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TMI Blog2018 (11) TMI 983X X X X Extracts X X X X X X X X Extracts X X X X ..... rief facts of the case are that the appellant is a travel agent engaged in providing services of booking of tickets for passengers travelling by air and other travel related services. It has opted to discharge service tax liability on basic fare as provided under Rule 6(7) of the Service Tax Rules,1994 as amended. The Airlines for promoting its sales introduce target-based incentive schemes where on achievement of certain targeted sales, incentive is offered to the General Sales Agents (GSA) who also are IATA Agents. The GSA in turn to maximise their share of incentive, in turn provide their own Computerised Reservation Systems (CRS) free of cost to travel agents. While providing CRS systems, the GSA in turn pass on certain percentage of incentive that they receive from Airlines. The Appellant has no privity of contract with any of the airlines. The Appellant purchases tickets by using the said CRS system from any of the IATA agents or from Airlines and makes payment of the same through Billing Settlement Plan of IATA. Hence neither the tickets are purchased from any of the airlines or the GSA agent nor the payment is made to any of the Airlines or the GSA. 2. The case of the appe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... category of BAS instead of Tour Operator services rejecting the submission of the party that the case laws cited by the party relate to advertising agency. Further, various Benches of CESTAT have followed the said decision without rendering any independent findings. 4. The Principal Bench however, did not consider the FINAL ORDER NO. A/52299/2017 dated 24th January 2017 in the case of M/s. Jose Travel vs. CCE Indore - TIOL-2017-1814 in identical set of facts of the appellant's case, after allowing the appeal by way of remand in para 6 observed as under :- We have heard both the sides and perused the appeal records. On perusal of the appeal papers it is clear that the Original Authority passed ex-parte order though he recorded that adequate opportunities have been provided to the appellant. The impugned order also did not examine the issues raised by the appellant for a proper finding. We have noted the submissions by the learned Counsel for the appellant, as recorded above. We are in agreement with the learned Counsel, that the impugned order as well as original order suffers from serious infirmity on factual and legal issues. We note that when the appellants have discharged serv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e; (ii) to confirm demand of service tax, the sub clause under which the activities are covered must be specified (iii) to attract the classification under BAS, the agreement must be between three parties; therefore, in absence of third party; (iv) Once the value of service is fixed, can any other consideration received be taxed under another category? (v) To fasten tax liability, there must be a value of service as provided under section 67 of the Chapter V of Finance Act, 1994, as amended up to date; (iv) the relationship of service provider and service receiver must exist; 7. The appellant in its application has referred to a catena of judgments pronounced by various Benches of CESTAT on each of the issue referred in Para 3 above. We have heard both sides and also perused the material placed on record. During the course of arguments, the Learned Counsel for the Appellant has taken us through various judgments on each issue in para 3 above. Therefore, accordingly now we proceed to discuss each of the submissions made before us. On Taxability of Incentives 5. First and foremost, issue is whether 'incentive' received on appreciable performance can be subjected to service t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... agreement, on achievement of such target and in excess of it, appellant was to receive some amount as an incentive. It is the case of the Revenue that such amount is taxable under Business Auxiliary Services, we find no substance in the arguments raised by the learned AR as well as the reasoning given by the adjudicating authority. The said amounts are incentive received for achieving the target of sales cannot be treated as Business Auxiliary Services, as incentive are only as trade discount which are extended to the appellant for achieving the targets. We find that this view has been taken by the Tribunal in the case of Sai Service Station (supra). With respect, we reproduce the relevant paragraphs: - 14. In respect of the incentive on account of sales/target incentive, incentive on sale of vehicles and incentive on sale of spare parts for promoting and marketing the products of MUL, the contention is that these incentives are in the form of trade discount. The assessee respondent is the authorized dealer of car manufactured by MUL and are getting certain incentives in respect of sale target set out by the manufacturer. These targets are as per the circular issued by MUL. Henc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to appellant when the vehicles are excise cleared and placed on common carrier. Depending on order quantity, the manufacturer raises invoices after according discounts which are designated as commission/incentive merely as a management terminology. Learned Chartered Accountant for appellant places reliance in the decisions of the Tribunal in Jaybharat Automobiles Limited v. Commissioner of Service Tax, Mumbai [2015-TIOL-1570-CESTAT-MUM = 2016 (41) S.T.R. 311 (Tri.)], Sai Service Station Limited v. Commissioner of Service Tax, Mumbai [2013-TIOL-1436-CESTAT-MUM = 2014 (35) S.T.R. 625 (Tri.)], Tradex Polymers Private Limited v. Commissioner of Service Tax, Ahmedabad [2014 (34) S.T.R. 416 (Tri.