9911796707
TMI Blog2024 (7) TMI 65X X X X Extracts X X X X X X X X Extracts X X X X ..... ny conditions of the Circular issued by the Ministry, it is for the concerned Ministry to take action against the appellants; for this reason, the amount charged by the appellants does not become a consideration for any other service. Ironically, the SCN does not specify what is the service rendered by the appellants to the airlines in addition to the service in relation to booking of tickets for passage through air. The argument that the convenience fee/ cancellation fee if permitted by the airlines should form part of the basic fare defies logic - the learned Adjudicating Authority simply refers to the definition of Business Auxiliary Service and accepts the contention of the SCN that the charges collected by the appellant are towards Business Auxiliary Service provided by the appellants but collected from the customers. The argument proposed in the SCN and accepted by the Adjudicating Authority would have made some sense if there was a tripartite arrangement or understanding between the airlines, the appellant and the customers. No such argument has been proposed in the SCN leave alone with evidence. It is a fallacy on the part of the Department to see every amount or payment re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are force in the submissions of the appellant that Department conducted audit of the Appellant in March and April 2010 for period 2006-07 to 2008-09 as mentioned in SCN dated 07.06.2012; the Appellant duly replied to all the communications received from the authorities from time to time; various SCNs on different issues were also issued to the Appellant on basis of information supplied by them - except for bald allegation of suppression of facts etc, no evidence showing the intent to evade payment of duty has been shown in the impugned order. Also looking in to the fact that issue being not free of doubt and being the subject matter of litigation all over, the appellants are entitled to entertain a belief that the Convenience Fee and Cancellation Fee are not chargeable to Service Tax - the extended period is not invokable in the facts and circumstances of the case. When the appellant succeeds on merits, there is no question of imposing any penalty. Appeal allowed. - MR. S. S. GARG, MEMBER (JUDICIAL) AND MR. P. ANJANI KUMAR, MEMBER (TECHNICAL) Present for the Appellant: Shri Arjun Raghavendera, Advocate Present for the Respondent: Shri Rajpal Sharma, Authorized Representative ORD ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the customer and the consideration for provision of such service can be paid by the airline in the form of commission; this makes it abundantly clear that an entity A can provide ATA service to a customer B for which the consideration can be paid by the airline C i.e., it is not necessary for the service recipient to pay for the service received; he relies on Hon ble Madras High Court in Airlines Agents Association vs UOI 2006 3 STR 3. He further submits that as per the provisions of Section 67 of the Finance Act, 1994, the tax on the services provided by an Air Travel Agent was payable at the prevailing rate of Service tax under Section 66, on the gross amount of commission received by the agent from the airlines; however, sub-Rule (7) of Rule 6 of the Service Tax Rules, 1994 provided an option to the Air Travel Agents to pay Service Tax on the basic fare as defined in this sub-Rule, at the rate specified under that sub-Rule; the Air Travel Agent had the option to pay service tax either on the basis of actual commission received(Option 1: On actual commission) or to pay service tax at the specified percentage of base fare as provided under Rule 6(7) (Option 2: On deemed commissio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... general description as held in CST, New Delhi Vs Globe Ground India Pvt Ltd [2015 (40) STR 417 (Del) and Premier Pest Control Pvt Ltd Vs CST2015 (38) STR 870 (Tri -Del) 3.2. Learned Counsel submits that notwithstanding the fact that the activities are clearly in relation to the booking of passage for travel by air ; if the activity is construed as a composite service where air ticket booking is held separate from the convenience of booking such air ticket online and the facility of cancellation of such air ticket, the essential nature of the composition of all the three activities is still one in relation to the booking of passage for travel by air; the convenience provided is exclusively for air ticket booking and so is the cancellation; therefore, even if the services are considered as composite services, by the essential character test, both the activities merit classification under the category of air travel agent services under 65(105)(l), rather than under the category of BAS under 65(105)(zzb). 3.3. Learned Counsel submits that notwithstanding the classification arrived as above, even applying the residuary principle, the services provided by the Appellant would be classifi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r tickets where the consideration in the form of commission is received from the airlines and further in relation to such booking of air tickets, a convenience fee is being paid; post 01.07.2012 also gives option to pay service tax at the rate prescribed under Section 66 / 66B on the gross amount received by the service provider or as at the rate prescribed under Rule 6(7) of the Service Tax Rules (at the rate of 0.618% and 1.236%) on the base fare; Thus, service tax once paid under Rule 6(7) of the Service Tax Rules, shall be considered as discharged of the service tax liability of the air travel agent; therefore, convenience fee is to be treated as consideration then the facilitating activity is to be treated to be in relation to the services of booking of tickets for travel by air; it cannot be classified as a separate service which stands distinct from the service of booking of air tickets. 