2023 (4) TMI 1134 - AT - Service Tax

Valuation of service - Air Travel Agent Service - inclusion of commission received by the appellant on the fuel surcharge in the basic fare - Rule 6 (7) of the Service Tax Rules, 1994 - period from December 2008 to February 2009 - HELD THAT - In the case of M/S AKBAR TRAVELS OF INDIA PVT. LTD. VERSUS THE PRINCIPAL COMMISSIONER OF SERVICE TAX, NEW DELHI 2020 (3) TMI 376 - CESTAT NEW DELHI , the Principal Bench has, after following the order in M/S. KAFILA HOSPITALITY TRAVELS LTD. VERSUS CST, DELHI 2015 (1) TMI 387 - CESTAT NEW DELHI , chosen to remit the matter back to the file of the Principal Commissioner for passing a fresh order since the Bench was satisfied that the Principal Commissioner had not considered the contentions of the appellant therein that that the commission on fuel surcharge was not paid normally to the Air Travel Agents by the Airlines. Rule 6 (7) ibid. clearly gives an option to the taxpayer, specifically an Air Travel Agent, to pay an amount calculated at the rate of 0.6% of the basic fare in the case of domestic bookings and at the rate of 1.2% of the basic fare in the case of international bookings instead of paying Service Tax at the rate specified in Section 66 of the Finance Act, 1994, and as per Section 66, the rate of Service Tax was a flat 12% of the value of taxable services. Section 67 ibid. provides for the assessable value to be the gross amount charged by the service provider for such service - What is relevant from the above is that the option is given to the taxpayer to remit the Service Tax either in terms of Rule 6 (7) ibid. or Section 67 ibid., and once an option is exercised by the taxpayer, the Revenue cannot find fault with the option so exercised. In the case of JAPAN AIRLINES INTERNATIONAL CO. LTD. VERSUS C.S.T. NEW DELHI 2016 (7) TMI 1077 - CESTAT NEW DELHI , the co-ordinate Delhi Bench has, however, held that fuel surcharge was includible in the assessable value, but it is clear from a reading of the said order that the Bench did not consider the order of the very same Bench in the case of M/s. Kafila Hospitality and Travels Ltd. and has chosen to hold so on the basis of the provisions of Section 67 of the Finance Act, 1994 - Admittedly, the appellant has chosen to pay Service Tax in terms of Rule 6 (7) ibid. and therefore, tax cannot be demanded by applying the provisions of Section 67 ibid. Hence, the ratio in M/s. Japan Airlines International Company Ltd. is not applicable. An airline may pay commission inter alia on various items, apart from the basic fare, which are indicated clearly in the ticket issued to a traveller. The basic fare is clearly indicated, followed by various other charges in such ticket. Hence, when the basic fare is so specifically indicated, the authorities cannot add or delete anything to the same to say that the basic fare should also include those other things - Rule 6 (7) has to be read, therefore, in the context of the break-ups given in the ticket wherein the basic fare stands clearly indicated and viewed thus, the interpretation drawn by the lower authorities to include the commission on fuel surcharge in the basic fare cannot hold any water, for which reason the impugned order cannot sustain. Appeal allowed.

Summary

Issues involved:
The issue involved in this case is whether the commission received by the appellant on the fuel surcharge is includible in the basic fare.

Summary:

Issue 1: Inclusion of commission on fuel surcharge in basic fare
The appellant, engaged in Air Travel Agent Service, was discharging Service Tax on the basic fare as per Rule 6(7) of the Service Tax Rules, 1994. A Show Cause Notice was issued to demand Service Tax on the commission received on fuel surcharge. Despite the appellant justifying its stand, the Adjudicating Authority confirmed the demand. The first appeal before the Commissioner of Central Excise (Appeals) was also dismissed. The central issue was whether the commission on fuel surcharge should be included in the basic fare.

Legal Interpretation and Precedents:
Rule 6(7) defines "basic fare" as the part of the air fare on which commission is normally paid to the air travel agent by the airline. Various CESTAT Benches have interpreted the term "basic fare" in similar cases, emphasizing that the commission should be paid on the part of the airfare normally paid by airlines to agents. The appellant opted to pay Service Tax under Rule 6(7), and therefore, the provisions of Section 67 regarding assessable value do not apply.

Decision and Rationale:
The Tribunal held that the basic fare, as clearly indicated in the ticket, should not be altered to include commission on fuel surcharge. The interpretation by lower authorities to include such commission in the basic fare was deemed incorrect. Consequently, the impugned order was set aside, and the appeal was allowed with any consequential benefits.

Conclusion:
The Tribunal ruled in favor of the appellant, emphasizing that the commission on fuel surcharge should not be included in the basic fare for the purpose of Service Tax liability under Rule 6(7) of the Service Tax Rules, 1994.

This summary provides a detailed overview of the legal judgment, focusing on the interpretation of the term "basic fare" and its application to the commission received on fuel surcharge in the context of Service Tax liability for Air Travel Agent Services.