2023 (11) TMI 16 - AT - Service Tax

Valuation - air travel agent service - addition of amount of fuel surcharge to the air fare for the purpose of determining the basic fare - Extended period of limitation - HELD THAT - The Commissioner was required to record a finding based on the evidence. The BSP statements, on which reliance has been placed by the Commissioner, clearly show that the fuel surcharge is not added to the air fare for the purpose of determining the commission amount. The Commissioner was also obliged, in terms of rule 6(7) of the 1994 Rules and the observations made by the Tribunal in its earlier order dated 14.10.2014, to determine that part of the air fare on which commission is normally paid by the airlines. The appellant had produced the BSP statements which conclusively show that the commission was received only on the air fare and not on air fare plus fuel surcharge. The finding recorded by the Commissioner that commission was paid on the air fare plus fuel surcharge cannot, therefore, be sustained and is set aside. Extended period of limitation - HELD THAT - It would not be necessary to examine whether the extended period of limitation was correctly invoked by the Commissioner. The order dated 30.01.2017 passed by the Commissioner cannot be sustained - Appeal allowed.

Summary

Issues Involved:
1. Non-payment of service tax on gross value including fuel surcharges.
2. Wrong availment of CENVAT credit on input service invoices issued at unregistered premises.

Summary:

1. Non-payment of service tax on gross value including fuel surcharges:

The appellant, an IATA-approved agent, challenged the order confirming the demand of service tax by including fuel surcharge in the "basic fare" under rule 6(7) of the Service Tax Rules, 1994. The appellant argued that they paid service tax only on the air fare on which commission is normally paid by airlines, as defined in rule 6(7). The department's audit and subsequent show cause notice alleged that the basic fare should include the fuel surcharge based on intelligence gathered.

The Tribunal, in a previous decision, remanded the matter to the Commissioner to verify if the commission was paid only on the air fare. However, the Commissioner, after remand, concluded that the commission was paid on both air fare and fuel surcharge based on an arithmetical calculation showing a fixed trend of 3% commission when fuel surcharge was added. This conclusion was reached without substantial evidence from the department to prove that airlines paid commission on fuel surcharge.

The Tribunal found that the Commissioner's finding was based on an incorrect assumption that the rate of commission should be uniform and not on concrete evidence. The BSP statements provided by the appellant showed that commission was calculated solely on the air fare, not including the fuel surcharge. Thus, the Tribunal set aside the Commissioner's order, concluding that the appellant had correctly paid service tax on the air fare alone.

2. Wrong availment of CENVAT credit on input service invoices issued at unregistered premises:

The Commissioner had initially denied the CENVAT credit availed on invoices issued to the appellant's unregistered Mumbai office. However, it was noted that there was no dispute about the receipt and accounting of the services in the appellant's books. The Commissioner, therefore, held that the appellant was entitled to the benefit of proviso to Rule 9(2) of the CENVAT Credit Rules, 2004, and dropped the demand on this account.

Conclusion:

The Tribunal allowed the appeal, setting aside the Commissioner's order dated 30.01.2017, and held that the appellant had correctly discharged the service tax liability on the air fare alone, as defined in rule 6(7) of the Service Tax Rules, 1994. The issue of extended period of limitation was not examined due to the primary issue being resolved in favor of the appellant.