2024 (1) TMI 1119 - AT - Service Tax

Classification of services - commission amount received from General Sales Agent (GSA) - Service tax on Receiving commissions from other than the airlines - commission received from their own branches. Classification of services - commission amount received from General Sales Agent (GSA) - incentives received from the airlines - Air Transport Agent services or Business Auxiliary Service? - HELD THAT - The issues raised with regard to the classification of the services under the category of Air Travel Agent service is no longer resintegra and has been decided in favour of the appellant and against the revenue - the contention of the Revenue that the amount received as airline incentive, productivity linked bonus (PLB) and Boarding incentives received by the appellant from the airlines are in the nature of promotion of the activities of the airlines and would therefore be taxable under the heading Business Auxiliary Service deserves to be rejected in view of the law settled by the Larger Bench in Kafila Hospitality Travels Pvt. Ltd. 2021 (3) TMI 773 - CESTAT NEW DELHI (LB) where the Tribunal considered the issue as to whether the amounts received by the appellant as incentives were towards promotion of their business and not the business of the airlines so as to be taxable under the category of Business Auxiliary Service . Reference was made by the Larger Bench to the decision in Airlines Agents Association vs Union of India 2001 (4) TMI 9 - HIGH COURT OF JUDICATURE (MADRAS) , where the Madras High Court held that the commission paid to the Air Travel agents had a direct nexus to the air travel agent services rendered to the passengers even if it indirectly benefited the business of the airlines. It was, therefore, concluded that air travel agent were not promoting or marketing the business of the airlines. Similarly, in the case of Commissioner of Central Excise versus Shabeer Travels 2010 (3) TMI 818 - KERALA HIGH COURT , the Kerala High Court rejected the contention of the department that the subagent was rendering BAS to IATA agent and held that when an assessee is in the business of booking air tickets through another air travel agent, the assessee essentially renders Air Travel Agent services to the main travel agent, and would, therefore, not be liable to pay service tax under the category of BAS. The Larger Bench, accordingly held that by rendering services connected to travel by air, a travel agent would render Air Travel Agent services and which services cannot be said to be for promotion or marketing for the airlines. Thus having considered the decision of the Larger Bench at length, no service tax can be levied on the appellant under the category of Business Auxiliary Service . Receiving commissions from other than the airlines - HELD THAT - The reliance placed by the learned Counsel for the appellant on the decision in M/s. Zuari Travel Corporation 2013 (7) TMI 911 - CESTAT MUMBAI squarely covers the said issue. The Tribunal dealt with the question as to whether the sub-agent of an IATA Agent who books the tickets of air for customers and get commission from IATA Agent is rendering services under the category of Business Auxiliary Services or the category of Air Travel Agent and held The activity undertaken by respondent herein, who is a sub-agent of the IATA agent comes under Air Travel Agents Services or Business Auxiliary Services . The ratio of the decision of the Hon ble High Court of madras in the case of Airlines Agents Association 2001 (4) TMI 9 - HIGH COURT OF JUDICATURE (MADRAS) would squarely apply to the facts of the present case. If the services rendered by the IATA agent is Air Travel Agents Services , the services rendered by a sub-agent is also the same and it cannot be different from that if Air Travel Agents Services . Demand pertaining to the commission received from their own branches - HELD THAT - Though the appellant and the branches are having separate service tax registration numbers but they are one and the same person and the transaction does not involve two separate entities. The branch has been set up for serving the appellant companies customers in and around Jaipur and the commission received by Jaipur office from other branch office is not for any taxable services rendered. The said commission is not received from any other person but by the appellant himself, which in essence is only on account of transfer of tickets from the branch to the appellant - The said issue has also been considered in Riya Travel Tours (I) Pvt. Ltd. 2018 (11) TMI 1804 - CESTAT MUMBAI , where the Tribunal held that the commission received by the head office from the branch office of the same entity is not taxable as both cannot be treated as separate entity. The demand raised by the revenue under the category of Business Auxiliary Service is unsustainable - the impugned order is set aside - appeal is allowed.

Summary

Issues Involved:
1. Classification of service tax on amounts received from airlines.
2. Taxability of commissions received from entities other than airlines.
3. Taxability of commissions received from the appellant's own branches.

Summary:

1. Classification of Service Tax on Amounts Received from Airlines:
The appellant, engaged in providing "Air Travel Agent Service," was accused of manipulating their books to evade service tax on commissions and incentives received from airlines. The Department issued a show cause notice demanding service tax under "Business Auxiliary Services" (BAS). However, the Tribunal referred to the Larger Bench decision in *Kafila Hospitality & Travels Pvt. Ltd.*, which held that such incentives are not taxable under BAS but fall under "Air Travel Agent" services. The Tribunal observed that the travel agent does not promote the airlines' business but merely provides booking options to passengers. Therefore, the amounts received as airline incentives, productivity-linked bonuses, and boarding incentives are not taxable under BAS.

2. Taxability of Commissions Received from Entities Other Than Airlines:
The Tribunal relied on the decision in *Zuari Travel Corporation* and *Akbar Travels of India Pvt. Ltd.*, which determined that commissions received from other travel agents or GSAs are not taxable under BAS. The Tribunal reiterated that services rendered by sub-agents to IATA agents fall under "Air Travel Agent" services, not BAS. Consequently, the demand for service tax on commissions from entities other than airlines was rejected.

3. Taxability of Commissions Received from the Appellant's Own Branches:
Regarding commissions received from their own branches, the Tribunal agreed that the appellant and its branches are a single entity despite having separate service tax registrations. The commission received from branches is not for taxable services but is an internal transfer of tickets. The Tribunal referred to the decision in *Riya Travel & Tours (I) Pvt. Ltd.*, which held that transactions between head office and branches of the same entity are not taxable as they do not constitute separate entities. Therefore, the demand for service tax on commissions from the appellant's branches was also rejected.

Conclusion:
The Tribunal concluded that the demands raised by the Revenue under BAS are unsustainable. The impugned order was set aside, and the appeal was allowed. The Tribunal's decision was consistent with previous judgments, emphasizing that service tax cannot be levied on the appellant under BAS for the amounts in question.