2017 (3) TMI 1019 - AT - Service Tax

Business auxiliary service - the assessee-Appellants used Computer Reservation System (CRS) of M/s Galileo India, Amadeus India and Calleo Distribution to encourage their business, for which they have been paying the incentives against the segment booked by the assessee-Appellants - whether the said service is classified under tour operator service or otherwise? - Regarding the commission/incentive received from GDS/CRS, it may be stated that the said GDS/CRS companies are providing adequate free of cost computers with essential accessories and software to the travel agents at their premises. These computers are connected worldwide to the GDS/CRS, which linked to ticket sales offices of various airlines, hotels and car rental agencies spread across the world. They are by using these GDS/CRS for booking tickets, receiving incentives from the said companies for every segment booked by them. Hence, the service provided by the assessee-Appellants has rightly been covered under the heading Business Auxiliary Service as defined u/s 65(19) of the FA, 1994 - appeal dismissed - decided against Appellant.

Summary

Issues:
Classification of services provided by the assessee-Appellants under "Tour Operator's Services" or "Business Auxiliary Services" and taxability of incentives received from GDS/CRS companies.

Analysis:
The appeal was filed against the order-in-appeal by the Commissioner (Appeals) Central Excise, New Delhi, regarding the classification of services provided by the assessee-Appellants. The assessee-Appellants, registered as "Air Travel Agent's Services," used Computer Reservation Systems (CRS) of various companies to issue air tickets and received incentives for segments booked during a specific period. The lower authorities classified the services as "Tour Operator's Services" under Section 65(11)(o) of the Act, leading to a dispute.

During the hearing, the counsel for the assessee-Appellants argued that they did not market the GDS/CRS and did not charge customers for using the software. The incentives received were not deemed commission but merely an incentive, hence not taxable. The counsel cited a Tribunal case to support this argument. On the other hand, the Department contended that the commission received falls under "Business Auxiliary Services," justifying the Service Tax demand upheld by lower authorities.

The Tribunal observed that the assessee-Appellants provided air and rail tickets, acting as "Rail Travel Agent's Service" as well. The GDS/CRS companies provided free computers and software to book tickets, and incentives were received for each segment booked. Consequently, the services were rightly categorized under "Business Auxiliary Service" as per Section 65(19) of the Finance Act, 1994. The Tribunal distinguished the cited case involving advertising agencies as inapplicable to the present scenario.

Referring to a clarification in the Central Excise, Customs & Service Tax Budget 2016-17, the Tribunal highlighted that incentives received by Air Travel Agents from CCRS companies are taxable as the agents promote the services provided by CCRS to airlines. Therefore, the Tribunal upheld the impugned order, dismissing the appeal filed by the assessee-Appellants.

In conclusion, the Tribunal affirmed the taxability of incentives received by the assessee-Appellants from GDS/CRS companies under "Business Auxiliary Services," in line with the clarification provided, and dismissed the appeal accordingly.