6. Learned Counsel would submit further that the service for which convenience fee is charged, though considered as separate, would qualify to be bundled with the service of booking air tickets as per section 66F of the Act; the Education Guide, published by CBIC in 2012 explains the same by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s Ltd Vs CCE, Belgaum 2008 (229) ELT 641 (SC) Essel Mining Industries Ltd Vs UOI 2011 (270) ELT308 (Bom) Allen Diesels India Pvt. Ltd Vs UOI 2016 (334) ELT 624 (Del) M.F. Rings Bearing Races Ltd Vs CC 2016 (337) ELT 17 (Del) Bullion and Jewelers Association Vs UOI 2016 (335) ELT 639 (Del) 8.1. He further submits that the language of this Rule 6(7) is clear; once the option to pay service tax under this Rule has been exercised, it shall apply in respect of all air bookings during the year and cannot be changed under any circumstances; air travel agents opting this option are liable to pay service tax only as a specified percentage of basic fare instead of paying service tax on actual income earned in terms of Section 66 /Section 66B of the Finance Act; in other words, there is no further choice with the air travel agent so as not to pay service tax under this Rule 6(7) in respect of services to any person for whatever reason; finding in the Impugned Order is contrary to the mandate of the statutory provision and liable to be set aside; this option did not undergo any substantial change after the introduction of negative list regime; thus, the position remained same both under the pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ellant duly replied to all the communications received from the authorities from time to time; various SCNs on different issues were also issued to the Appellant on basis of information supplied by them; therefore, extended period cannot be invoked against the appellant in subsequent Show Cause Notices. The appellant entertained a bona fide belief that once Service Tax is paid under Rule 6(7), they need nor pay service tax on other elements; The issue involved is of classification and interpretation of statutory provisions thereof and therefore extended period cannot be invoked. Essential conditions which need to be satisfied for invoking the extended period are not fulfilled. There was no positive act on the part of the appellant with intent to evade payment of duty. 10.1. Learned Counsel submits that therefore, impugned order is not-tenable and is liable to be set aside. Demand of service tax demand amounting to INR 12,08,83,904/- pertaining to the period April 01, 2010 to October 31, 2013 stands barred by limitation. He relies on the following. Hyderabad Polymers (P) Ltd Vs CCE 2004 (166) ELT 151 (SC) ECE Industries Ltd Vs CCE 2004 (164) ELT 236 (SC) Maruti Udyog Ltd V CCE, 2002 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... man Air Courier (P) Ltd. Vs CCE, Jaipur 2004 (170) ELT 417 (T) Hindustan Steel Ltd Vs the State of Orissa 1969 (2) SCC 627. Bharat Wagon Engg. Co Ltd Vs CCE, Patna, (146) ELT 118 (Tri. Kolkata) Goenka Woollen Mills Ltd Vs CCE, Shillong, 2001 (135) ELT 873 (Tri. Kolkata). Bhilwara Spinners Ltd Vs Commissioner of Central Excise, Jaipur, 2001 (129) ELT458 (Tri. Del.) 11.1. Learned Counsel submits also that as per erstwhile Section 80 Of the Finance Act (applicable till 14th May 2015), no penalty can be imposed upon an assessee under Section 77 or Section 78 thereof where there is a reasonable cause for the failure on account of which, such penalty is sought to be imposed upon the assessee. He places reliance on Zee Limited Vs CCE 2006(4) S.T.R. 349(T); ETA Engineering Ltd Vs CCE 2004 (174) ELT 19 (Tri-LB) and Ram Krishna Travels Pvt Ltd Vs CCE 2007 (6) STR 37. 12. Shri Rajpal Sharma, Learned Special Counsel, appearing on behalf of Revenue, argues opposing various grounds of appeal filed by the appellant. As regards the ground that services provided to airlines and to the passengers are air travel agents service, he submits that it is not denied by any departmental authority and accord ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e form of commission, is received by the appellant from airlines, which is ultimately recovered from the passenger; these activities are undeniably covered in the category of air travel agent service prior to 1.7.2012 and in taxable service thereafter; no separate service relating to or connected with booking of the air tickets is provided by the appellant to the passengers to which the recovery of convenience fees can be attributed; Convenience fee or service fee , in addition to commission from the airlines for providing air travel agent service, is recovered not for providing any booking related service but for providing various additional services after booking of the ticket such as issuing of boarding passes, providing information relating to time of the flight, rescheduling or cancellation and such other details which involves use of internet, staff and various administrative expenses; since these services are provided post booking of tickets, these are not covered in the definition of air travel agent service and are different from the services provided in relation to booking of passage for travel by air. 12.2. Learned Special Counsel submits further that this finding is ful ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e airlines for facilitating the sale of tickets; the very name air travel agent clearly denotes that the appellant is an agent of the airlines; all activities relating to booking of the tickets and other customer care services are on behalf of the airlines only; passengers approach the appellant because they are the agent of the airlines and not due to any of their standalone services; it is evident from the sample copy of the agreement (para 3.3) between the appellant and indigo airlines stipulates that apart from booking of tickets, travel agent shall also carry out such other incidental and ancillary functions as may be required by indigo from time to time; para 4.3.c provides that