2018 (7) TMI 1211 - AT - Service Tax

Booking of passage for travel by air - Air Travel Agent - Whether the service provider who has discharged his service tax liability as provided under Sub-rule 7 of Rule 6 of Service Tax Rules, 1994, is required to pay service tax on the incentive received from Airline? Held that - The appellant had exercised option not to pay tax on commission at the rates specified in Section 66 of the Act and they were paying service tax according to option available under Rule 6 (7) of Service Tax Rules, 1994 on the basic fair value of the Air Ticket at rates specified in the said Rule - demand not sustainable - appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Request for adjournment
2. Liability of service provider for service tax on incentives received from Airline

Analysis:
1. Request for Adjournment:
The appellant submitted a request for adjournment, which was rejected, and the appeal proceeded for decision.

2. Liability of service provider for service tax on incentives received from Airline:
The main issue in the appeal was whether a service provider, who had already discharged the service tax liability as per the Service Tax Rules, was required to pay service tax on the incentives received from an Airline. The appellant, registered as an Air Travel Agent, had paid service tax as per the rules but received incentives from Airlines. The dispute arose when the authorities issued a show cause notice demanding tax on these incentives. The original authority had dropped the demand, stating that the appellant had opted not to pay tax on commission as per Section 66 of the Act and was paying service tax based on the basic fair value of the Air Ticket under Rule 6 (7) of the Service Tax Rules, which was challenged in the Order-in-Appeal. The Tribunal found the original authority's view legally sustainable and set aside the Order-in-Appeal, restoring the Order-in-Original and allowing the appeal filed by the appellant.

This judgment clarifies the tax liability of service providers on incentives received from Airlines, emphasizing the importance of correctly interpreting the relevant provisions of the Service Tax Rules.