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TMI Blog2013 (8) TMI 49X X X X Extracts X X X X X X X X Extracts X X X X ..... e Act. While challenging above 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 invocable on the ground that the appellant was not liable to service tax under section 66A of the Act. 2. At the outset Sri Puri learned Chartered Accountant appearing for the appellant submitted that the material facts of the present appeal being similar to the case argued in the case of M/s Thai Airways, he adopts those arguments for the present appeal. BACK GROUND OF THE CASE, INVESTIGATION RESULT AND ADJUDICATION FINDINGS 3.1 When it came to knowledge of Revenue that certain Airlines operating in India were availing "Online information and data base access or retrieval service" from foreign based CRS service providers and were liable to service tax as recipient of service, but no service tax due were deposited by them, investigation was made. It was revealed that those Airlines in terms of certain agreements with foreign based companies viz M/s. Galileo International Partnership USA, M/s. Abacus Distribution System Pvt. Ltd. Singapore, M/s. Amadeus Marketing, S.A. Spain, M/s. Sabre Travels Information Networ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and use by the Airlines 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 3.7 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 the person liable to pay such service tax. It was revealed that Indian companies with similar names viz. M/s Galileo (India) Pvt. Ltd, M/s Abacus Distribution systems (India) Pvt. Ltd and M/s Amadeus (India) Pvt. Ltd, were functioning in India as separate legal entities. M/s Abacus Distribution System (I) P. Ltd and M/s Galileo India P Ltd function as National Marketing Companies entrusted with the work of Marketing the Abacus and Galileo CRS to travel agents in India. Such fact was confirmed from the statements recorded from Shri Ankur Bhatia of M/s Amadeus India (P) Ltd. and Shri V. Kesavan, General Manager, M/s Galile ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... India through their permanent establishment in India. 3.11 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. 3.12 Contention of the appellant that the impugned service was provided outside India as the CRS company and their parent company were situated outside India for which there cannot be tax liability of appellant was considered by ld. Adjudicating Authority. But he discarded such plea finding that the CRS companies even if situated outside India were providing service to Appellant having establishment in India which enabled Travel Agents of the appellant to achieve its object. Appellant may not be privy to the contract between CRS/GDS companies, but its parent company entered into contract with CRS/GDS companies to achieve object of the appellant operating in India under RBI permission and service was provided to the Appellant in India. Revenue accordin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ant from levy of service tax. Head office of the appellant entered into similar agreement with various CRS service providers. One of such service provider was AMADUES. That company had entered into agreement with this appellant in similar terms as that was entered into with M/s Thai Airways. 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 Agents. Therefore the appellant cannot be called upon to pay tax for the same service. (C). If the appellant is required to pay tax as a service recipient, it would be eligible to avail Cenvat credit thereof and no revenue gain shall be made by the Government by adjudication exercise. (D). Appellant relying on the Circular dated 19.06.2012 and Para 71.1 of the decision of the Tribunal (reference order of third member in reference) in the case of Paul Merchants reported in submitted that the service recipient is t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e appellant. 5.3 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 Taxation of Services (Provided from outside India and Received in India) Rules, 2006 and liable to service tax. 5.4 The appellant being recognized as an entity in India by Reserve Bank of India at the approved address was recipient of service from CRS companies abroad to make that available to its Travel Agents and others for booking tickets etc., and was making payment to CRS companies through regulatory measures of RBI under FEMA by settlement of its account with its head office and clear the debits made to its accounts for tickets booked in India. Therefore it cannot plead its innocence of no liability under service tax law. 5.5 Inviting attention to the reply of the Appellant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oncession on time bar plea. Tax and Penalty imposed by the learned Adjudicating Authority should remain untouched by Tribunal. FINDING AND CONCLUSION OF TRIBUNAL 6. 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 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 appellant making use of the service of master computer of the CRS company and also examining the considerations paid by the appellant to avail above service during the period 18/04/2006 to April 2008 held that the appellant as a service recipient of taxable service u/s 65(105)(zh) of the Act was liable to service tax under section 66A of the Act. Accordingly, he raised demands as set out at the outset. Section 65(105)(zh) of the Act which is the taxing entry reads as under: "Section 65 (105) "taxable service" means any service provided or to be provided, - xx xx (zh) to any person, by any person, in relation to on-line informa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o a participating carrier agreement with Amadeus". Appellant was one of the participating carriers and defined as Participant in the agreement. 11. The agreement aimed to facilitate dissemination of information supplied by Amadeus affiliates and participating carriers including the participating appellant, for the promotion of its products and services. An Amadeus subscriber i.e. IATA and affiliate were allowed under a contract arrangement with the Amadeus system to obtain information, make reservations and issue documents involving travel related service. 