2018 (7) TMI 1390 - AT - Service Tax

Business Auxiliary Service - commission received from M/s. Amadeus India Pvt. Ltd. for booking of tickets through Computerized Reservation Booking System (CRBS) offered by the said company - Held that - Appellants have not countered the findings of the lower appellate authority that the agreement is a conditional agreement and that loyalty incentive will only be paid on the tickets booked in the airlines specified by Amadeus based on achievement of segment volumes. We are unable to fathom how in spite of such agreement between the appellant and Amadeus, there could have been any confusion that they were promoting the business of the latter and in such a situation how there could be any bonafide belief that the services are not in the nature of Business Auxiliary Service - demand upheld. Penalty - Held that - There was some interpretational confusion that prevailed in respect of the taxability of the impugned services - the penalties imposed under sections 76 and 78 are set aside by invoking Section 80 of the Finance Act. The demand of service tax along with interest thereon and the penalty imposed under section 77 upheld - appeal allowed in part.

Summary

Issues:
1. Liability to pay service tax on commission received for booking air tickets through Computerized Reservation Booking System (CRBS).
2. Applicability of extended period of limitation for invoking service tax liability.
3. Interpretational confusion regarding the taxability of services.
4. Imposition of penalties under Sections 76, 77, and 78 of the Finance Act.

Analysis:
1. The appellants, engaged in booking air tickets, received commission from a company for booking tickets through CRBS. The Department contended that the commission received was Business Auxiliary Service, thus necessitating payment of service tax. A show cause notice was issued proposing a service tax liability of ?24,69,920 with interest and penalties. The adjudicating authority and Commissioner (Appeals) upheld the demand. The appellant conceded the issue against them but argued for limitation citing a bonafide belief of non-taxability, referencing a High Court judgment. The AR supported the findings. The Tribunal noted the conditional agreement between the appellant and the company providing the software, emphasizing loyalty incentives based on specific conditions. The Tribunal found no confusion regarding the promotion of the company's business and upheld the extended period of limitation, denying the bonafide belief argument.

2. Despite interpretational confusion on taxability, the Tribunal sustained the service tax demand and interest while setting aside penalties under sections 76 and 78 by invoking Section 80 of the Finance Act. The appeal was partly allowed based on these considerations.

3. The judgment highlighted the distinct facts of the case compared to precedent judgments, emphasizing the conditional agreement and lack of confusion regarding the nature of services provided. The Tribunal concluded that the appellant did not have a bonafide belief in non-taxability, upholding the extended period of limitation for invoking service tax liability.

4. The Tribunal's decision balanced the confusion surrounding taxability with the appellant's argument of limitation, ultimately upholding the service tax liability while setting aside penalties under specific sections of the Finance Act based on reasonable cause for non-payment. The judgment was pronounced on 18.07.2018.