-Ahmd.)] and Garrisson Polysacks Private Ltd. v. Commissioner of Service Tax, Vadodara [2015 (39) S.T.R. 487 (Tri.-Ahmd.)]. In re Jaybharat Automobiles Limited, the Tribunal held that: '6.5 On the appeal by Revenue on the issue of incentives received by the appellant from the car dealer, we find that the relationship between the appellant and the dealer is on a principal to principal basis. Only because some incentives/discounts are received by the appellant under various schemes of the manufac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... x under provisions of the Act. On specific sub clause 7. The next issue to be examined by us is whether service tax can be demanded on any service under BAS without specifying the applicable sub clause? BAS comprises a set of services. It is important to classify the sub category of BAS before confirming the demand. Therefore, it would be appropriate to refer to the statutory definition provided under the Act, which is reproduced as under: - S. 65(19). 'Business auxiliary service means any service in relation to, - (i) Promotion or marketing or sale of goods produced or provided by or belonging to the client; or (ii) Promotion or marketing of service provided by the client; or (iii) Any customer care service provided on behalf of the client; or (iv) Procurement of goods or services, which are inputs for the client; or Explanation. - For the removal of doubts, it is hereby declared that for the purposes of this sub-clause, 'inputs' means all goods or services intended for use by the client; or (v) Production or processing of goods for, or on behalf of, the client; or (vi) Provision of service on behalf of the client; or (vii) A service incidental or auxiliary to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y Services' comprises of a set of services. It is important to classify the activity under the specific sub-clause before confirming the demand. We find that the same has not been done. In the Tribunal's decision in the case of United Telecom Ltd. reported in 2011 (21) S.T.R. 234 (Tri.-Bang.), the Tribunal has held that Service Tax liability cannot be confirmed without mentioning the specific sub-clause under which the activities are covered. The decision is squarely applicable to the facts of the present case and hence we find that the demand for service tax cannot be sustained. (ii) Jak Traders Pvt. Ltd. vs Commissioner of Central Excise, Kanpur [2016 (43) S.T.R. 259 (Tri. - All.)] 5. Having considered the rival submissions, we find that in the admitted fact and circumstances, the service provided by the appellant does not fall under any of the sub-clauses (i) to (vii) of Section 65(19) under the head Business Auxiliary Services. We take notice of the fact that the appellant have neither facilitated sale of any goods of their client nor service. It is admitted fact that the appellants are not involved in any activity directly relating to promoting or marketing of goods. The a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aimed by the media. After showing these amounts as amounts payable for some time, the amount has been written back as per the provisions of accounting standards. These amounts are in any case payable to the media as and when the claim is lodged and therefore, this amount cannot be construed as consideration received towards services rendered. Therefore, the confirmation of Service Tax demand on these amounts, i.e. volume discounts, rate difference and amounts written back cannot be sustained in law and accordingly, we set aside the same. (v) Toyota Lakozy Auto Pvt Ltd, vs. C. S.T & Ex, Mumbai ll & V - 2017 (52) S.T.R. 299 (Tri-Mum) 3. Appellant contends that ₹ 81,35,813/- and ₹ 1,21,47,133/- for the two periods has been wrongly subjected to tax because the agreement between the appellant and M/s. Toyota Kirloskar Motor Limited is one of supply of vehicles by the latter on 'principal-to-principal' basis on which title and risk, as per Agreement, are passed on to appellant when the vehicles are excise cleared and placed on common carrier. Depending on order quantity, the manufacturer raises invoices after according discounts which are designated as commission/incentiv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nal supra, we hold that the discounts received on procurement of vehicles from the manufacturer are not liable to tax as 'business auxiliary services' and set aside the demand on that head On perusal of the judgments we find that in absence of invoking specific sub clause of BAS, under which the activity is covered the demand of service tax is unsustainable. On Tripartite agreement 9. The next argument advanced before us is that in order to merit classification under BAS, there must be three parties as stated in para 8 above. It can be seen that the expression used in the definition are 'Promotion or marketing or sale of goods produced or provided by or belonging to the client; or Promotion or marketing of service provided by the client, Any customer care service provided on behalf of the client and Procurement of goods or services, which are inputs for the client'. 