2015 (1) TMI 387 - AT - Service Tax

Air Travel Agent Service - Receipt of commission on air fare - Invoices issued on the name of other office s address which is not mentioned in registration - Commissioner upheld service tax demand but set aside cenvat credit demand - Penalty u/s 77 & 78 - Held that - The appellant as IATA Agent have two options to discharge service tax liability. The first option is to pay service tax on the gross amount of commission received. However, Rule 6(7) provides another option to them to pay service tax @ 0.6% of the basic fare in respect of domestic bookings and @ 1.2% of the basic fare in respect of the international booking. The word, basic fare is defined in the sub-rule as the part of the airfare on which the commission is normally paid to the Air Travel Agent by the Airlines. The explanation to Rule 6(7) defining the term basic fare clearly indicates that the basic fare for the purpose of this sub-rule is not the gross fare but is the part of the gross airfare charged from the passengers on which the Airlines normally pay commission to the Air Travel Agent. The expression air fare on which the commission is normally paid means the portion of air fare, whether 100% or a lesser percentage; on which most of the Airlines pay the commission ignoring the stray cases in which commission is paid on a different part of air fare. The appellant s plea is that they have discharged service tax liability under Rule 6(7), only on that part of the gross airfare on which the commission was paid to them by the Airlines and most of the Airlines pay commission only on that portion of fare. Term basic fare , in terms of its definition in Rule 6(7), is not the gross fare including fuel surcharge, but is that part of the gross airfare on which the concerned Airlines normally pay the commission to the Air Travel Agent. Therefore, what is relevant for the purpose of Section 6(7) is as to on which part of the airfare, the commission was being normally paid by the Airlines to the Air Travel Agent s. According to the appellant, the have evidence to prove that they have discharged the service tax liability under Rule 6(7) only on that part of the fare on which the commission was being paid, but this plea has not been considered by the Commissioner. In view of this, the impugned order is set aside and the matter is remanded to the Commissioner for de novo decision after considering the Appellant s plea and also our observations in this order. Misc. application for additional evidence is also allowed. In course of de novo proceedings, the Commissioner shall consider the documents produced by the appellant in support of their plea that they have paid service tax on that part of the airfare on which the commission is normally paid by the Airlines. - Decided in favour of assessee.

Summary

Issues:
1. Service tax liability calculation under Rule 6(7) of the Service Tax Rules, 1994 for an Air Travel Agent.
2. Admissibility of cenvat credit and penalty imposition.

Analysis:
Issue 1: Service tax liability calculation under Rule 6(7) of the Service Tax Rules, 1994 for an Air Travel Agent:
The appellant, an approved agent of International Air Ticketing Association, was under scrutiny for service tax payment discrepancies. The dispute revolved around the interpretation of Rule 6(7) of the Service Tax Rules, 1994, which provides options for service tax payment based on the basic fare for domestic and international bookings. The department alleged that the appellant failed to pay service tax on the correct fare component, leading to a demand for differential service tax. The Commissioner's order confirmed a substantial service tax demand along with penalties. The appellant contended that they had paid service tax as per the basic fare defined in Rule 6(7) and provided evidence to support their claim. However, the department insisted on determining the liability based on the gross commission due to lack of detailed fare breakdown. The Tribunal observed that the basic fare, as per Rule 6(7), refers to the portion of the airfare on which airlines typically pay commission to agents. The Tribunal found merit in the appellant's argument and remanded the matter to the Commissioner for a fresh decision, considering the appellant's evidence and the Tribunal's interpretation of the basic fare concept. The Tribunal allowed the appellant's application for additional evidence, emphasizing the importance of determining service tax liability accurately under Rule 6(7).

Issue 2: Admissibility of cenvat credit and penalty imposition:
Apart from the service tax dispute, the issue of admissibility of cenvat credit and penalty imposition was also addressed. The Commissioner's order dropped the cenvat credit demand but imposed penalties on the appellant under relevant provisions. The appellant challenged these penalties in the appeal. However, the Tribunal's primary focus was on the service tax liability calculation under Rule 6(7), leading to the remand of the entire matter for a fresh decision. The Tribunal did not delve deeply into the penalty aspect, as the service tax calculation issue took precedence in the appeal proceedings. The Tribunal's decision to remand the case for a de novo decision encompassed all aspects, including the penalty imposition, leaving the final decision on penalties to the Commissioner upon reevaluation of the service tax liability calculation.

In conclusion, the Tribunal's judgment centered on interpreting Rule 6(7) for service tax calculation, emphasizing the importance of correctly determining the basic fare component for Air Travel Agents. The remand order for a fresh decision by the Commissioner aimed to ensure a fair assessment based on the Tribunal's interpretation and the appellant's evidence, highlighting the significance of accurate service tax liability determination in such cases.