2024 (7) TMI 11 - AT - Service Tax

Classification of services - Business Auxiliary Service (BAS) or not - GDS Commission, incentive, cancellation charges etc., received by the appellants - Levy of service tax - collection of certain amounts from the clients for Visa/Passport Processing charges with management fees, emigration charges collection etc. - amount collected/retained/received by the Appellants as ORC (Over Riding Commission)/ RAF (Retaining Refund Administrative Fees) - Air Ticket purchased by the appellants from Airline consolidators and sold to customers at higher price - Amount representing Service tax recovered from their sub-agent but the same was not deposited to the Government exchequer - extended period of limitation. Classification of services - Business Auxiliary Service (BAS) or not - GDS Commission, incentive, cancellation charges etc., received by the appellants - HELD THAT - The Air Travel Agents are using the portals of the same CRS service providers for booking of air tickets. The CRS is computerized system used to store and retrieve information and conduct transaction related to Air Travel. Major CRS operators that book and sell tickets for multiple Airlines are known as Global Distribution Systems (GDS). On perusal of the statutory provisions vis- -vis the activities undertaken by the appellants, the appellants is not an agent, working on behalf of the customers for facilitating purchase of tickets from the CRS. The customers approaching the appellants for booking of tickets are not aware about the particular CRS, who issues the ticket through the appellants. In order to fall under the purview of BAS, there must be involvement of three parties namely, the service provider, service receiver and the agent facilitating procurement of service for and on behalf of the service provider - A passenger is not aware of the CRS Company being utilized by the travel agent for booking the segment nor can a passenger influence appellants /travel agent to avail the services of a particular CRS Company. The passenger cannot directly use the CRS software provided by the Company to book an airline ticket. It cannot, therefore, be said that the appellants are promoting any activity for the passenger or they are providing services on behalf of CRS. The commission, incentives, cancellation charges etc., received by the appellants cannot be subjected to levy of service tax under BAS. Moreover, it is on record that during the disputed period, the appellants were paying service tax under Rule 6(7) ibid and since, payment of service tax under air travel service was accepted by the department, contrary stand cannot be taken to fasten the tax liability on the appellants under a different category of service namely, BAS. The subject disputed issue herein is squarely covered by the ruling of Larger Bench of Tribunal in the case of Kafila Hospitality Travels Pvt. Ltd. 2021 (3) TMI 773 - CESTAT NEW DELHI (LB) . It has been held that the incentive/commission is not subject to levy of service tax - the demand cannot be sustained in the present disputed matter. Levy of service tax - collection of certain amounts from the clients for Visa/Passport Processing charges with management fees, emigration charges collection etc. - HELD THAT - The learned adjudicating authority in the present case, has wrongly conceived the CBEC circular dated 20.04.2011, inasmuch as all the taxable services are defined in sub-clauses of clause 105 of the Section 65 ibid at that relevant point of time. This statutory provision is still existing even from 01.07.2012 onwards. The CBEC Circular clarifies that the assistance for processing of visa application does not fall within the scope of services defined under Section 65(105) (k) ibid, 65(105) (zzb) ibid and Section (105) (zzzq) ibid - When the learned adjudicating authority could not determine the nature of taxable service provided by the appellants in this case, it is absolutely improper on the part of the department to confirm the service tax demand on such ground. It is well settled position of law that lack of clarity in the show cause notice/order and omission to indicate the specific category of service, under which the tax is proposed to be demanded will vitiate the proceedings ab initio. In such circumstances, the demand of service tax cannot survive. Levy of service tax - amount collected/retained/received by the Appellants as ORC (Over Riding Commission)/ RAF (Retaining Refund Administrative Fees) - HELD THAT - Appellants render the services of Air Travel