2021 (9) TMI 922 - AT - Service Tax

Levy of service tax - Air Travel Agent service - commission received from the airlines - rule 6 (7) of the Service Tax Rules, 1994 - HELD THAT - This issue was referred to a Larger Bench of the Tribunal by a Division Bench in KAFILA HOSPITALITY AND TRAVELS PVT LTD VERSUS C.S.T. -SERVICE TAX - DELHI 2018 (11) TMI 983 - CESTAT NEW DELHI where it was held that In view of difference of opinion, matter should be referred to Larger Bench. We direct the Registry to place the records before Hon ble President for constitution of Larger Bench. In view of the discussion, the findings and the answers given by the Larger Bench on the six issues, the impugned order dated July 27, 2015 passed by the Commissioner cannot be sustained and is set aside - Appeal allowed.

Summary

Issues Involved:
- Whether the appellant is required to discharge service tax liability on the commission received from airlines.

Analysis:
1. The appellant, an air travel agent, filed an appeal against the order passed by the Commissioner of Service Tax (Appeals) directing the adjudicating authority to decide the quantification of demand afresh. The issue revolved around the service tax liability on the commission received by the appellant from airlines.

2. The matter was referred to a Larger Bench of the Tribunal by a Division Bench, and the hearing was adjourned pending the decision in another case. During the relevant period, the appellant sold air tickets and received commission from airlines, specifically M/s. Continental Airlines.

3. The appellant contended that it was discharging its service tax liability under the category of "Air Travel Agent" as per the Service Tax Rules, 1994. However, a show cause notice was issued alleging non-payment of service tax on the commission received.

4. The Commissioner confirmed the demand through an order, which was subsequently challenged in an appeal before the Commissioner (Appeals). The Division Bench framed six issues for reference to the Larger Bench, seeking clarification on various aspects related to service tax liability.

5. The Larger Bench, in its order, concluded that the air travel agent was promoting its own business and not that of the airlines or CRS companies. It categorized the service under "air travel agent" service, stating that incentives paid for achieving targets are not subject to service tax.

6. The Larger Bench provided answers to the six issues raised, clarifying that incentives received by a service recipient from a service provider cannot be subjected to service tax. It also addressed the other issues based on the discussion and findings, setting aside the impugned order and allowing the appeal.

7. Consequently, the order dated July 27, 2015, passed by the Commissioner was set aside, and the appeal was allowed based on the findings and answers provided by the Larger Bench on the issues referred to it.

This detailed analysis outlines the progression of the case, the key legal arguments, the reference to the Larger Bench, and the final decision based on the interpretation of service tax liability on the commission received by the appellant from airlines.