10. Thus, it is clear from the definition that there must be three parties to any contract attracting levy of service tax under BAS first the owner of goods/provider of service, second the intermediary providing goods or services on behalf of the client and third is targeted audience/parties. Unless these three p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... trong force in the contentions raised by learned Counsel that in order to tax this account as a commission, there has to be necessarily three parties, seller, purchaser and a person who negotiates such transaction. From the records it is very clear that DEL had not negotiated purchase or sale on behalf of appellant or their customers; to our mind the deduction/commission is nothing but trade discount. In view of the factual position as ascertained from the records, we hold that the impugned orders demanding service tax under reverse charge mechanism from appellant are unsustainable and liable to be set aside. (c) Ferro Scrap Nigam Ltd. vs Commissioner of Central Excise, Raipur [2014(36) S.T.R. 955 (Tr.- Del.)] 9. As regards second criteria that the said activity has to be 'on behalf of the client', we find that the matter is no longer res integra and stand settled by various decisions of the Tribunal. Even the Board's Circular has clarified the same. For ready reference we may reproduce the relevant portion : Circular No. 137/111/2007-CX, dated 15-7-2007 "03. The matter has been examined by the Board. The view of the Board is that the incineration/shredding of bio-medical w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ussed above, it cannot be said that appellants have undertaken job work on behalf of the clients, in view of the fact that there were only two parties to the transaction in this case, whereas where the production is on behalf of the clients, there would be three parties. Since, services undertaken by the appellants is not covered by the definition, no service tax is attracted. Accordingly, impugned order is set aside and appeal is allowed". Further, in the case of Rathour Engg. Works - 2012 (27) S.T.R. 37 (Tri.-Del.), the Tribunal held as under :- "6. The appellants carry out the process of grinding and smoothening the edges, called fettling of the rough castings, received from principal manufacturers who clear the goods after carrying out further processes. Since there is no dispute that this activity of the appellants does not amount to manufacture, it can only be called processing not amounting to manufacture, which was not taxable during the period of dispute. We also agree with the appellant‟s plea that as held by the Tribunal in cases of M/s. Auto Coats. v. CCE, Coimbatore (supra), M/s. Gedee Weiler Pvt. Ltd. v. CCE, Coimbatore (supra) and M/s. Sonic Watches v. CCE, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llip; We find that leasing of tower space does not fit under any limb of the definition of Business Auxiliary Service quoted above. The adjudicating authority's observation that lease of tower space also promotes the service provided by the cellular telephone operator is not based on any sound logic or rationale. Further there is nothing in the Finance Act, 1994 to even suggest that there was a transplant of any part of BAS into telecom service with effect from 1-6-2007 which by implication means that the service was not taxable under Business Auxiliary Service prior to 1-6-2007. Thus, we are of the view that the demand of ₹ 74,27,181/- confirmed under Business Auxiliary Service on the amount received for lease of tower space on its microwave towers to various cellular operators is not sustainable." (f) Coca Cola (I) Pvt. Ltd. vs. Commissioner of Service Tax, Delhi [2015 (40) S.T.R. 547 (Tri. - Delhi)] '12. It is admittedly unusual to copiously and verbatim quote paragraphs after paragraphs from the adjudication order. However, it was felt necessary in the present case to do so to drive home the point that the adjudicating authority has been highly and conspicuously non-s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... liary Service'. We further find that even M/s. NHAI and MSRDC do not consider the toll collection by the respondents on their behalf as commission agent. They consider the respondents as in business of toll collection and even tax is collected at source u/s. 206C of the Income-tax Act from the instalments paid by the respondents. The said section is in respect of collection of tax of income tax at the time of receipt of amount. The respondents income is towards its own toll collection and they do not get any commission on account of collection of toll from NHAI/MSRDC. There is no deduction of tax at source under Section 194H which is towards collection of tax on commission income. Thus, the difference between the toll collection and the bid amount paid by the respondents to M/s. NHAI/MSRDC in no way can be termed as consideration for any service. The reliance placed by the Revenue upon Board Circular No. 152/3/2012-S.T., dated 22-2-2012 is not correct for the reason that the respondents has not collected such toll charges on commission or charges on behalf of NHAI/MSRDC. The toll collection is their own income and is not parted with NHAI/MSRDC as they are concerned only with the bi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... they have paid Service Tax on that part of the airfare on which the commission is normally paid by the Airlines. The appeal, stay application as well as misc. application stand disposed of as above (b) Akbar Travels India Pvt Ltd vs. CCE Lucknow - 2018 (14) G.S.T.L 248 - (Tri-All) - Para 4 On perusal of records, we find that the appellant was registered in the category of Air Travel Agent. Air Travel Agent is defined as a person engaged in providing any service connected with the booking of passage for travel by air. The appellant discharged his service tax liability as provided under sub-rule (7) of Rule 6 of Service Tax Rules, 