2023 (11) TMI 13 - AT - Service Tax

Levy of service tax - Business Auxiliary Service - incentive/commission for exceeding the target of the sale of air tickets - HELD THAT - The matter is no longer res integra as the issue has already been decided by the Larger Bench in case of KAFILA HOSPITALITY TRAVELS PVT. LTD. VERSUS COMMISSIONER, SERVICE TAX, DELHI 2021 (3) TMI 773 - CESTAT NEW DELHI (LB) , in favour of the appellant where it was held that incentives paid for achieving targets cannot termed as consideration and, therefore, are not levaible to service tax under section 67 of the Finance Act. Following the above decision of the Larger Bench it is held that the impugned Order-In-Appeal is without any merit and therefore, set aside - appeal allowed.

Summary

Issues involved: Service tax liability on incentives received by Air Travel Agent for exceeding ticket sales target.

The appellant, an Air Travel Agent, received an incentive/commission from a principal for exceeding ticket sales target. The revenue alleged that this constituted a Business Auxiliary Service and issued a show cause notice demanding service tax. The appellant argued that a Larger Bench decision had already held that such incentives are not taxable as consideration for promoting the principal's business.

The Tribunal examined the scope of "incentives" and the provisions of section 67 of the Finance Act, which governs the valuation of taxable services for service tax purposes. It noted that service tax is levied on the gross amount charged for providing a taxable service, and any amount not representing consideration for the service cannot be taxed. The Tribunal also referred to a Supreme Court decision emphasizing that only amounts calculated for providing taxable services are subject to service tax.

Additionally, the Tribunal cited a Federal Court of Australia decision, which held that payments must be attributable to a particular supply to qualify as consideration for tax purposes. Incentives based on general performance, not specific transactions, do not constitute consideration. The Tribunal also referenced its own decision where it ruled that incentives are not subject to service tax as they are not consideration for any service provided.

Relying on the precedent set by the Larger Bench decision and the legal principles discussed, the Tribunal concluded that the incentives received by the Air Travel Agent for achieving sales targets cannot be considered as consideration and are not liable to service tax under section 67 of the Finance Act. Therefore, the impugned Order-In-Appeal was set aside, and the appeal was allowed.