2021 (10) TMI 385 - AT - Service Tax

Levy of service tax - Incentive received by service receiver from service provider, on appreciable performance - confirmation of demand without specifying the sub clause of BAS under which the activities are covered - confirmation of demand under the taxable category of BAS in absence of three parties service provider, service receiver and targeted audience - where value of service is fixed under an option provided under the Rules, such option having been exercised and not withdrawn, is it open for the authorities to demand service tax on other consideration or incentive received - fastening of service tax liability without specifying the consideration for service as provided under Section 67 of the Chapter V of Finance Act, 1994 - fastening of service tax liability in absence of the relationship of service provider and service receiver - Invocation of extended period of limitation - section 73(1) of the Finance Act, 1994. HELD THAT - The reference was answered by the Larger Bench of the Tribunal in KAFILA HOSPITALITY TRAVELS PVT. LTD. VERSUS COMMISSIONER, SERVICE TAX, DELHI 2021 (3) TMI 773 - CESTAT NEW DELHI . The issues are answered as below Whether the Incentive received by service receiver from service provider, on appreciable performance, can be subjected to service tax? - HELD THAT - The incentives received by a service recipient from a service provider cannot be subjected to levy of service tax. Whether a demand can be confirmed without specifying the sub clause of BAS under which the activities are covered? - HELD THAT - This issue does not arise for consideration in this appeal as the show cause notice and the adjudicating order had confirmed the demand under section 65(19)(ii) of the Finance Act. Whether demand of service tax can be confirmed under the taxable category of BAS in absence of three parties service provider, service receiver and targeted audience? - HELD THAT - A passenger cannot be deemed to be an audience for the promotion of the business of CRS Companies. Whether in cases where value of service is fixed under an option provided under the Rules, such option having been exercised and not withdrawn, is it open for the authorities to demand service tax on other consideration or incentive received, be taxed under another category? - Can service tax liability be fastened without specifying the consideration for service as provided under Section 67 of the Chapter V of Finance Act, 1994 as amended up to date? - Can service tax liability be fastened in absence of the relationship of service provider and service receiver? - HELD THAT - In view of the discussion and findings these issues do not arise for consideration and are, therefore, not being answered. The findings and the answers given by the Larger Bench on the six issues, the impugned order dated May 20, 2015 passed by the Commissioner cannot be sustained and is set aside - Appeal allowed.

Summary

Issues Involved:
1. Whether incentives received by a service recipient are subject to service tax.
2. Confirmation of demand without specifying the sub-clause of BAS activities.
3. Confirmation of service tax demand under BAS category in the absence of three parties.
4. Taxability of incentives received when the value of service is fixed under a different option.
5. Fastening service tax liability without specifying consideration for service.
6. Imposition of service tax liability in the absence of a relationship between service provider and receiver.

Analysis:
1. The appeal sought to quash the order confirming service tax demand under the extended period of limitation. The Tribunal referred six issues for determination, including the taxability of incentives received by a service recipient. The Larger Bench concluded that incentives received are not subject to service tax as the air travel agent promotes its own business, not that of airlines or CRS companies.

2. The Commissioner confirmed the demand based on the promotion of CRS businesses by the appellant. However, the Larger Bench determined that the appellant was promoting its own business as an air travel agent, not the CRS companies or airlines. Therefore, the demand under the BAS category was not applicable.

3. The Commissioner's order raised concerns about the promotion of other IATA agents' businesses by purchasing air tickets. The Larger Bench clarified that the appellant's activities were not promoting other IATA agents' businesses, leading to the conclusion that the demand under the BAS category was not justified.

4. The Commissioner invoked the extended period of limitation to confirm the service tax demand related to target-based incentives and CRS commissions. However, the Larger Bench's findings established that the incentives paid for achieving targets are not leviable to service tax, rendering the demand invalid.

5. The Commissioner's order was based on the premise that the appellant promoted the businesses of CRS companies and other IATA agents. However, the Larger Bench's analysis revealed that the appellant was primarily promoting its own business as an air travel agent, leading to the dismissal of the service tax liability.

6. In conclusion, the Larger Bench set aside the Commissioner's order, stating that the incentives received by the service recipient are not subject to service tax. The appeal was allowed based on the findings that the appellant was promoting its own business as an air travel agent, not those of airlines or CRS companies.