2018 (7) TMI 533 - AT - Service Tax

Liability of Service Tax - incentive received for use of AMADEUS CRS software - demand of service tax with interest and penalty - time limitation - Held that - The issue has been decided in the case of D. PAULS CONSUMER BENEFIT LTD. VERSUS CCE, NEW DELHI 2017 (3) TMI 1019 - CESTAT NEW DELHI , where it was held that the service provided by the assessee-Appellants has rightly been covered under the heading Business Auxiliary Service as defined u/s 65(19) of the FA, 1994 - demand of tax upheld. Penalties - Held that - The issue was under litigation and being an interpretation one, the appellant had put forward reasonable cause for not discharging the service tax - penalty not warranted. However, there are no grounds to accept the argument of the counsel on the issue of limitation. Appeal allowed in part.

Summary

Issues:
1. Liability to pay service tax on incentive received for the use of AMEDEUS software.
2. Grounds for challenging the imposition of penalties.

Analysis:

Issue 1: Liability to pay service tax on incentive received for the use of AMEDEUS software
The appellant, a travel agency with IATA certification, used the integrated computer reservation system developed by Amadeus Global Travel Distribution, Spain. The department contended that the appellant should pay service tax on the incentive received for using the AMADEUS CRS software. The appellant argued that there was no legally enforceable contract to pay any incentive, and they were not aware of the terms between AMADEUS, Spain, and Amadeus India Pvt. Ltd. The appellant did not render any service to AIPL, and the incentive was for using the software, not for promoting AMADEUS. The appellant believed the incentive was not subject to service tax and that there was no suppression of facts to evade payment. The appellant also raised the issue of limitation, stating that they had reasonable cause for not discharging the service tax. The tribunal held that the levy of service tax was legal and proper based on a previous decision and rejected the argument on limitation. However, invoking section 80 of the Finance Act, the tribunal set aside the penalties imposed due to the interpretational nature of the issue.

Issue 2: Grounds for challenging the imposition of penalties
The appellant challenged the imposition of penalties, arguing that there was no legally enforceable contract for the incentive received and that they were not aware of the terms and conditions between the parties involved. The appellant believed they had reasonable cause for not discharging the service tax and that there was no intent to evade payment. The tribunal considered the interpretational nature of the issue and set aside the penalties while upholding the demand for service tax and interest.

In conclusion, the tribunal modified the impugned order by setting aside the penalties imposed without disturbing the demand for service tax or interest. The appeal was partly allowed with consequential relief, if any.