9911796707
TMI Blog2013 (8) TMI 48X X X X Extracts X X X X X X X X Extracts X X X X ..... ions throughout this order to arrive at the conclusion in all these five appeals. The adjudication order dated 25/11/2011 involved in ST appeal No. 330/2012 gave rise to following consequences relating to the period form 18 April 2006 to March 2008 and other appeals have similar consequences for different periods: (i) levy of service tax of Rs.6,66,15,243/-(Rupees six crore sixty six lakhs fifteen thousand and two Hundred Forty three only) including Education Cess and Higher Education Cess under the first proviso to Sub-section (1) of Section 73 of the Act, along with interest. (ii) imposition of Penalty of Rs.6,66,15,243/-/-(Rupees six crore sixty six lakhs fifteen thousand and two hundred Forty three only) u/s 78 of the Act. (iii) penalty of Rs.5,000/- imposed under Section 77 of the Act. 3. While challenging aforesaid levy it was also challenged that extended period of limitation prescribed by proviso to sub-section (1) of Section 73 of the Act was not invokable on the ground that the appellant was not liable to service tax under section 66A of the Act. BACK GROUND OF THE CASE, INVESTIGATION RESULT AND ADJUDICATION FINDING AS WELL AS C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... well as other facility is derived therefrom for ticket booking for passengers according to availability and preparation of passengers manifest as well as check-in-service documents etc. No payments were made by the travelers or the Travel Agents to the CRS companies. But payments were made by service recipient Airlines. 4.6 It was found that the Appellant Airline was making payment to the CRS Companies for each booking, cancellation, etc made by the Travel Agents as per terms agreed between the parties to the agreement. Airline specific CRS software was in use and data base was maintained by CRS companies for easy access and use by the Airline as well as Travel Agents for ultimate benefit of each other so as to facilitate sale of products and services of Airlines. Airline appellant in consideration of the receipt of online data base access and retrieval thereof was paying agreed charges to the CRS companies 4.7 Enquiry was made to ascertain whether the CRS companies viz. M/s Amadeus Marketing S.A.R.L. France, M/s Abacus Distribution system Pvt. Ltd, Singapore, M/s Galileo International Partnership, USA and M/s Sabre-American airlines Inc, USA, had any office in India to determine ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... parties resulting in carrying out of economic activity. Appellant's reliance on the clarification of Board circular F.No 137/57/2006-CX.4 dated 18.05.2007 was not acceptable to Revenue. 4.10 Revenue on the basis of aforesaid common features of the service of aforesaid description provided by CRS companies and availed by Airlines held that section 65(105)(zh) read with section 65(75) of Chapter-V of the Act was applicable to levy service tax for provision of service prescribed by clause 3(iii) of the Taxation of Services (Provided from outside India and received in India) Rules 2006 received by the Airlines operating in India through their permanent establishment in India. 4.11 Examining section 65(105)(zh) of the Act, learned Adjudicating Authority opined that it was not necessary that the data/information should be provided to a customer personally or that the computer network should be owned by the service provider as service being accessible or retrievable online in respect of data or information through the computer network as vehicle online. 4.12 Contention of the appellant that the impugned service was provided outside India as the CRS company and their parent company wer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t at Bangkok and the CRS Company's server was connected to the server of the head office of the appellant for updating and interacting to serve the travel Agents through IATA approved software. Travel Agents in turn were serving the passengers for which the travel agents were liable to service tax. Consequently head office of the appellant was getting service of CRS companies abroad allowing the later to exhibit data of the former to travel agents. Accordingly appellant not being recipient of service u/s 65(105)(zh) read with section 65(75) of the Act is not liable to service tax nor penalty. 5.3 Section 66A (2) of Finance Act, 1994 was applicable to immune the appellant from levy of service tax. The agreements under which the head office acted is as per agreements copies available at page 108 to 198 of the appeal folder. There was no agreement between CRS companies and Travel Agents. Revenue had no evidence of agreement between CRS companies and IATA. The Appellant has suffered tax for providing passenger service. So also Travel Agents have suffered tax serving the passengers. Proceeding before Tribunal is pending in respect of the service provided by CRS companies to Travel Agen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tter No. CO.FCS.1219/1003/Activity/77 dated 9/5/1977. It operated in India to achieve the object of Airline business getting service from CRS companies abroad. Section 65(105)(zh) read with section 65(75) is applicable to the appellant as recipient of the service described by that section and without such service being received in India, travel agents in India shall fail to achieve their object. Learned adjudicating authority on proper interpretation of the said sections as well as the rules framed under the Act brought the appellant to the purview of section 66A of the Act and levied the demand which is sustainable. Section 66A (2) of the Act is not applicable to the case of the appellant. 