2023 (5) TMI 566 - AT - Service Tax

Adjustment of service tax already paid with subsequent service tax liability instead of filing refund - cancellation of Air tickets - issuance of Credit Notes towards the cancellation amounts paid to the clients - Point of Taxation Rules, 2011 - whether Service Tax is required to be discharged, the moment the Invoice is made by the Appellant and subsequent issue of Credit Note will not have any impact on the future Service Tax payable? - HELD THAT - The Delhi Tribunal in the case of JJANTA TRAVELS (P) LTD. VERSUS COMMISSIONER OF C. EX., CHANDIGARH 2007 (8) TMI 72 - CESTAT, NEW DELHI has held that that The air travel agent in his fortnightly return gives the particulars of tickets cancelled or modified and adjusts the commission accordingly subject to final approval by the airlines. Since the commission is adjusted automatically and the service tax is paid on the net commission received, the question of separately claiming refund of service tax need not arise. The Department has preferred an Appeal before the Punjab Haryana High Court which has held that It was noticed in the circular that cancellation or modification of tickets is a common phenomenon and frequent feature in air travel. Details of cancelled or modified tickets are provided by a travel agent in the fortnightly returns filed and adjustment of the commission is made subject to final approval of the airlines. The commission is ultimately paid by the airlines on the net commission received by a travel agent. Accordingly, no question arises for separate claim of refund of service tax. Since the Appellant has been following the practice as per the Trade Notice No. 6/97-ST dated 1/7/1997 issued by the DOR and issue is also squarely covered by the decision of the Delhi Tribunal duly affirmed by the Hon ble Punjab and Haryana High Court. Appeal allowed.

Summary

Issues involved:
The issues involved in the judgment are whether the cancellation amounts paid to clients by an Air Travel Agency can be adjusted in their monthly Service Tax payments, and the applicability of the Point of Taxation Rules, 2011 in such cases.

Summary:

Issue 1: Adjustment of cancellation amounts in Service Tax payments
The Appellant, a provider of Air Travel Agency Services, had been paying Service Tax regularly. The Department discovered that the Appellant issued Credit Notes towards cancellation amounts paid to clients and adjusted them in their monthly Service Tax payments. A Show Cause Notice was issued demanding Service Tax, which was confirmed by the Lower Authorities. The Appellant relied on Trade Notice No. 6/97-ST and the case law of Janta Travels (P) Ltd. to support their position that the Service Tax already paid can be adjusted for cancellation amounts. The Department argued that as per the Point of Taxation Rules, 2011, the Service Tax is required to be discharged when the Invoice is made, and subsequent Credit Notes do not impact future Service Tax payable. The Tribunal, considering the Delhi Tribunal and Punjab & Haryana High Court decisions, allowed the Appeal, stating that the Appellant's practice aligns with the Trade Notice and the legal precedents.

Issue 2: Applicability of Point of Taxation Rules, 2011
The Department contended that the Point of Taxation Rules, 2011 mandate the discharge of Service Tax when the Invoice is issued, regardless of subsequent Credit Notes. However, the Appellant argued that the Trade Notice and legal precedents support adjusting Service Tax for cancellation amounts. The Tribunal, referencing the decisions of the Delhi Tribunal and Punjab & Haryana High Court, allowed the Appeal based on the alignment of the Appellant's practice with the Trade Notice and legal interpretations.

This judgment clarifies the permissibility of adjusting cancellation amounts in Service Tax payments for Air Travel Agencies based on relevant legal precedents and circulars, providing guidance on the applicability of the Point of Taxation Rules, 2011 in such scenarios.