2018 (5) TMI 1220 - AT - Service Tax

Business Auxiliary Service - as per the understanding made between the appellant and M/s. Amadeus India Pvt. Ltd., the said company has provided Central Reservation System (CRS) to book air tickets of various Airlines, with which they had business tie-ups - extended period of limitation - Held that - The law is well settled that incentives/commission received from the CRS Companies is taxable under the category of Business Auxiliary Service . Extended period of limitation - Held that - The extended period of limitation as per the proviso to Section 73 (1) of the Act is invokable, only in the situation, where there is involvement of suppression, fraud, mis-statement etc., with the intent to evade payment of service tax - in this case, it is an accepted fact that the said ingredients are absent. Thus, in absence of proper substantiation regarding involvement of the appellant in the fraudulent activities, extended period of limitation cannot be invoked The appellant is liable to pay service tax under the normal period of limitation along with interest - penalty set aside - appeal allowed in part.

Summary

Issues:
Classification of services under Business Auxiliary Service, Invocation of extended period of limitation for service tax demand, Applicability of penalties under Sections 77 and 78 of the Act.

Classification of services under Business Auxiliary Service:
The appellant provided services categorized under Air Travel Agent's Services, Rail Travel Agent Service, and Rent-a-Cab Scheme Operator Service. The Service Tax Department observed that the Central Reservation System (CRS) activities conducted by the appellant with M/s. Amadeus India Pvt. Ltd. fell under the definition of "Business Auxiliary Service." The appellant did not pay service tax for these activities, leading to a demand of ?35,55,510/- confirmed by the Department. The appellant accepted liability but disputed the classification, citing ambiguity. The Tribunal acknowledged the tax liability but noted that the issue of service tax on CRS was contentious. It held that the extended period of limitation could not be invoked without evidence of suppression, fraud, or misstatement to evade tax payment, as seen in the case of D. Pauls Consumer Benefit Ltd. The Tribunal referred to precedents like Janta Travels Pvt. Ltd. to support its decision.

Invocation of extended period of limitation for service tax demand:
The Tribunal emphasized that the extended period of limitation could only be invoked in cases involving suppression, fraud, or misstatement with intent to evade service tax payment. As the appellant's case lacked evidence of fraudulent activities, the Tribunal concluded that the extended period of limitation was not applicable. It highlighted that the Department's invocation of the extended period was unjustified, especially when the issue of service tax on CRS was not free from doubt. The Tribunal set aside the impugned order, allowing the appeal and confirming the service tax demand only for the normal limitation period, without imposing any penalties.

Applicability of penalties under Sections 77 and 78 of the Act:
The Tribunal found no merit in confirming the service tax demand and penalties under Sections 77 and 78 by invoking the extended period of limitation. After setting aside the penalties, the Tribunal allowed the appeal in favor of the appellant, clarifying that the appellant was liable to pay service tax under the normal limitation period with interest but without any penalties. The decision highlighted that the absence of suppression of facts precluded the imposition of penalties, aligning with the Tribunal's interpretation of the law regarding the invocation of the extended period of limitation.

In conclusion, the Tribunal's judgment addressed the issues of service classification, extended limitation period for tax demand, and penalties under Sections 77 and 78, emphasizing the necessity of evidence for invoking the extended period and the absence of fraudulent intent in determining tax liabilities.