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TMI Blog2020 (10) TMI 286X X X X Extracts X X X X X X X X Extracts X X X X ..... servation System (CRS) in return for commission on each booking for air travel or accommodation effected on the system by subscriber travel agents in India. In addition, 'marketing service fee' was also to be received by them for providing assistance services in operating the computer reservation system (CRS) software. 2. Proceedings were initiated against the appellant-assessee for recovery of service tax that had not been discharged as 'intermediary' on 'commission' and 'marketing service fee' received for the period from 1st July 2012 to 31st March 2016 and which, in accordance with rule 9(c) of Place of Provision of Service Rules, 2012 that deems the location of the provider as the place of provision, has been rendered in the taxable territory. The proposal in show cause notice dated 19th April 2017 for recovery of Rs. 50,65,35,795, under section 73(1) of Finance Act, 1994, along with applicable interest under section 75 of Finance Act, 1994, was confirmed and penalty of like amount imposed under section 78 of Finance Act, 1994 with further penalty of Rs. 5000 under section 77 of Finance Act, 1994 vide order-in-original no. 96/COMMR/(DR. KNR)/CGST & CEX/MC/2018-19 dated 6th No ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rketing fee' received between October 2006 and February 2010 which is yet pending for adjudication. For the period after February 2010, it appears that a conscious decision was taken not to issue notices as the condition of 'used outside India' was excluded in the relevant Rules for qualifying as export of service. The present proceedings, though, relate to the period after the 'negative list' regime was notified in July 2012, with Place of Provision of Service Rules, 2012 as the pivot for primary evaluation of one among the several conditions, stipulated in rule 6A of Service Tax Rules, 1994, to be fulfilled without exception for qualifying as export. 5. There is no dispute that, for want of exclusion from the definition of service, of enumeration in the negative list or of exemption under any notification, the transaction is otherwise taxable. The claim to being an exporter is based on the contract, asserted to be on principal-to-principal basis, which places the recipient in Singapore and obliges that entity to remit the dues in convertible foreign currency. The scope and terms of the contract were dealt with at length by Learned Counsel and, placing emphasis on the decision of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ervice, in several decisions arising from proceedings initiated against airline operators. Prominent among these are British Airways v. Commissioner of Central Excise [2014-TIOL-979-CESTAT-DEL] and Jet Airways (I) Ltd v. Commissioner of Service Tax, Mumbai [2016 (8) TMI 989 - CESTAT MUMBAI]. Access to the system is provided to travel agents (subscribers) whose incentivizing through appropriate share of the ticket discounts offered by the airlines has been held by the Tribunal, in D'Pauls Consumer Benefit Ltd v. Commissioner of Central Excise, New Delhi [2017 (52) STR 429 (Tri-Del)], to be taxable consideration for rendering 'business auxiliary service' in the erstwhile regime. Entities, contracted by competing owners/licencees for marketing the use of their software platforms among travel agents in return for a share in the commission, were held by the Tribunal, in Blue Star Air Travel Services Pvt Ltd v. Commissioner of Service Tax [2018-TIOL-1233-CESTAT-AHM], to be taxable for rendering of 'business auxiliary service' to the licenced holder of the software. The underlying web of transactions were segregated as different taxable services though, as pointed by Learned Counsel with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ently limited impost to specific services and describing the activity to be taxed, could not do without stipulating the recipient but for whom service would remain unfulfilled. The recipient, being the destination of the service and the source of the consideration, made manifest the rendering of service. The description of the levy as 'destination based consumption tax' by the Hon'ble Supreme Court in All India Federation of Tax Practitioners v. Union of India [(2007) 7 SCC 527)] was the ray of sunbeam illuminating a dawn that, at its meridian zenith, inspired the decision of the Tribunal in Paul Merchants Ltd v. Commissioner of Central Excise, Chandigarh [2012-TIOL-1877-CESTAT-DEL] to place the recipient inextricably within the context of tax on services. Not least of such pronouncements is the decision of the Hon'ble Supreme Court in Union of India v. Intercontinental Consultants and Technocrats Pvt Ltd [2018 (10) GSTL 401 (SC)] that restricted the taxable value to the extent of description of the taxable transaction manifested through provider and recipient. 