Agent by booking of passage for travel by air for the clients/ customers. If the Airlines do not provide any commission to them, they recover the cancellation charges/booking overhead charges/ cost of booking tickets in the name of ORC/RAF from their customers - It is not disputed that in respect of cancelled tickets, the airlines/CRS do not give any commission whatsoever to the appellants. In view of this, no service tax would be payable under Section 65(105)(l) ibid on the said charges, which are a part of the airfare received by the appellants from the persons booking the air ticket(s); who, subsequently, had cancelled the same. Therefore, this activity is not taxable under BAS during the period of dispute and thus, the said disputed charges which are recovered/ retained by the appellants are not liable to Service tax under BAS. Levy of service tax - Air Ticket purchased by the appellants from Airline consolidators and sold to customers at higher price - HELD THAT - The appellants are purchasing ticket from Consolidator/General Sale Agents/other agents on discounted price and thereafter, they are selling at a higher price to the customers. The trade margin earned for such purpose is not taxable as held by the Tribunal in the case of Commissioner of Service tax, Ahmedabad Vs. Om Air Travels Pvt. Ltd 2019 (6) TMI 1022 - CESTAT AHMEDABAD where it was held that In the fact that the appellants is purchasing the ticket on discounted price and selling the same at higher price to the customer, the difference, in our view, is a trade margin during the process of sale and purchase of the tickets. Therefore, we do agree with the contention given by the Ld. Commissioner (Appeals). Accordingly, the demand raised on trade margin of purchase and sale of the tickets shall not be taxable - From the documentary evidences provided by the appellants, it is found that wherever tickets were purchased from consolidators, they had started paying Service tax on the basic fare from 01.04.2014. In these circumstances, the service tax demand confirmed against ticket booked through consolidators, is legally not correct and there are no merits in the impugned order, insofar as it has confirmed the adjudged demands on the appellants. Amount representing Service tax recovered from their sub-agent but the same was not deposited to the Government exchequer - HELD THAT - Any person who has collected any amount, which is not required to be collected, from any other person, in any manner as representing service tax, shall forthwith pay the amount so collected to the credit of the Central Government. A correct reading of the provisions indicates that the amount representing service tax would necessarily mean the service Tax not paid. There is no provision to say that service tax which has already been paid should not be recovered from anyone. Such an understanding is contrary to the principles of indirect taxation. The provisions would apply only in cases where service tax is recovered, by the person liable to pay tax from their customers and is not paid to the Government. The incidence of an indirect tax is bound to be passed on - the allegation of the department that what the appellants deposited with the government was the Service tax collected by them from consolidators in the commission and not the Service tax collected from the Appellant s customers is factually incorrect and without any evidences. Hence, there is no question of depositing the same amount again to the government under Section 73(2) ibid. Extended period of limitation - HELD THAT - The Department had alleged that the fact of receipt of said amount/charges was not disclosed in any manner. To this effect, we find that all the disputed amounts/charges received by them are duly accounted for in their books of accounts and also disclosed in Annual Report viz. Profit and loss account and the Balance Sheet, which is a public document and also known to the Department. Having disclosed the receipts of said disputed amount in the Annual Report coupled with the bona fide belief of the appellants, we find that there is no suppression of facts in the instant case with an intention to evade payment of Service tax. Hence, we hold that the proviso to section 73(1) ibid i.e., extended period of time cannot be invoked in this case and the demand of service tax is hit by limitation of time. There are no merits in the impugned order, in so far as it has confirmed the adjudged demands on the appellants. Therefore, the impugned order is set aside - appeal allowed.

