2023 (3) TMI 1211 - AT - Service Tax

Levy of Service tax - business auxiliary service - amount received by the appellant for using Central Reservation System (CRS) - amount received towards money transfer transactions would be exigible to service tax or not? - period involved is from October 2009 to March 2015. HELD THAT - This issue has been decided by a Larger Bench of the Tribunal in favour of the appellant in KAFILA HOSPITALITY TRAVELS PVT. LTD. VERSUS COMMISSIONER, SERVICE TAX, DELHI 2021 (3) TMI 773 - CESTAT NEW DELHI where it was held that It, therefore, clearly transpires from the aforesaid decisions that incentives paid for achieving targets cannot termed as consideration and, therefore, are not leviable to service tax under Section 67 of the Finance Act. The view expressed by the Larger Bench in Kafila Hospitality was subsequently followed by a Division Bench of the Tribunal in M/S. ASVEEN AIR TRAVELS (P) LTD. VERSUS COMMISSIONER OF GST CENTRAL EXCISE, CHENNAI 2022 (4) TMI 1035 - CESTAT CHENNAI . It has, therefore, to be held that the Commissioner (Appeals) committed an error in confirming the demand of service tax on the amount received by the appellant from the companies. The order dated December 26, 2017 passed by the Commissioner (Appeals) in so far as it confirms the demand of service tax in respect of the amount received by the appellant from the companies providing CRS, is set aside - Appeal allowed.

Summary

Issues:
1. Whether the amount received by the appellant for using Central Reservation System (CRS) is liable to service tax under "business auxiliary service."
2. Whether the amount received for money transfer transactions is also liable to service tax under "business auxiliary service."

Issue 1:
The appeal challenged the Commissioner (Appeals)'s order confirming the demand of service tax on the amount received by the appellant for using CRS from certain companies. The Adjudicating Authority held that the appellant's activities constituted promotion/marketing for these companies, making the amount received subject to service tax under "business auxiliary service." The Commissioner (Appeals) upheld this decision based on a Division Bench ruling. However, the Larger Bench of the Tribunal, in the case of Kafila Hospitality, concluded that the appellant was promoting its own business, not that of the airlines or CRS companies. The Bench clarified that incentives for achieving targets are not subject to service tax. This decision was also followed in another case by a Division Bench of the Tribunal.

Issue 2:
The appellant was also involved in money transfer transactions and received a commission for remittance services provided to a specific company. The Adjudicating Authority deemed this amount liable to service tax under "business auxiliary service." However, the Commissioner (Appeals) dropped this issue based on a previous Tribunal decision. The Larger Bench's ruling in Kafila Hospitality further emphasized that incentives received by a service recipient are not subject to service tax. The Division Bench in Asveen Air Travels also followed this principle. Consequently, the demand for service tax on the amount received for money transfer transactions was set aside.

In conclusion, the Tribunal allowed the appeal, setting aside the demand for service tax on the amounts received by the appellant for using CRS and money transfer transactions. The judgments in Kafila Hospitality and Asveen Air Travels clarified that incentives for achieving targets are not considered "consideration" under the Finance Act, hence not subject to service tax. The rulings emphasized that the appellant was promoting its own business, not that of the service providers, leading to the dismissal of the service tax demands.