2018 (3) TMI 635 - AT - Service Tax

Online Information and Data Base Excess or Retrieval Service - Revenue contended that the appellant herein received such service from foreign based CRS Companies under the main category of Computer Network Services in terms of Section 65 (105) (zh) of the Finance Act, 1994 - tax liability from 01/04/2006 to 31/03/2013 - reverse charge mechanism - Held that - the tax liability of the appellant on reverse charge basis in terms of Section 66A has been resolved by the ratio adopted by this Tribunal in British Airways 2014 (6) TMI 626 - CESTAT NEW DELHI (LB) , where it was held that The appellant in the present case is only appointing IATA agents, dealing with them, collecting sale proceeds of the tickets sold by them and remitting the same to the head office. They are not, in fact, even using the said service directly and as such can, by no stretch of imagination held to be service recipient in India so as to pay any service tax - the tax liability of the appellant for the period prior to 01/07/2012 as confirmed by the impugned order cannot be sustained. For the period post 01/07/2012 we have examined the changed legal position. Section 66A has been made inapplicable from that date. However, the statutory provisions available in the said Section has been made applicable through different legal provisions more specifically the changed Section 68(2), Section 66B (44) explanation 3 read with explanation 4 and Section 66C read with Place of Provision of Services Rules, 2012. Even for the period post to 01/07/2012 there is no material change to attract service tax liability on the part of the appellant. No statutory changes or change in fact were brought in w.e.f. 01/07/2012 in order to vary the finding for this period. Appeal allowed - decided in favor of appellant.

Summary

Issues Involved:
1. Tax liability of the appellant office in India for services received under “Online Information and Database Access or Retrieval Service” from foreign-based CRS companies.
2. Applicability of Section 66A of the Finance Act, 1994, and subsequent statutory provisions post 01/07/2012.
3. Determination of the recipient of services for tax purposes.

Detailed Analysis:

1. Tax Liability for Services Received from Foreign-Based CRS Companies:
The appellant, an international airline with a head office in France and an office in India, entered into contracts with foreign companies providing centralized reservation systems (CRS). The dispute centered on whether the appellant's Indian office should be liable for service tax under “Online Information and Database Access or Retrieval Service” for these services. The revenue argued that the services fell under Computer Network Services as per Section 65(105)(zh) of the Finance Act, 1994, and issued show cause notices for the period from 01/04/2006 to 31/03/2013.

2. Applicability of Section 66A and Subsequent Provisions Post 01/07/2012:
For the period prior to 01/07/2012, the Tribunal had already resolved similar disputes in cases like British Airways and Korean Air, determining that the tax liability under Section 66A did not apply. The appellant argued that these precedents should apply to their case as well. Post 01/07/2012, despite the introduction of new statutory provisions (Section 66D, Section 68(2), Section 66C, and the Place of Provision of Services Rules, 2012), the appellant maintained that these changes did not alter the fundamental ruling regarding their tax liability.

3. Determination of the Recipient of Services:
The Tribunal's decisions in British Airways and Korean Air emphasized the importance of identifying the recipient of the service. In British Airways, the Tribunal concluded that the Indian branch of a foreign company should be treated as a separate person for tax purposes under Section 66A. It was determined that the services were provided to and consumed by the head office in the UK, not the Indian branch, thus negating the tax liability of the Indian branch. Similarly, in Korean Air, the Tribunal reiterated that the service recipient must be clearly identified, and in cases where the contract and payment were handled by the foreign head office, the Indian branch could not be deemed the recipient of the service.

Conclusion:
The Tribunal found that for the period prior to 01/07/2012, the tax liability of the appellant was resolved by the precedents set in British Airways and Korean Air. For the period post 01/07/2012, despite new statutory provisions, the Tribunal concluded that there was no material change to justify a different outcome. The services in question were provided by CRS companies located outside India, and the appellant's Indian office did not make payments for these services. Consequently, the Tribunal set aside the impugned order and allowed the appeal, ruling that the appellant was not liable for service tax for the period in question.