6.2 The appellant as a business entity was supposed to be covered by Part XI of Companies Act, 1956 which prescribes rules regarding companies incorporated outside India and governed by mandatory requirement of Accounting Standard 17 for segment reporting by the appellant and was also governed by mandatory requirement of Accounting Standard 18 i.e., making related party disclosure. Therefore it was covered by section 66A (1) without being covered by section 66A(2) of the Act read with the Taxat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Indian Travel Agents. Therefore no service provided by CRS/GDS companies to appellant is misconceived by appellant. Taxation of passenger service is a different subject by a separate taxing entry and taxing service received or provided by travel agents does not exonerate appellant from its liability when event of levy of the appellant arose under law. 6.10 Para 3.1, 3.2, 3.3, 4 of the Show Cause Notice are significant paragraphs depicting the basis of allegation bringing home the appellant to charges and that could not be defended by the appellant for which no interference to adjudication is desirable. Adjudication should be sustained without any concession on time bar plea. Tax and Penalty imposed by the learned Adjudicating Authority should remain untouched by Tribunal. FINDING AND CONCLUSION OF TRIBUNAL 7. Learned Adjudicating Authority considering role of the appellant and operating in India under RBI permission at the place of business establishment in India having its head office in Bangkok and availing "on-line information and data base access and retrieval" service provided by CRS companies abroad for booking air tickets by its Air Travel Agents in India for the appellan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... anies so that its objects of promotion of air transport business was not defeated by Air Travel Agents in India. 11. In the course of hearing both the parties relied on an agreement appearing at page 127 to 142 of the appeal folder to argue their case and stated that the said agreement was representative sample of all other agreement with CRS companies containing similar clauses and understanding. Therefore that document was examined. According to that document, head office of the appellant entered into agreement with AMADEUS MARKETING S.A.R.L in France. Thai Airways International (without the word Ltd at page 162) signed the agreement on 16.2.1990 and Amadeus Marketing S.A.R.L signed the same on 05.04.1990. That was witnessed on 01.03.1990. Such document carried seal of Thai International Public Co. Ltd, New Delhi (the Appellant). The agreement thus does not speak on which date that came to see the light of the day. However both sides having relied on that and that document having governed the transactions of the appellant was examined. The agreement so relied was governed by French Law as stated therein. 12. According to the above said agreement, Amadeus group (as defined under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2. The PARTICIPANT shall offer AMADEUS Subscribers, ATOs and CTOs, any improvements enhancements or additional functions to its system's information and reservation services, on non-discriminatory terms, subject to technical feasibility. 3. The PARTICIPANT will ensure that any CRS in its control provides to all its subscribers display and booking facilities for all services of AMADEUS Affiliates on a level equal to the level it provides to any other carrier, including affiliated carriers, subject to technical feasibility. The PARTICIPANT will also make its best efforts to ensure that any CRS with which it is affiliated providers this level of display and booking facilities in respect of AMADEUS Affiliates, subject to technical feasibility. The list of AMADEUS Affiliates is shown in Attachment D of the Agreement. AMADEUS will notify the PARTICIPANT of any changes to the list. The PARTICIPANT'S obligations under this Agreement will automatically apply to any entity that becomes and AMADEUS Affiliate. 4. The PARTICIPANT wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3. Before AMADEUS Global Core is equipped with a fully integrated ticketing system, ticket issuance for the PARTICIPANT will be subcontracted by AMADEUS to a third party system. 15. Above article 2 at page 131 of the appeal folder brought out relation of the CRS Company (AMADEUS) with the appellant and its head office as well as its Air Travel Agents in India defining their role and relation confining the terms of the agreement to themselves without allowing a third party to be user of the facility. 16. Agreement between the parties did not prohibit the appellant to have access to the data base maintained by the CRS companies in their system at any time to protect its interest. So also there was no bar on the appellant in that regard while only prohibition for the appellant was to provide no access to a third party through its own system to the CRS system of CRS companies under Article 2(H) of the agreement. This establishes that online data base access and retrieval of the data by the appellant from CRS companies was its absolute right being an inevitable necessity to make it litigation free ensuring storage of error free information in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AMADEUS A) Non-discriminatory services 1. AMADEUS will comply with all applicable regulations concerning display of information. 2. AMADEUS will offer neutral display to all AMADEUS Subscribers. The AMADEUS Neutral Display will conform to the EEC-Code of Conduct. A number of display options will available to meet the requests of customer. 