2012 (10) TMI 723 - Commissioner - Service Tax

Demand interest and penalty - Air Travel Agent Service - providing the service of air travel ticket booking the appellant used central Computer Reservation Systems (CRS) software Held that - Appellant had used the software developed by M/s. Amadeus India Pvt. Ltd. for booking air tickets to the customers. For continued usage and patronage of the said software in the midst of other competing booking systems available in the ticketing trade M/s. Amadeus India Pvt. Ltd. have paid an incentive/commission to the appellant - amount collected as incentive is in no way connected to the service rendered by the appellant to their clients in providing the service of booking air tickets nor it is billed to the clients - appellant is not liable to pay service tax on the amount collected as incentive. As the demand itself is not valid the question of demanding interest and imposing penalty do not arise - Appeal is allowed

Summary

Issues:
1. Limitation of time for demand
2. Liability to pay service tax on incentives received from M/s. Amadeus Systems

Analysis:

Issue 1: Limitation of time for demand
The appellant, an Air Travel Agent, received incentives from CRS developers. The Department alleged non-payment of Service tax on these incentives from 2003-04 to 2007-08. The appellant argued they believed the incentives were not taxable and had disclosed them in their Annual Report. The Adjudicating Authority invoked the extended period of time for demand. However, the Commissioner found that there was no intention to evade tax as the incentives were disclosed in the Annual Report. Therefore, the demand was hit by the limitation of time, surviving only from 1-10-2007.

Issue 2: Liability to pay service tax on incentives
The Department alleged that the appellant, by using software from M/s. Amadeus, promoted their business and should pay service tax on incentives received. The appellant contended there was no service provider-receiver relationship with M/s. Amadeus, as the software was provided free of cost. The Commissioner noted the lack of evidence proving a service relationship between the parties. The Commissioner referenced a Tribunal decision stating that incentives not connected to services provided are not taxable. Applying this, the Commissioner held that the incentives received were not taxable as they were unrelated to the services provided by the appellant. Consequently, the demand, interest, and penalties were deemed invalid, and the impugned order was set aside.

In conclusion, the appeal was allowed in favor of the appellant, ruling out the liability to pay service tax on the incentives received from M/s. Amadeus Systems.