, leading to tax liability. The Tribunal examined GSA agreements and activities, distinguishing between air travel agents' ticketing commissions and GSA's promotional responsibilities. The Tribunal upheld the original authority's decision that BTPL is liable for service tax on over-riding commission and target incentives. 2. BTPL argued that since air travel agents already pay service tax on ticketing charges for international tickets, no additional tax should apply to over-riding commissions. However, the Tribunal clarified that GSA activities, beyond ticket sales, are subject to service tax under BAS. Citing precedents, the Tribunal affirmed that over-riding commissions and target incentives received by GSA are taxable. The Tribunal rejected BTPL's claim that service tax on ticketing charges precludes tax on over-riding commission and incentives. 3. The Tribunal addressed the Department's appeal against dropping the demand for the extended period. The Department argued that BTPL's prior intimation of GSA activities did not absolve them from service tax liability introduced in 2003. The Tribunal reviewed the time bar issue, emphasizing BTPL's intimation to the department and the complexity of interpreting legal provisions. Finding no evidence of suppression or misstatement by BTPL, the Tribunal upheld the original authority's decision on the time bar. 4. Regarding BTPL's appeals on treating services to foreign airlines without offices in India as export of services, the Tribunal analyzed the nature of services provided by BTPL. Citing relevant case law, the Tribunal concluded that if services are consumed outside India and payment is made in foreign currency, BTPL is not liable for service tax under BAS. The Tribunal rejected the service tax liability on export of services to foreign airlines without offices in India, based on the destination-based consumption tax principle. 5. In the final decision, the Tribunal rejected the appeals against the service tax liability on BTPL and upheld the tax liability only where conditions for taxability were not fulfilled. The judgment provided a detailed analysis of the issues, including the nature of GSA agreements, distinction between air travel agents and GSAs, interpretation of legal provisions, and the treatment of services as exports based on consumption location and payment currency.
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