2017 (8) TMI 220 - AT - Service Tax

Commission received - business of providing service of booking air travel tickets - basic fare - interpretation of the word basic fare - The basic allegation is that appellant has not discharged service tax on the supplementary commission received by them. Held that - It is not seen stated either in the show cause notice or in the Order-in-Original whether the appellant has received from the Customer ₹ 13,500. On behalf of the appellant the Learned Counsel has explained that such basic fare is not the price at which the ticket is sold to the customer and that appellant has not received any amount in the manner of supplementary Commission. The worksheet produced by the appellant also shows that the appellant has not received any such supplementary commission. However, this aspect has to be verified with the accounts/records of appellant before entering into a conclusion. For this, the matter requires to be remanded. Section 67 of the Finance Act, 1994 provides that value of taxable services includes the commission received by air travel agent from the airline, and does not include the airfare collected by air travel agent in respect of service provided by him - N/N. 20/97 dated 26.06.1997 makes it clear that basic fare means, that part of the fare on which commission is normally paid to the travel agent by the airlines. Therefore it needs to be verified as to what is the actual commission received by the appellant. In a similar issue the Tribunal in the case of Aero World Travels Vs CCE, Jalandhar 2005 (2) TMI 7 - CESTAT (NEW DELHI) observed that Revenue was in error in treating the printed fare on the tickets as basic fare. This indicates that the word basic fare used by IATA in their BSP statement and the basic fare used in Notification 20/97 dated 26.06.1997 may not be the same. The matter requires to be remanded to the original authority who shall verify as to the quantum of actual commission received by appellant - appeal allowed by way of remand.

Summary

Issues:
1. Allegation of non-payment of service tax on commission received from airlines for the sale of air tickets.
2. Discrepancy in the interpretation of basic fare and commission components.
3. Dispute regarding the supplementary commission and standard commission.
4. Application of Notification 20/97 dated 26.06.1997 and Notification 22/97 dated 26.06.1997.
5. Need for verification of actual commission received by the appellant before concluding the case.

Analysis:
The appeal before the Appellate Tribunal CESTAT Chennai involved the issue of non-payment of service tax on the commission received by the appellants from airlines for selling air tickets. The appellants argued that they did not receive any supplementary commission as alleged by the department, contrary to the findings of the original authority. The dispute centered around the interpretation of basic fare and commission components, with the department contending that the appellants had not paid service tax on the supplementary commission. The Tribunal noted discrepancies in the understanding of basic fare and commission calculation and emphasized the need for verification of the actual commission received by the appellants.

The Tribunal referred to Section 67 of the Finance Act, 1994, which includes the commission received by air travel agents from airlines in the value of taxable services. The interpretation of basic fare was crucial in determining the taxable value. The Tribunal highlighted Notification 20/97 dated 26.06.1997, which defines basic fare as the part on which commission is typically paid to travel agents by airlines. The Tribunal noted that the appellant denied receiving the alleged supplementary commission and stressed the importance of verifying the actual commission before reaching a conclusion.

In a similar case, the Tribunal cited the Aero World Travels judgment, where the Revenue was found to be mistaken in treating printed fare on tickets as basic fare. The Tribunal in that case ruled that the margin from ticket sales alone could constitute agency commission subject to taxation. The Tribunal directed a remand to the original authority for verifying the actual commission received by the appellant. It was argued that the margin per ticket received by the appellant should be considered as commission. The Tribunal set aside the impugned orders, allowing the appeals by way of remand for further proceedings and verification of commission details.

Overall, the judgment highlighted the importance of correctly interpreting basic fare and commission components in determining the taxable value of services provided by air travel agents. The need for thorough verification of actual commission received before imposing tax liabilities was emphasized, ensuring a fair and accurate resolution of the dispute.