12. The term AMADEUS Subscribers as defined by Article 1 of the agreement means "any person other than an Amadeus affiliate or participating carrier, using under a contract or other arrangement the AMADEUS system to obtain information, make reservations and Issue documents involving travel related services". They were user of on line data service provided by CRS Company to achieve the object of the appellant 13. Responsibilities and rights of the participants was defined by the Article 2 of the above agreement and relevant part thereof reads as under: Article 2 RESPONSIBILITIES AND RIGHTS OF THE PARTICIPANT &nbs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... System terminals in one or more of its offices. Such installations of AMADEUS System equipment will be subject to a separate agreement that will cover the equipment lease or purchase, the connection and communication costs. 6. At the PARTICIPANT'S option, AMADEUS will take all reasonable steps necessary to provide to AMADEUS Subscribers, ATOs and CTOs Direct Assess to the PARTICIPANT'S system to obtain flight information and last seat availability. This option, and the conditions hereof, are described in Schedule 2 of the present Agreement. B) Compliance with applicable formats 1. If the PARTICIPANT elects to supply its schedule and fare information directly to AMADEUS, the PARTICIPANT will be responsible for compliance with the SSIM or ATPCO formats used by AMADEUS. 2. The PARTICIPANT will ensure that the PARTICIPANT'S system fully complies with the interline reservation policies, procedures and message-formats set forth in AIRIMP and amendments thereto. C) Seat availability PARTICIPANT'S seat availabili ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... S by CRS companies for use of Air travel Agents to promote, its business. 16. Understanding of the parties also did not reveal forgoing of the right of access by the appellant to the data base maintained by CRS Companies for the obvious reason that reservation data/information was its property and liability of the CRS Companies to the appellant was limited only to the extent of booking fees paid by the appellant in the event of damages arising out of the performance or breach of the agreement between the parties. It may be appreciated that no one would prefer to cause prejudice to himself surrendering his right of self-protection. The Appellant was not an exception to that. Thus existence of right of appellant to access data base on line including retrieval thereof by appellant is undeniable. 17. Article 4 of the agreement dealing with consideration payable by service recipient exhibit that the participant shall pay AMADEUS a booking fee for each participant net booking through the Amadeus system, including booking made by ATOs ad CTOs. ATO means "Airport Ticket Offices" and CTO means "City Ticket Offices". 18. Article 5 of the agreement dealt with periodical payments to be made ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ters and editing rules. 5. AMADEUS will provided the PARTICIPANT with any enhancements to the AMADEUS system information and reservations services on non-discriminatory terms, subject to technical feasibility. If, however, because of technical or resource limitations, it is not practical of feasible for AMADEUS to Implement an enhancement or modification at the same time for all Participating Carriers, then AMADEUS will determine the order of implementation. B) Modifications AMADEUS shall have the right to make any adjustments, modifications and changes to its programme and services it consider necessary from time to time. AMADEUS will notify the PARTICIPANT of any significant change. C) Flight Availability AMADEUS will store PARTICIPANT flight availability status coded in accordance with the relevant provisions of Attachment B (Schedule Loading and Sales Facility) to this Agreement, and in accordance with AIRIMP formats. D) Rejected messages AMADEUS will review rejected messages it receives ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of this section, be taxable service, and such taxable service shall be treated as if the recipient had himself provided the service in India, and accordingly all the provisions of this Chapter shall apply : Provided that where the recipient of the service is an individual and such service received by him is otherwise than for the purpose of use in any business or commerce, the provisions of this sub-section shall not apply: Provided further that where the provider of the service has his business establishment both in that country and elsewhere, the country, where the establishment of the provider of service directly concerned with the provision of service is located, shall be treated as the country from which the service is provided or to be provided. (2) Where a person is carrying 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 persons for the purposes of this section. Explanation 1. - A person carrying on a business through a branch or agency in any country shall be treated as having ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ates in India competing with other airlines. 25. Each economic activity being distinct and separate, appellant providing passenger service in India and suffering service tax cannot be a consolation to Revenue to grant immunity to appellant taxation of the aforesaid service on reverse charge mechanism provided u/s 66A of the Act incidence to tax arise u/s taxing entry 65(105)(zh) read with section 65(75) of the Act read with the relevant rules made under the Act. Legislature have wide latitude in the matter of taxation to pick and choose event of levy, nature of services and different aspect of services in a series or cluster of services. So also pendency of appeal in Tribunal in respect of service provided by CRS companies to Travel Agents or taxation of passenger service provided by the appellant does not alter the taxability of service received by the appellant under reverse charge mechanism u/s 66A of the Act. 26. Appellant's plea that it shall get Cenvat credit of service tax levied by the adjudication order does not exonerate it from the liability it has incurred under the law. Grant of Cenvat credit arises only if service tax is paid by the appellant and such grant not othe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pellant thus fails for which that is dismissed. (Pronounced in the open court on......................................) Contra Per: Rakesh Kumar, Member (T) 30. I have gone through the order prepared by my Learned Brother which was received on 09.05.2013. Since I do not agree with his conclusions, I am recording a separate order. However before the coming to the issues involved in these appeals, it would be worthwhile having a brief look once again at the basic facts of this case. 31. The appellant M/s. Austrian Airline, E-11-12, Mariane Arcade, Outer Circle, Connaught Place, New Delhi, are a branch office in India of Austrian Airlines, Office Park 2- Post Box -100 A-1300, Viena Airport