3. In the neutral display provided to AMADEUS Subscribers, referred to in Article 3.A.2 above, subject to subscriber's input parameters, AMADEUS shall display the PARTICIPANT'S direct and connecting flights in a non-discriminatory manner on the same level as the direct non-stop, other direct and connecting flights or other transportation services, respectively, of any other participating carrier. 4. In the neutral display provided to AMADEUS Subscribers, referred to in Article 3.A.2 above, subject to the editing rules, which are available for inspection at the AMADEUS principal office, AMADEUS will accept for storage in its database a maximum of 60 single routings and 60 double routi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... information and reservation services with AMADEUS and was required to provide all AMADEUS Subscribers, ATOs and CTOs with information and reservations services as advantageous as those provided to any subscriber of any other computerized reservation and ticketing system. Such services included passenger information, schedule, space availability, fares and fare information and procedure. Thus AMADEUS was a data processor through its master computer to serve the appellant for booking its tickets by Indian Air Travel Agents. 23. Fiction was created by the appellant bringing so many jargons and terminology and illusory concept of entities to raise confusions while the matter was plain and simple to understand modus operandi and arrangement of the appellant. Ticket reservations were done by Air Travel Agent for the appellant making use of the services received by the appellant as an organ of its foreign head office having approved place of business in India under RBI permission. It was recipient of the impugned service in India from CRS Companies located abroad through computer network online. 24. Section 66A read with section 65(105)(zh) and section 105(75) of the Act which brought ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n India. Storage of such data in the computer of CRS companies for use thereof was an inevitable necessity since liability of the subscribers to the appellant was limited to the service charge paid by it in respect of each service of ticket booking. Therefore the appellant did not remain silent without exercise of its right of access to such data base and/or retrieval thereof to ensure that that it becomes litigation free. The appellant having right of access to the data base and for such service of access, it had made payments to the CRS Companies. Appellant's plea that service was provided to the head office is baseless. Appellant failed to establish that its existence in India was of no use to it. Revenue's arguments that appellant's remittances came to notice of investigation proved quid pro quo is well founded. So also when the appellant failed to prove that it had not enjoyed any connectivity to the CRS system of CRS companies to respond to travel agents in India, it failed to succeed in adjudication. This rules out appellant's plea that its head office was only recipient of service but not the appellant. 26. When the appellant falls u/s 66A (1)(b) of the Act as recipient of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d retrieval thereof. Nor also reliance on the Board Circular (supra) has any force as circular cannot override the law. Appellant has thus misplaced the cited decision. 30. When the appellant failed to be registered under the Act and file returns periodically, its plea of bonafide belief does not arise sine it escaped scrutiny of law. There was deliberate breach of law to cause evasion. Had there been no investigation, appellant's liability would not have been unearthed. Breach of law is neither eroded by lapse of time nor defiance thereof unpunishable. Bonafide should be patent from conduct and a mere plea of bonafide does not make the believer riskless in fiscal administration. Adjudication was not time barred when suppression of fact and intention to evade was detected by investigation. Liability of the appellant arose under law. Had the appellant sought registration and filed nil returns with notes appended to that explaining its belief, it would have provided foundation for its belief to be bonafide. But the appellant had not done so. An assessee either may voluntarily come to record seeking registration or may be brought to record by process of law or investigation. Upon inv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ic Company Ltd., having their office at The American Plaza, Intercontinental Eros, Nehru Place, New Delhi are a branch office in India of M/s. Thai Airways International Public Ltd., Bangkok, Thailand (hereinafter referred to as Thai Airways'). They are engaged in providing the services of air transportation of passengers and cargo. M/s. Thai Airways have obtained the permission of the Reserve Bank of India for setting up branch offices in India and besides the main branch office in New Delhi, they have branch offices at other places also in India. The appellant, however have obtained centralized service tax registration at New Delhi in respect of service of transportation of goods by air and transportation of passengers by air provided by all the branches in India. The appellant have appointed IATA authorized travel agents in India for selling of tickets of Thai Airways. The tickets are sold by the IATA agents on behalf of Appellant. The IATA Agents after selling the tickets of Thai Airways remit the money after retaining their agreed commission, to the