11. That design, comprising specific descriptions, encapsulated within the provider-recipient engagement, and considerati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct, 1994 not only to cover all 'activities' save those exogenic to, and excepted in, the definition but also those excluded out of, and exempted from, levy in 'negative list' or by notification. Also, here the expression 'for another', as substitute for 'to any person', eliminates the erstwhile touchstone of 'recipient' for determination of the rendering of service and thus conflates the definition and 'service' in its essential form; resort to 'recipient' was henceforth restricted to situations, specifically articulated, where such recognition is necessary for harmony with the charging provision. In the new scheme of tax, 'consideration', as also the 'provider', continued to be no less vital than before for discerning the service transaction even as 'recipient', with the obliteration of carefully crafted boundaries inherent to the definition of 'taxable services' by the generalized explication as the substituting of self-performance, had ceased to be. 13. Impliedly, the obligation to recompense the provider devolves on the person who opted for hiving off the undertaking of an activity. Consequently, the extent, and not just the measure of value, of service, no longer bound by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lity of the definition of 'service', with the potential to unhinge the integrity of the charging provision and of rule 3, for taxing of transactions occurring in the 'taxable territory', were sheared for re-orientation in the interests of harmonious blending within the scheme of taxation. In the dispute before us, we are not concerned with rule 8 of Place of Provision of Service Rules, 2012; to the particular aspect that rule 9(c) was designed to address, we shall turn presently after taking into consideration the rival submissions as this very incorporation, as successor of 'business auxiliary service', is the sticking point in the controversy before us. 14. We have posited in our exposition supra that the scope of taxable service in the erstwhile regime was determined along the border of the provider-recipient transaction that frames the image suggested by the description and to which the consideration was subordinated as a measure of the value for tax. Almost all the enumerations were formulated in 'by - to' equations reflecting duality of provision and consideration flows in service transactions. The only exception was 'business auxiliary service', defined in section 65(105)(1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dispute upto 1st May 2006, was not 'business auxiliary service' and that the benefit of Export of Services Rules, 2005 was available, and held as squarely applicable to their dispute, decided in Abacus Distribution Systems (India) Pvt Ltd v. Commissioner of Service Tax, Mumbai-I [2014-TIOL-1617-CESTAT-MUM]. The rulings of the competent authority in the matter of Go Daddy India Web Services Pvt Ltd [2016 (46) STR 806 (AAR)] and of Universal Services India Pvt Ltd [2016 (42) STR 585 (AAR)] were also cited by him. 17. Learned Counsel relies on the decision of the Tribunal in Sunrise Immigration Consultants Private Limited v. Commissioner of Customs, Central Excise & Service Tax, Chandigarh [2018 (5) TMI 1417- CESTAT Chandigarh holding that referral of potential students/customers of banks/educational institutions by the appellant for commission is not taxable as 'intermediary' , in Evalueserve SEZ Pvt Ltd and Anr v. Commissioner of Customs, Central Excise & Service Tax, Chandigarh [2018 (12) TMI 1242-CESTAT Chandigarh] holding that receipt of consideration from overseas client excluded them from tax as 'intermediary', in Valmiki Consultants Pvt Ltd v. Commissioner of Customs & Centr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g fiction in Place of Provision of Service Rules, 2012 is invalidated merely because of the location of provider and/or receiver outside the taxable territory. She also cited the decision of the Hon'ble Supreme Court in Joint Commr of Income Tax, Surat v. Saheli Leasing & Industries Ltd [2010 (253) ELT 705 (SC)] and in Krishena Kumar and ors v. Union of India and ors [(1990) 4 SCC 207]. 19. It may be germane that Learned Counsel sought to press into service the decision of the Tribunal in Principal Commissioner of Central Excise, Pune-I v. Advinus Therapeutics Ltd [2016-TIOL-3138-CESTAT-MUM] and, in particular, the proposition that '12.....The 'negative list' regime was not intended to be either detrimental or beneficial to existing assessee is acceptable as such intent was specifically sanctioned by legislation. The respondent, prior 1st July 2012, was eligible for all benefits as the service rendered by them was treated as export with the recipient of service being outside the country. The corresponding provision in Place of Provision of Service Rules, 2012 is rule 3 which brings the service within the ambit of export of service in rule 6A of Service Tax Rules, 1994. The reven ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ew