Austria (hereinafter referred to as 'Austrian Airlines'). They are engaged in providing the services of air transportation of passengers and cargo. Austrian Airlines have obtained the permission of the Reserve Bank of India for setting up branch offices in India. The appellant have obtained service tax registration at New Delhi in respect of service of transportation of goods by air and transportation of passengers by air provided by them in India appellant have appointed IATA authorized travel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the appellant who are the Branch Office of Austrian Airlines in India. The department was of the view that the service being provided by the CRS Companies "Online Database access and/or retrieval" taxable under section 65(105)(zh) read with Section 65(75) and Section 65(36) of the Finance Act, 1994 and since the same has been used by the IATA Agents in India for selling of tickets of Austrian Airlines, the remuneration received by the CRS Companies abroad from the Airlines, Viena, 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, Show Cause Notices dtd. 24.10.08 was issued to the appellant for demand of service tax including education cess amounting to Rs.2,70,29,310/-, in respect of period from 01.04.2003 to 31.03.2008 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. 31.1 This Show Cause Notices was adjudicate vide order No.3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... office in India ; (b) the agreements for providing service are between the Appellant's head office at Viena, Austria and the CRS Companies; and (c) the payments for the services rendered by the CRS Companies have been received by them directly from Austrian Airlines, Viena and as such the entire payments for the services, in question, have been made outside India [Para 21of the impugned order]. The dispute is only on the point as to whether the Appellant- the branch office of Austrian Airlines, Viena 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. 34. Coming first to the question of classification of the service, the activity of the CRS Companies is maintaining online information on real time basis about the flight schedule, fare, seat availability etc. of the flights being operated by Austrian Airlines all over the world, for which CRS Companies have linkage with the computer system of Austrian Airlines, Viena and providing access in respect of this information to the IATA agents appointed by the Airlines which is used by them ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 provision of some services to another person C. Thus When a manufacturer A, who has sold some goods manufactured by him to B and is under obligation to provide free repair services to B during warranty period and engages C to provide the service or free repairs to B for which he pays to C, the recipient of the service provided by C is A, not B. The B is only the beneficiary of the service provided by C. However when there is no l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nother 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 country C will be treated as having received the service from that establishment of the service provider which is directly concerned with the Provision of service [2nd Proviso to Section 66 A(1)]. In my view, the underlying principle behind this Proviso will also be applicable for determining as to who is the service recipient, when a service provider A located abroad, has provided service to a Company having head office out ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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) Rules, 2006, put together, for the purpose of determination of the location of service recipient, divide the service into three categories and prescribe different criteria in this regard for each category. In respect of services in relation to an immovable property, as enumerated in these rules, the same are treated as having been received at the location where the immovable property is located. In respect of performance based services, as enumerated in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... base 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 Austrian Airlines in India is the recipient, as contended by the Department, or as pleaded by the Appellant, their head office at Viena, which has entered into agreements with the CRS Companies for Provisions of Service and has made payment for the service provided, is recipient of the service. However for deciding this question, in view of the Provisions of Section 66A(2), the branch office and the head office are to be treated as two separate persons. The Revenue's plea is that as the service provided by the CRS Companies has been used by the IATA agents in India appointed by the Appellant for sale of the Airline's Tickets, it is the Appellant who have to be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onsideration 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 such obligation and A had acted only as a facilitator or agent of C, A can be treated as having made the payment on behalf of C and indirect flow of consideration from C to B can be presumed and C will have to be treated as the service recipient. Applying the above criteria, in respect of the service provided by CRS Companies, the Appellant can be treated as the recipient only if the service provided by the CRS Companies is meant for the Appell ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ppellant 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 neither evidence, nor even allegation of the Department that the Appellant is the person liable to make payment to CRS Companies for there services or have made payment to them directly or indirectly. (5) When the service has been received by the Head Office of the Appellant at Viena against its agreements with CRS Companies and as accepted in the impugned order, entire payment has been made abroad by the Head Office dire ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 circumstances where revenue neutral situation comes about in relation to the credit available to the assessee himself of the duty paid by him and not by the way of availability of credit to the buyer of the assessee's manufactured goods [para 13(b) of the judgment], longer limitation period under Proviso to section 11A (1) of Central Excise Act, 1994 would not be applicable. The ratio of this judgment is squarely applicable to the facts of this case, as the Provisions of Section 11A (1) of Central Excise Act, 1944 are in ..... X X X X Extracts X X X X X X X X Extracts X X X X
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