the agent shall at all times ensure that the passenger is provided with accurate, authentic, correct and detailed information as regards Indigo s flight schedules, departure and arrival timings and such other information as may be relevant for the passenger s travel; these services are clearly post-booking of tickets and are provided on behalf of the airlines; the appellant s status as mere agent of the airlines is again clearly corroborated by paras 5.2 and 5.3 of the Master User Agreement. Which pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d Special Counsel submits that the appellant has not given any logic to support the claim that even cancellation of ticket is an activity related to booking of ticket and hence duty paid by them under Rule 6(7) of STRs covers duty leviable on ticket cancellation charges also; it is evident from the word cancellation that the activity is not a booking at all and instead it is related to nullification of the booking which is opposite of booking of the ticket. Learned Special counsel submits that there is an apparent contradiction in the claim of the appellant in as much as if it is a service relating to booking of ticket only, it is not known as to why cancellation charges are recovered from the passengers in addition to booking charges collected at the time of booking of the ticket; the appellants are paying Service tax on their own on cancellation charges w.e.f 1.7.2012, though they continued to pay service tax on air travel agent service under Rule 6(7) only. 15.1. Learned Special Counsel submits that the appellant s averment that cancellation charges are in the nature of penal charges or liquidated damages and hence not liable to service tax is rightly rejected by the Commissione ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cal ST 3 Returns and above did not pay service tax; had there been a bona fide intention on their part, the appellant should have sought clarification from some competent authority or a tax consultant in case they had any doubt regarding taxability of the above two services; they did not pay service tax even after receiving the SCN /OIO. Learned Special Counsel submits that the appellant s contention that department was fully aware of their activities as various SCNs on different issues were issued; audit of their records were conducted in 2010 for the period 2006-7 to 2008-9 does not carry any legal weight as no specific instance of audit para or SCN covering the current issue is mentioned in the appeal; the business of air travel agent being very complicated, it cannot be assumed just on the basis of few SCNs and one audit in 2010 that the department had known all activities of the appellant; it is all the more difficult because convenience fee or ticket cancellation fee h were not mentioned in the invoices or in the financial records; the appellant has also admitted that these were recovered under general heading Taxes, fees and surcharge ; the evasion has been detected by the D ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... applicable to the appellants? (iv) Whether in the facts and circumstances of the case, extended period is invokable? (v) Whether the appellants have rendered themselves liable to pay penalty? 19. The appellants are registered for Air Travel Agent Service; they provide their website to various customer who book tickets from various airlines for passage through air; the appellants receive a commission from the airlines for the same; the appellants also collect a convenience fee from the passengers and in cases where tickets are cancelled, the appellants charged a cancellation fee from the customers. It is the case of the Revenue that the convenience fee and the cancellation charges are not part of the Air Travel Agent Service and are in the nature of consideration received by them towards the Business Auxiliary Service rendered by them to the airlines, before 01.07.2012 and as a consideration towards taxable service after 01.07.2012; the appellants being the agent of the airlines and being bound by the agreement with the airlines, any consideration paid to them or received by them is to be treated as amounts paid by the service recipient i.e. the airlines. It is the defence of the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cified in sub-clauses (i) to (vi), such as billing, issue or collection or recovery of cheques, payments, maintenance of accounts and remittance, inventory management, evaluation or development of prospective customer or vendor, public relation services, management, or supervision, and includes services as a commission agent but does not include any activity that amounts to manufacture of excisable goods. Explanation. For the removal of doubts, it is hereby declared that for the purposes of this clause, (a) commission agent means any person who acts on behalf of another person and causes sale or purchase of goods, or provision or receipt of services, for a consideration, and includes any person who, while acting on behalf of another person (i) deals with goods or services or documents of title to such goods or services; or (ii) collects payment of sale price of such goods or services; or (iii) guarantees for collection or payment for such goods or services; or (iv) undertakes any activities relating to such sale or purchase of such goods or services; (b) excisable goods has the meaning assigned to it in clause (d) of section 2 of the Central Excise Act, 1944(1 of 1944); (c) manufac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uestion of their getting a commission from the airlines. It is not as if the air travel agents get a fixed commission or income from the airlines irrespective of the passages booked by them in favour of the customers in the nature of a retainer fee or guarantee money , at least that is not the case pleaded before us. Therefore, unless the air travel agents book the tickets and thereby unless they provide the services to the customers, they do not become