1994. The appellant received some incentives from the Airlines. Considering the said incentive to be consideration required to be included in the total consideration received for the purpose of assessment, the appellant was issued with a show cause notice dated 7-5-2010 which culminated into the passing of impugned Order-in-Appeal. The Original authority has dropped the demand holding that the appellant had exercised option not to pay tax on commission at the rates specified in Section 66 of the Act and they were paying service tax according to option ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mine taxability. It is taxable only if and when any, or a particular, service is rendered to a recipient. Consideration is, undoubtedly, an essential ingredient of all economic transactions and it is certainly consideration that forms the basis for computation of service tax. However, existence of consideration cannot be presumed in every money flow. Without an identified recipient who compensates the identified provider with appropriate consideration, a service cannot be held to have been provided. In a taxation scheme that specifies the particular targets of taxation, tax liability will arise when a provider conforming to the relevant description in the charging section performs an activity that conforms to the relevant description in the charging section on the request, and for the benefit, of a recipient conforming to the relevant description in the charging section. Service, its taxability and the provision of the taxable service to a recipient, in that order, are necessary pre-requisites to ascertaining the quantum of consideration on which ad valorem tax will be levied. This fundamental will not alter in the scheme of the negative list too; a service that is clearly identifi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n‟ble Supreme Court of India in Union of India v. Delhi Chit Fund Association - 2015 (38) S.T.R. J202 (S.C.)]. The relevant text of Para 9 is reproduced as under: - 9. We shall first address the argument that what is excluded is only a service in relation to an activity which constitutes merely a transaction in money or actionable claim. The basis of this argument is the principle that a provision cannot exclude something from the definition, unless it is included in the definition. Section 65B(44) defines 'service' as any activity carried out by a person for another for consideration. This implies, as pointed out on behalf of the petitioner, that there are four elements therein: the person who provides the service, the person who receives the service, the actual rendering of the service and, lastly, the consideration for the service. The opening words of the definition consist of the above four aspects or characteristics and unless all the four are present, the activity cannot be charged with service tax. A mere transaction in money or actionable claim cannot under the ordinary notions of a service be considered as a service, neither can it be considered as falling within t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion received by them is for 'Business Auxiliary Service' under Section 73(1) of the Finance Act, 1994. The case law cited by the learned counsel for the assessee-appellants is not applicable in the instant case as the same was dealing with the advertising agencies. So, on the facts, the ratio laid down in the said case is not applicable to the present case. 18. The Appellant has submitted that the assessee in case of D.Paul was registered under 'Air Travel Agent' and demand was confirmed by Commissioner (Appeals) under 'Tour Operator Services' that was again reclassified by CESTAT under 'Business Auxiliary Services' without rendering any finding of the fact that: - (a) there existed 'Tripartite Agreement' between the Galileo India, Amadeus India and Calleo Distribution and the assessee with regard to targeted audience before whom the services provided by Galileo India, Amadeus India and Calleo Distribution were promoted; (b) The incentives were held to be taxable only on the sole ground that the case law cited before Bench related to Advertising agency; (c) On what basis the taxable category of Tour operator was changed to 'Business Auxiliary Services' (d) What was the consid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of gum only) it was held to be classified under Chapter 11 as the product of milling industry and not a gum fall under Heading 13.01. Submission of Mr. K. Radhakrishnan is that in the aforesaid situation the Tribunal should have referred the matter to the Larger Bench for consideration. Instead, the Tribunal chose to follow the decision in Hindustan Gum and Chemicals Ltd., holding at the same time that the order in Dilip Gum Industries does not come as a binding precedent, which according to the learned senior counsel was impermissible. 4. We are inclined to agree with the aforesaid submission of learned senior counsel. After finding a conflict of opinion rendered by two coordinate Benches in the aforesaid two cases, the only course of action open for the Tribunal was to refer the matter to the Larger Bench to resolve this conflict. It may also be recorded that against the judgment of the Tribunal in Hindustan Gum and Chemicals Ltd. the Department had filed an appeal in this Court and this Court has referred the matter back to the Tribunal observing that some of the aspects have not been properly dealt with by the Tribunal. The said judgment remanding the case back to the Tribuna ..... X X X X Extracts X X X X X X X X Extracts X X X X
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