2017 (7) TMI 681 - AT - Service Tax

Classification of service - Computerized Reservation System (CRS) service - incentives provided to the appellant for increase in usage of their CRS - whether fall under Business Auxiliary Services or not? - extended period of limitation - penalty - Held that - t the issue regarding classification of CRS service under the category of Business Auxiliary Service has already been decided - the issue regarding levy of service tax on CRS was not free from doubt and accordingly, suppression of facts with intent to evade payment of service tax cannot be levied against the appellant. Therefore, the extended period of limitation invoked in this case cannot be sustained. The demand of service tax liability should be confined to the normal period - Since, there is no suppression of facts, penalty imposed under Section 78 on the appellant cannot be sustained - appeal allowed - decided partly in favor of appellant.

Summary

Issues: Classification of CRS service under Business Auxiliary Services, Suppression of facts for levy of service tax, Extended period of limitation for service tax demand, Imposition of penalty under Section 78.

Classification of CRS service under Business Auxiliary Services:
The appellant provided Air Travel Agents Services using Computerized Reservation Systems (CRS) of two companies, receiving incentives from them. The department classified the services under Business Auxiliary Services, leading to a service tax demand. The Commissioner (Appeals) upheld the demand. The appellant argued that there were divergent views on the levy of service tax on incentives received for CRS services. The Tribunal noted conflicting decisions but held that the appellant is liable to pay service tax under Business Auxiliary Services. However, since the issue was not free from doubt, suppression of facts for tax evasion couldn't be established, and the extended period of limitation for tax demand was not justified. The demand for service tax was restricted to the normal period, and the penalty under Section 78 was set aside.

Suppression of facts for levy of service tax:
The appellant contended that due to conflicting views on the levy of service tax on incentives received for CRS services, suppression of facts couldn't be proven. The Tribunal agreed, stating that since the issue was not clear, the appellant couldn't be accused of suppressing facts to evade service tax payment. Consequently, the imposition of penalty under Section 78 was deemed unsustainable.

Extended period of limitation for service tax demand:
The Tribunal found that the issue of levy of service tax on CRS services was not free from doubt, as indicated by divergent views in previous cases. Therefore, the extended period of limitation invoked for confirming the service tax demand was deemed unjustified. The demand for service tax liability was restricted to the normal period, and the penalty under Section 78 was set aside.

Imposition of penalty under Section 78:
The Tribunal set aside the penalty imposed under Section 78 due to the lack of suppression of facts by the appellant and the absence of justification for invoking the extended period of limitation for the service tax demand. The appeal was allowed, confirming the service tax demand under the normal period and disposing of the case accordingly.