paradigm, every activity, save for specific exclusions, that involve a 'provider' and 'consideration', is 'service' but the absence of description, and, that too, qualified with 'any other person' therein, eliminates borderlines segregating each service. That absence is a deliberate consequence of superfluity of the extent of activities or 'service' in the general scheme of taxation and, conversely, where description is warranted, the span of activity is to be inferred from, 'consideration' paid for it. Thus, in normal circumstances, receipt of 'consideration' suffices for saddling the 'provider', subject to exclusions and exemptions afforded by section 66D and section 93, with levy of tax as 'service' rendered in 'taxable territory' under the authority of section 66B of Finance Act, 1994 much like it was in the classificatory regime. The 'out of normal' is the contriving, in specific circumstances, of 'taxable territory', under authority of section 66C of Finance Act, 1994 by recourse to Place of Provision of Service Rules, 2012 which is designed to locate the delivery of service within the 'taxable territory', by reference to provider, in rule 9, or recipient, in rule 8 and, i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... utonomy and to be inferred from the nature of the 'consideration', will relegate the corresponding activity to that of 'intermediary' which is subordinate to a 'main service' on own account within which it is rendered. By designating of the activity of 'intermediary' as 'service' but not on its own account to be distinguished by provision of 'main service' on own account, it would appear that while being 'provider' - one of the two essential determinants of 'service' - the 'consideration' received, as it must for coverage under Finance Act, 1994, by the 'intermediary' is lesser than, or subordinate to, the consideration that corresponds to performance of the 'main service' on own account. Here, irrespective of the delivery of the 'main service' in the 'taxable territory' or otherwise, the 'consideration' received by the 'provider' in India is deemed to have been for service rendered in India. From this would emerge a pattern in which 'services' coalesce within a 'main service' detracting from independent existence of each of them except for the description corresponding to 'consideration' of the coalesced 'main service' rendered on own account which is characterized by the recipien ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ection 65B(44) of Finance Act, 1994, to airlines and hotels, on the back of the Abacus 'computer reservation system' and it is from the fare and tariff, respectively, recovered from the traveler through the subscriber, that airlines and hotels pay for the facilitation service. The airlines/hotels and the travel agents are not bound to each other and nor do either contract for exclusive use of the Abacus system. It is upon the volumes generated by the subscriber on Abacus that the licencee of the software is paid and it is from this payment that the assessee, as well as subscribing travel agent, are compensated by the licencee which flows from the agreement of the licencee with the assessee and of the assessee with the travel agent. In all of these multiple transactions that enable a traveler to fly or occupy accommodation, the fare and tariff is in the public domain and the airline/hotel offers commission on that to the parent company of the appellant; 'consideration' for all other transactions pertaining to the ticketing/booking are constrained within this consideration to derogate from autonomy of negotiation and progressive summation of consideration to paid by the ultimate cons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... scharge of tax liability. 26. Learned Counsel has also made submissions on the bar of limitation and did plead for waiver of penalty under section 80 of Finance Act, 1994. Attention has also been drawn to the deficiency of evidence to sustain the invoking of section 78 of Finance Act, 1994. We also find that these submissions may require fresh consideration in the light of our finding that 'commission fee' is not consideration for export of service. Moreover, the appeal of the appellant-assessee on the rejection of refund claims stands partially decided on the basis of our findings but would yet remain incomplete unless the activity for which 'marketing service fee' is the consideration has been subjected to the test of conformity with 'intermediary' service. That portion of the refund claim that has been rejected on the ground of lack of nexus and bar of limitation will require to be looked into afresh in the light of several judicial pronouncements that have settled identical disputes. 27. For these reasons, we hold that the appellant-assessee has failed to discharge the tax liability on 'commission fee' received as 'intermediary' for marketing and promoting of 'computer reserv ..... X X X X Extracts X X X X X X X X Extracts X X X X
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