2021 (11) TMI 176 - AT - Service Tax

Levy of service tax - Business Auxiliary Services - booking of segments and thus assisting in marketing and promotion of the CRS of various companies - demand of interest and penalty - HELD THAT - Since on the issue of the leviability of the service tax, under the category of business auxiliary services , on the incentives received by the appellant in this appeal have been considered and decided by the larger bench in KAFILA HOSPITALITY TRAVELS PVT. LTD. VERSUS COMMISSIONER, SERVICE TAX, DELHI 2021 (3) TMI 773 - CESTAT NEW DELHI , in favour of appellant holding against the leviability, this bench will be barred from reconsidering the same issue. Once the issue of leviability under the category of business auxiliary services is decided in favour of the appellant, the demand of service tax fails and consequently the demand for interest and penalties too will fail. Appeal allowed.

Issues Involved:
1. Classification of services under "Business Auxiliary Services."
2. Demand of Service Tax and interest.
3. Imposition of penalties under various sections of the Finance Act, 1994.
4. Applicability of larger bench decision in Kafila Hospitality & Travels Pvt Ltd case.

Detailed Analysis:

1. Classification of Services under "Business Auxiliary Services":
The Commissioner held that the appellant's activities were taxable under "Business Auxiliary Services" as defined under Sub Sections (19) read with Sub Section (105) (zzb) of the Finance Act, 1994. The appellant was found to be promoting the business of M/s Abacus by booking air tickets on their CRS, thus falling under the category of business auxiliary services. The larger bench of CESTAT, in the case of Kafila Hospitality & Travels Pvt Ltd, concluded that the air travel agents were promoting their own business and not that of the airlines or CRS companies. Therefore, the services rendered by the appellant should be classified under "air travel agent" services and not "business auxiliary services."

2. Demand of Service Tax and Interest:
The Commissioner confirmed the demand of Service Tax amounting to ?2,51,89,781/- for the period from August 2007 to March 2011 under "Business Auxiliary Services," along with interest under Section 75 of the Act. Additional demands of ?1,82,86,264/- and ?51,42,432/- were confirmed for subsequent periods. The larger bench decision in Kafila Hospitality established that incentives received by air travel agents from airlines or CRS companies are not taxable under "business auxiliary services." Consequently, the demand for service tax on the appellant fails.

3. Imposition of Penalties:
The Commissioner imposed penalties under Sections 77 and 78 of the Finance Act, 1994, but refrained from imposing penalties under Section 76 due to the imposition under Section 78. Given the larger bench's decision that the services do not fall under "business auxiliary services," the penalties imposed under Sections 77 and 78 also fail. The larger bench emphasized that incentives paid for achieving targets are not taxable, eliminating the basis for penalties.

4. Applicability of Larger Bench Decision:
The appellant argued that the issue had been decided in their favor by the larger bench of CESTAT in Kafila Hospitality & Travels Pvt Ltd. The larger bench had allowed the intervention application filed by the appellants in this appeal, noting that the issues involved were the same. The larger bench concluded that the air travel agent is promoting its own business, not that of the airlines or CRS companies, and that incentives paid for achieving targets are not leviable to service tax. This decision binds the current appeal, and the bench cannot reconsider the same issue.

Conclusion:
The appeal is allowed, and the impugned order is set aside. The demand for service tax, interest, and penalties under "business auxiliary services" fails in light of the larger bench's decision in Kafila Hospitality & Travels Pvt Ltd. The order pronounced in the open court on 29.10.2021 confirms this outcome.

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