appellant through Billing Statement Plan (BSP) and the appellant, in turn, remit the money to their Head Office at Bangkok. The a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f Thai Airways, the remuneration received by the CRS Companies abroad from Thai Airways, Bangkok, would attract service tax from the Appellant in India under reverse charge mechanism of section 66A of the Finance Act, 1994 read with Rule 2(1)(d)(iv) of the Service Tax Rules, 1994, as according to Department, the services have been consumed in India by the Appellant. On this basis, four Show Cause Notices dtd. 10.10.09, 09.04.2010, 19.10.2001 & 08.04.2001 were issued to the appellant for demand of service tax including education cess amounting to Rs.4,16,09,932/-, Rs.04,21,74,455/-, Rs.1,82,56,729/- Rs.1,92,13,354/- respectively, in respect of period from April'08 to September 2010, along with interest on it under section 75 of the Finance Act, 1994 and also for imposition of penalties on the appellant under section 76,77 & 78 of the Finance Act, 1994. 35.1. These Show Cause Notices were adjudicated by a common order No.66-69/AKM/CST/ADJ/2012 dtd.31.08.2011 by which the service tax demands along with education cess totalling Rs.9,98,54,052/- were confirmed against the appellant under section 73 of Finance Act, 1994 along with interest on it under section 75 ibid. Besides this, whil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... RS Companies is not covered by the definition of "online information and data base access and/or retrieval" service as defined in Section 65(105)(zh) read with Section 65 (75) and Section 65(36) of the Finance Act, 1994 and hence the same is not taxable. 37.1. There is no dispute that:- (a) the service providers i.e. the CRS Companies are located abroad and they do not have any office in India ; (b) the agreements for providing service are between the Appellant's head office at Bangkok and the CRS Companies; and (c) the payments for the services rendered by the CRS Companies have been received by them directly from Thai Airways, Bangkok and as such the entire payments for the services, in question, have been made outside India [Para 58 & 59 of the impugned order dtd. 31.08.2012 and para 28.3 of impugned order dtd. 25.11.11]. The dispute is only on the point as to whether the Appellant- the branch office of Thai Airways, Bangkok in India, can be treated as the recipient of the service provided by the CRS Companies and on this basis subject to service tax under reverse charge mechanism of Section 66A. 38. Coming first to the question of cla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... kin to a transaction of sale of goods, it can be treated as an activity carried out by a person (service provider) for another person for some consideration -the consideration can be in cash or other than cash, whether paid directly or indirectly. Just as in case of a sale transaction, the buyer is the one who is obliged to make the payment or makes the payment for the goods purchased and is legally entitled to receive the goods, in case of a service transaction, the service recipient would be the person who is legally entitled to receive the service and is liable to make the payment or makes the payment and whose need is satisfied by the Provision of the service i.e. who consumes the services, or in other words, is the buyer of the service. Thus, for existence of a service transaction between two persons. A (Service provider), and B (Service recipient) not only there must be an activity performed by A for B, but there must also be flow of consideration, cash or other than cash, direct or indirect from B to A and the provision of Services must satisfy some need of B, which may be his personal need, the need of his business or need to discharge some legal obligation regarding provis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f a body corporate, the place where it is incorporated or is "otherwise legally constituted is treated as its "usual place of residence" [explanation 2 to Sec. 66A] and a person carrying on a business through a branch or agency in any country, is to be treated as having "permanent establishment" in that country. Under section 66A(2), when a person carries on a business through a permanent establishment in India and through another permanent establishment in a country other than India, such permanent establishments shall be treated as separate person for the purpose of this section. Thus for the purpose of section 66A, the Head Office of a multinational company incorporated or legally constituting in a Country A and its branches in Countries B,C and D would be treated as separate persons. In term of 1st Proviso to Section 66A(1) the provisions of this sub-section are not applicable to an individual in respect of service received by him from abroad unless the service is for use in any business or commerce. Another important Provision of Section 66A is that when the service provider has his business establishment in more than one country, say A and B, the service recipient located in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... establishment in India, would be taxable in India only if the consumer of the service, who is the same as the recipient of the service, is located in India. Here it may also be clarified that unlike a transaction of sale of goods, in a transaction of provision of service, the receipt and consumption goes together, as the provision of service satisfies the need of the service recipient and, thus, stands consumed by him. In other words in case of a service transaction, the service recipient is also the person who has