entitled to any commission. Their commission is entirely depended on and connected with the passage they book for the customers. It cannot, therefore, be said that the commission that the air travel agents get from the airlines is independent of and distinct from the services that they provide to the air-travellers and are relatable to the business that they provide to the airlines. On the other hand, since there is no guarantee money given or no fixed commission given, which has no nexus with the bookings that an air travel agent achieves for the airlines, it has to be said that the air travel agent's commission is integrally connected with the booking that he makes and in the process the services that he gives to the customers ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gents to be for different services provided defeats the very purpose of the Statute. Therefore, it can not be said that the Convenience fee and cancellation fees are towards the Business Auxiliary Service rendered by the appellant to the Airlines. 24. The Show-Cause Notice issued to the appellants cites the order dated 24.09.2013 of the Secretary, Ministry of Civil Aviation and concludes that the appellant did not have proper reasons for charge of convenience fee or service fee for booking air ticket, re-issue, re-booking/ amendment fee of air ticket, when they were already earning commissions for the same from airlines; the reasoning given by the appellants that they are providing convenience to the passengers for online ticket, is not plausible; it appears that they are earning commission for the services provided to the airlines and the passengers; nobody charges any amount without providing any service and nobody charges fees for the same service from two persons i.e. one from airlines and another from passengers; it appears that the appellants are charging convenience fee/ service fee from the passengers for some other services not in relation to booking of passage for travel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es collected by the appellant are towards Business Auxiliary Service provided by the appellants but collected from the customers. The argument proposed in the SCN and accepted by the Adjudicating Authority would have made some sense if there was a tripartite arrangement or understanding between the airlines, the appellant and the customers. No such argument has been proposed in the SCN leave alone with evidence. It is a fallacy on the part of the Department to see every amount or payment received by the assessee is necessarily for and towards a consideration for provision of some service or the other. 26. We find that Tribunal has been consistent in holding that the charge of provision of Business Auxiliary Service cannot be slapped without identifying a particular sub-clause thereof. It may be argued that once the word Business Auxiliary Service is mentioned, the appellant is put to notice on the purport of the SCN and thereby an opportunity to defend himself is given. However, as seen above, the SCN, considers the charges collected by the appellant to be remuneration, at times to be for some service and at times to be for Business Auxiliary Service . Tribunal in the case of M/s. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... functions as may be required by Indigo from time to time. 28. We find that the issue of cancellation charges came for discussion before tribunal in the case of Globe Forex and Travels Ltd (Supra) and the bench held that cancellation fee paid to the Air Travel Agent in excess of the commission is exempt from the levy of service tax. Bench held that 8. As regards the service tax demand on the cancellation charges, these charges are collected from the persons booking the air ticket and this is not the amount received from the appellant s client - the airlines. It is not disputed that in respect of cancelled tickets, the airlines do not give any commission whatsoever to the appellant. In view of this, we hold that no service tax would be payable under Section 65(105) (l) of the Finance Act, 1994 on the cancellation charges which are a part of the airfare received by the appellant from the persons booking the air ticket who, subsequently, had cancelled the same. Moreover, in any case, in terms of exemption Notification No. 22/97-S.T., dated 26-6-1997 the amount received by the air travel agent, which is in excess of the commission received by him from the airline for the booking of pas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to be viewed to be in furtherance of one Business Interest or the other. For example, if a business house gets the house constructed, the service provider cannot be said to be rendering Business Auxiliary Service . Such a view would definitely defeat the scheme of service tax. We are of the considered opinion that when the activity or service has a specific characteristic of a particular service, the same can not be classified under a general category. We are of the considered opinion that the service that the appellants are rendering, is classifiable as Air Travel Agents Service. 32. We find that the larger Bench of the Tribunal in the case of Kafila Hospitality and Travels Pvt. Ltd. (supra) held that: 70. The two competing entries are air travel agent service and BAS . It would be seen from the definition of air travel agent that it includes all services connected with or in relation to the booking of passage for travel by air. The services in question are booking of airlines tickets and for achieving a pre-determined target, the air travel agent also receives an additional amount in the form of incentives/commission from the airlines or the CRS Companies. The receipt of incenti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the contract. In case the customer does not show up for availing the service, the supplier may retain or forfeit part of the consideration or security deposit or earnest money paid by the customer for the intended supply. 