2017 (9) TMI 257 - AT - Service Tax

Air Travel Agency Services - non-payment of Service Tax on a portion of consideration received by them when they sold tickets purchased from another travel agent - whether such portion to be considered under Business Auxiliary Services or otherwise? - Held that - there is no arrangement either by contract or by otherwise between another travel agent and the appellant for promoting the business of another travel agent. The travelling public is getting only ticket with no identity linking the same to another travel agent. In such situation, it could not be said that the appellant is promoting the business of another travel agent, in their capacity as sub-agent. No such fact has been established in the impugned order by the lower authority - demand not sustainable - appeal allowed - decided in favor of appellant.

Summary

Issues:
Non-payment of Service Tax on a portion of consideration received by the appellant when selling tickets purchased from another travel agent.

Analysis:
The appellant, engaged in providing air travel services, was registered under the category of Air Travel Agency Services and was discharging Service Tax. The dispute arose regarding non-payment of Service Tax on a portion of consideration received by the appellant when they sold tickets purchased from another travel agent. The lower authorities confirmed the demand and imposed penalties on the appellant.

The appellant contended that they were registered as air travel agents and were discharging service tax regularly. They purchased tickets from another travel agent when they did not have sufficient stock and sold them to the public. The appellant relied on a clarification from the Commissioner, Service Tax, Delhi, stating that sub-agents not receiving commission from airlines or directly issuing tickets were not required to collect or pay service tax. Therefore, the appellant did not pay service tax on tickets purchased from another travel agent.

The appellant also argued that the demand was time-barred, citing a previous clarification by the Jurisdictional Commissioner stating they were not liable to pay service tax when acting as sub-agents. On the other hand, the authorized representative reiterated the findings of the lower authorities, stating that during the material time, air travel agents providing services to customers were liable to pay tax under that category. The demand in question pertained to the commission received from another travel agent to promote their business with the public.

After hearing both sides and examining the appeal records, it was observed that the appellant was registered as a travel agent and was discharging service tax under that category. The dispute centered around the appellant obtaining tickets from another travel agent and selling them to the public, with the commission/profit earned being taxed under Business Auxiliary Service. However, it was noted that there was no arrangement between the appellant and the other travel agent to promote the latter's business. The lower authority's emphasis on the appellant being liable for service tax under Business Auxiliary Service when not selling airline tickets directly was deemed unsustainable. The transaction between the appellant and the other travel agent was characterized as a simple sale and purchase of tickets, with no evidence supporting the appellant acting as a commission agent for the other travel agency.

In conclusion, the impugned order was found to be unsustainable, and the appeal was allowed, setting aside the earlier decision.