Summary

Issues Involved:
1. Classification of services under Business Auxiliary Services (BAS).
2. Liability of service tax on incentives/commissions from GDS/CRS companies and airlines.
3. Service tax on Visa/Passport processing charges, management fees, and emigration charges.
4. Service tax on Over-Riding Commission (ORC) and Refund Administrative Fees (RAF).
5. Service tax on the margin earned from selling air tickets at a higher price.
6. Alleged non-deposit of collected service tax to the government.
7. Invocation of the extended period of limitation for issuing the show cause notices.

Issue-wise Detailed Analysis:

1. Classification of services under Business Auxiliary Services (BAS):
The Tribunal examined whether the GDS Commission, incentives, cancellation charges, etc., received by the appellants are subject to service tax under BAS. The Tribunal found that the appellants, as air travel agents, were not promoting or marketing services of CRS companies or airlines but were promoting their own business. The Tribunal held that the services provided by the appellants fall under "air travel agent" services and not BAS, as per the definition provided in Section 65(19) and Section 65(105)(zzb) of the Finance Act, 1994. The Tribunal relied on the Larger Bench decision in Kafila Hospitality & Travels Pvt. Ltd., which held that incentives/commissions are not subject to service tax under BAS.

2. Liability of service tax on incentives/commissions from GDS/CRS companies and airlines:
The Tribunal referred to the definition of "air travel agent" under Section 65(4) and the taxable service under Section 65(105)(l). It concluded that the incentives/commissions received by the appellants from GDS/CRS companies and airlines are not subject to service tax under BAS. The Tribunal emphasized that the appellants were paying service tax under Rule 6(7) and that the nature of services rendered by the appellants did not change due to the receipt of incentives/commissions.

3. Service tax on Visa/Passport processing charges, management fees, and emigration charges:
The Tribunal referred to CBEC Circular No. 137/6/2011-ST, which clarified that assistance for processing visa applications does not fall under taxable services. The Tribunal found that the learned adjudicating authority wrongly interpreted the CBEC circular and held that the demand for service tax on Visa/Passport processing charges, management fees, and emigration charges is not maintainable. The Tribunal emphasized that the impugned order did not categorize these services under any specific definition of taxable service.

4. Service tax on Over-Riding Commission (ORC) and Refund Administrative Fees (RAF):
The Tribunal found that the learned adjudicating authority dropped the demand on ORC/RAF for the period up to 30.06.2012 but confirmed the demand for the subsequent period. The Tribunal held that ORC/RAF collected by the appellants from their clients/customers are not taxable under BAS. The Tribunal noted that the impugned order did not specify under which clause of the definition of BAS the ORC/RAF would be covered.

5. Service tax on the margin earned from selling air tickets at a higher price:
The Tribunal referred to the decision in Commissioner of Service Tax, Ahmedabad Vs. Om Air Travels Pvt. Ltd., which held that the trade margin earned from purchasing tickets at a discounted price and selling them at a higher price is not taxable. The Tribunal found that the appellants were purchasing tickets from consolidators and selling them at a higher price, and the trade margin earned is not subject to service tax.

6. Alleged non-deposit of collected service tax to the government:
The Tribunal examined the provisions of Section 73A of the Finance Act, 1994, and found that the appellants had collected service tax from their customers and deposited it with the government. The Tribunal noted that the appellants' Managing Director confirmed in his statement that the service tax collected was credited to the government exchequer. The Tribunal held that the allegation of non-deposit of collected service tax is factually incorrect and without evidence.

7. Invocation of the extended period of limitation for issuing the show cause notices:
The Tribunal found that the extended period of limitation cannot be invoked in the present case as there was no suppression of facts with an intention to evade payment of service tax. The Tribunal noted that the appellants had disclosed the disputed amounts in their Annual Report and maintained complete records. The Tribunal held that the demand for service tax is hit by the limitation of time and relied on the decision of the Hon'ble Apex Court in Nizam Sugar Factory v. CCE.

Conclusion:
The Tribunal set aside the impugned order and allowed the appeal in favor of the appellants, granting consequential relief as per law. The Tribunal found that the demands for service tax under BAS, on Visa/Passport processing charges, ORC/RAF, and the margin earned from selling air tickets at a higher price, were not sustainable. The Tribunal also held that the extended period of limitation could not be invoked, and there was no evidence of non-deposit of collected service tax.