consumed the service. (4) Conceptually the Export of Service Rules, 2005 together with Taxation of Services (Provided from outside India and received in India) Rules, 2006, are basically the Rules for determining the place of service recipient/service consumer, and for this reason only, in the budget of 2012-13, these Rules have been replaced by Place of Provisions of service Rules, 2012, the Rule 3 of which states that the place of Provisions of a service shall be the location of the service recipient (who is the service consumer). (5) Export of Service Rules, 2005 and Taxation of Service (Provided from outside India and received in India) Ru ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... p; (a) agreements are between Thai Airways, Bangkok and the CRS Companies (located outside India and not having any branch or business establishment in India); and (b) the entire payments to the CRS Companies have been made directly by the head office located outside India and no part of payment has been made by the branch office (Appellant). 40.1 As held in para 38 above, the service provided by the CRS Companies is "Online Database access and/or retrieval" service taxable under Section 65(105)(zh), read with Section 65(75) and Section 65(36) of the Finance Act, 1994 and this service is covered by Rule 3(iii) of the Taxation of Services (Provided from outside India and received in India) Rules, 2006. This service provided from outside India, would be treated as received in India, only if it has been "received by a recipient located in India for use in relation to business or Commerce". The dispute is as to whether the Appellant, the branch office of Thai Airways in India, is the recipient, as contended by the Department, or as pleaded by the Appellant, their head office at Bangkok, which has entered into agreements with the CRS Companies for Provisions of Serv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or Provision of service, is the person obliged to make the payment or pays for the same and the person whose need is satisfied by the Provision of service, the need, as discussed above, may be his personal need, the need of his business or the need to discharge some legal obligation for provision to service of another person. Thus in a service transaction between A and B, against Provision of service by A to B, there would be always flow of consideration from B to A, which, as mentioned above, can be in cash, or other than in cash or direct or indirect. Therefore, for existence of service transaction between A and B, along with Provision of service by A to B, there must be Provision for flow of consideration from B to A and only then the B can be treated as service recipient. The consideration in some cases can be indirect. For example, if on the instructions of a person A located outside India, a person B, also located outside India, provides a performance based service to a person C located in India and it is A who makes payment to B for the service, the A will be treated as service recipient only if A has a legal obligation to get the service provided to C, But if there is no su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... otiate the agreements with CRS Companies on behalf of branches for provisions of service to them. When it is the Head Office which has received the service and it is Head Office which is liable to pay for the service and has actually made payment for the same, it is the Head Office which has to be treated as the recipient of the service provided by the CRS companies. (3) When neither any service has been received by the Appellant nor there is any evidence or even any allegation that any payment was made directly or indirectly by the Appellant to CRS Companies nor any presumption in this regard can be made, the Appellant can not be treated as recipient of the service provided by the CRS Companies. (4) Merely because the IATA agents appointed by the Appellant in India used the Services provided by the CRS Companies from abroad, the Appellant do not become the recipient of the Service. For being treated as recipient, a person, in addition to being user of the service to satisfy his need, must also be the person legally entitled to receive the service and the person liable to make the payment/person making the payment for the service. In this case, there is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ither directly or indirectly by the way of debit/credit notes, account adjustment or by other indirect mean, for the services provided by the CRS Companies. 40.3 In view of the above discussion, the Appellant, the branch office in India of Thai Airways, Bangkok, can not be treated as recipient of the service provided by the CRS Companies, in pursuance of their agreements with the Appellant's Head Office at Bangkok and, therefore, no service tax can be charged from the Appellant. 41. As regards the question of longer limitation period under Proviso to Section 73(1) of the Finance Act, 1944, the same would not be available to the Department, as no intention to contravene the Provisions of Finance Act, 1994 and of the rules made there under can be attributed to the Appellant for the reason that even if they are required to pay service tax on the service, In question, provided by CRS Companies, the entire service tax paid would be immediately available to them as Cenvat Credit and collection of service tax from the Appellant would be a revenue neutral exercise. A Larger Bench of the Tribunal in case of Jay Yushin Ltd. reported in 2000 (119) ELT - 718, has held that in such circumstan ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