11.1. It is a common business practice for suppliers of services such as hotel accommodation, tour and travel, transportation etc. to provide the facility of cancellation of the intended supplies within a certain time period on payment of cancellation fee. Cancellation fee can be considered as the charges for the costs involved in making arrangements for the intended supply and the costs involved in cancellation of the supply, such as in cancellation of reserved tickets by the Indian Railways. 11.2. Services such as transportation travel and tour constitute a bundle of services. The transportation service, for instance, starts with booking of the ticket for travel and lasts at least till exit of the passenger from the destination terminal. All services such as making available an online portal or convenient booking counters with basic facilities at the transportation terminal or in the city, to reserve the seats and issue tickets for reserved seats much in advanc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... after. In fact, the taxable service is also defined to mean any service provided or to be provided to any person (any customer before amendment), by an air travel agent in relation to the booking of passage for travel by air. 36. It is pertinent to note that the definition does not define the service to be just booking ticket but a service provided or to be provided by an Air Travel Agent in relation to the booking of passage for travel by air. Even going by the definition, it can not be said that the activities are not in relation to the service as an air travel agent. After analysing the facts of the case, statutory provisions, judicial pronouncements, as discussed above, we are of the considered opinion, that the Convenience fee and Cancellation Charges collected by the appellants are towards the service rendered by them as an Air Travel Agent only and no other service is rendered by the appellant either to the customer or the airlines. The liability to Service Tax having been discharged, as a percentage of base fare under Rule 6(7) of Service tax Rules, no additional liability can be fastened to the appellant before 01-07-2012 i.e. before the negative list regime has been put ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o be identified. Post 01.07.2012, there should be an express or implied reciprocity and a consideration for the same. In the instant case, as far as the Convenience fee and cancellation charges are concerned, there is reciprocity and flow of consideration between the customer and the appellants and the airlines is not involved, notwithstanding the fact that they collect the fare and cancellation charges for the booking of ticket for passage through air; airlines have nothing to do with the charges collected by the appellant; service or tolerance, if any, flows from the appellant to the customer, who pays the consideration. Post 1.7.2012 also an option has been given to the appellants to pay service tax at the rate prescribed under Section 66 / 66B of the Act on the value of services as determined in terms of Section 67 of the Finance Act read with Service Tax (Determination of Value) Rules, 2006 ( Valuation Rules') or as a percentage of Basic fare under Rule 6(7) of the Service Tax Rules. 39. We are in agreement with the contention of the appellants that if convenience fee is to be treated as consideration then the activity for which it is to be treated so is the activity of fa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f clothing free of cost per day; such service is an ancillary service to the provision of hotel accommodation and the resultant package would be treated as services naturally bundled in the ordinary course of business. We find in view of the above, the activities undertaken by the appellant are treated as separate services can be bundled together and be classified as Air Travel Agent Service. We find that Tribunal in the case of Mody Education Foundation (Supra)held that Hostel services and education services provided by boarding school are naturally bundled in ordinary course of business; education service gives essential character to such bundle. We are in agreement with the appellants claim that the principle is squarely applicable in the instant case since service of online booking for which convenience fee is charged is naturally bundled with service of booking tickets and the service of booking tickets gives essential character to such bundle. Therefore, the benefit of Rule 6(7) which is available to service of booking tickets is also available to the service of online booking. 42. It is the contention of the department that the convenience fee is not added to the basic fare. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Tribunal in the case of British Airways Plc India (Supra). 45. We have gone through the submissions of Revenue and the case law relied upon by them. In view of the discussion as above, we do not find any force in the submissions on behalf of the Revenue. We are of the considered opinion that the Convenience Fee and Cancellation Fee are not relatable to any other service provided by the appellant and the Service Tax being discharged in terms of Rule 6(7) of Service Tax Rules, 2006, no additional liability of Service Tax can be fastened to the appellant on account of Convenience Fee and Cancellation Fee either before or after 01-07-2012. The appeals succeed squarely on merits. 46. Learned Counsel for the appellants also based his submissions on limitation. He submits that in the past the Department has been invoking extended period in the notices, the SCN issued in the present case which is a subsequent Show-Cause Notice, extended period of limitation cannot be invoked at all; there was no fraud or collusion or willful misstatement or suppression of facts or contravention of any provision of the Finance Act or the Rules made there under, with intent to evade payment of tax on the ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
