2018 (5) TMI 1472 - AT - Service Tax

Business Auxiliary Service - incentive / commission received from insurance companies for arranging overseas mediclaim policy for the clients - incentive received from CRS AMADEUS for booking air tickets - income from airlines towards cancellation of tickets. Incentive received for use of AMADEUS software - extended period of limitation - Held that - the issue was under litigation and highly contentious, invocation of extended period do not sustain - the penalties on this count also cannot sustain - demand with penalties set aside. Incentive / commission received from insurance companies for arranging overseas mediclaim policy for the clients - Held that - the said commission would be promotion of business of the insurance companies and therefore would rightly fall under BAS - taking into consideration that the appellant had bonafide belief that as per Board clarification, they would not be liable to pay and the same would be subject to levy only under insurance auxiliary service, the penalties imposed requires to be set aside - demand upheld - penalty set aside. Income from airlines towards cancellation of tickets - Held that - the issue stands covered by the decision in the case of Sharma Travels 2008 (8) TMI 102 - CESTAT NEW DELHI , where it was held that it is established that the Respondent had not passed the incidence of tax to any other person. Commissioner (Appeals) rightly set aside the demand of duty - demand set aside. Tour Operator Service - charges towards delivery and handing over of tickets together with itinerary and such handing over charges - Held that - It is not brought out from records that the appellant is engaged in tour operator service. Merely booking of tickets and collecting charges for handing over the tickets would not amount to tour operator service - demand set aside. Appeal allowed in part.

Summary

Issues: Classification of income received from insurance companies, classification of commission from CRS AMADEUS, charges for delivery of tickets, income from airlines for ticket cancellations.

Classification of income received from insurance companies:
The appellants, registered as IATA Air Travel Agents, received commission from insurance companies for arranging overseas mediclaim policies. The department contended that this income is subject to service tax under Business Auxiliary Service (BAS). The appellant argued that the commission should be classified as insurance auxiliary service, not BAS, citing a Board circular. The tribunal found that the commission promoted the business of insurance companies, falling rightly under BAS. However, considering the appellant's genuine belief based on the Board's clarification, the penalties imposed were set aside.

Classification of commission from CRS AMADEUS:
The commission received from CRS AMADEUS for booking air tickets was also challenged for service tax under BAS. The appellant acknowledged a precedent against them but argued that the issue was contentious and subject to interpretation. The tribunal agreed that the penalties on this count could not be sustained due to the prolonged interpretational dispute.

Charges for delivery of tickets:
The department imposed service tax on charges collected by the appellants for delivering tickets, considering it taxable under tour operator service. The appellants contended that they were not engaged in tour operator service, merely booking tickets for clients. The tribunal agreed, setting aside the demand on this count as there was no evidence of the appellants being involved in tour operator services.

Income from airlines for ticket cancellations:
The issue of income received from airlines for ticket cancellations was raised, with the appellant citing favorable decisions in their support. The tribunal followed the precedent and set aside the demand on this ground.

In conclusion, the tribunal modified the impugned order, sustaining the demand on AMADEUS software and commission for insurance policies but setting aside the penalties imposed. The demand regarding tour operator service charges and ticket cancellation income was also set aside. The appeals were partly allowed with consequential relief, if any.