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TMI Blog2024 (7) TMI 1402X X X X Extracts X X X X X X X X Extracts X X X X ..... is not subject to levy and collection of service tax. The Coordinate Bench of the Tribunal set aside the demand raised on outbound tours. By judicial discipline, following the decision in the case of M/s Weldon Tours Travels Pvt. Ltd. [ 2024 (5) TMI 371 - CESTAT NEW DELHI ], the demand of service tax for the disputed period on outbound tours cannot sustain and requires to be set aside. Whether the appellant is liable to pay service tax under Business Auxiliary Services on incentives received for use of Amadeus software? - HELD THAT:- The said issue is settled by the Lager Bench in the case of M/s. Kafila, Hospitality Travels Pvt. Ltd. [ 2021 (3) TMI 773 - CESTAT NEW DELHI (LB) ] where it was held that ' Consideration, which is taxable under Section 67 of the Finance Act, should be transaction specific. Incentives, on the other hand, are based on general performance of the service provider and are not to be related to any particular transaction of service. It needs to be noted that commission, on the other hand, is dependent on each booking and not on the target. If the air travel agent does not achieve the predetermined target, incentives will not be paid to the travel agents.& ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The Ld. Counsel Ms. Radhika Chandrasekhar, appeared and argued for the appellant. It is submitted that the appellant conducts outbound tours. These package tours (outbound tours) are arrangement for tours outside India. The appellant has divisions which include tour division, ticketing division, foreign exchange division, visa division and miscellaneous division. With respect to outbound tours, when the client contacts the tour division of appellant, the client is given a quotation for the package. Once the quotation is accepted by the client, the tour division on behalf of the appellant raises an invoice on the client for the complete package. This includes ticket, tour arrangement abroad, visa and forex, on the basis of the requirement of the client. The service charges are received by appellant in Indian currency. 5. The ticketing division raises an inter-division invoice on its tour division for the purpose of booking air tickets with applicable service tax. The appellant has duly discharged the service tax on booking of air tickets. The tour division coordinates with persons located abroad for the purpose of making arrangements of accommodation, sightseeing, guide, transport ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... de India, the outbound tours cannot be subject to levy of service tax within India. This aspect was also clarified by various Circulars/Trade Notices issued by various Commissionerates which are detailed below:- (a) Trade Notice issued by Delhi Commissionerate in Trade Notice No.71- CE (Service Tax) / 97 dated 29.08.97. Paragraph 3.6 Trade Notice reads as under: 3.6 service tax on services rendered by tour operators is only on services rendered in India in respect of a tour within Indian territory. Services rendered by tour operators in respect of outbound tourism i.e. for tours abroad, do not attract service tax. In case of a composite tour which combines tour within India and also outside India, service tax will be leviable only on services rendered for tours within India provided, separate billing has been done by the tour operator for services provided in respect of tours within India . (b) Trade Notice No.1/2000 dated 27.04.2000 by Pune Commissionerate. (c) Trade Notice No.110/97 dated 28.08.1997 by Madurai Commissionerate. Notification No.38/2007-ST dated 23.08.2007 which provides for abatement percentage for package tour increased to 75% (Notification No.1/2006-ST amended). ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... after referred to as the Finance Act), the Central Government, on being satisfied that it is necessary in the public interest so to do, hereby exempts the taxable service of the description specified in column (3) of the Table below and specified in the relevant sub-clauses of clause (105) of section 65 of the Finance Act, specified in the corresponding entry in column (2) of the said Table, from so much of the service tax leviable thereon under section 66 of the said Finance Act, as is in excess of the service tax calculated on a value which is equivalent to a percentage specified in the corresponding entry in column (5) of the said Table, of the gross amount charged by such service provider for providing the said taxable service, subject to the relevant conditions specified in the corresponding entry in column (4) of the Table aforesaid : S. No. Sub-clause of clause (105) of Section 65 Description of taxable service Conditions Percentage 2. (n) (a) Services provided in relation to a tour, by a tour operator, - (1) where the tour operator provides a package tour; (2) where the services provided are other than in relation to a package tour. The bill issued for this purpose indicate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion of such services as are performed outside India:] Provided that where such taxable service is partly performed outside India, it shall be treated as performed outside India: (emphasis supplied) 12. It is submitted by the Ld. Counsel from clause (ii) of Rule 3 it can be seen that tour operator service when partly performed outside India it shall be treated as performed outside India. In the present case, though the customer might have made payments in Indian currency since the tour happens entirely outside India, the said services are not subject to levy of service tax within India. 13. The decision of the Hon ble Supreme Court in the case of All India Federation of Tax Practitioners versus Union Of India (2007) 7 S.T.R. 625 (S.C.) at para 7 and para 20 was referred to by the Ld. Counsel. The Hon ble Apex Court observed that the service tax is a destination based consumption tax. The Tribunal in the case of M/s. Cox Kings India Limited 2014 (35) S.T.R 817 (Tribunal-Delhi) considered the issue as to whether outbound tours would be subject to levy of service tax under Tour Operator Services. It was held that the consideration received for operating and arranging outbound tours (pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ings dated 19.10.2023 is reproduced as under:- 47. The earlier decision in Cox Kings had not determined its decision on the given set of facts but on restricted interpretation of the definition of tour operator as prevailing then. The stated interpretation of the definition is not consistent with the revision in the definition. Hence, the division bench assigned to dispose off this appeal will have to decide the outcome without placing reliance on the interpretation of the Principal Bench relied upon by the appellant. All the issues in the appeal as well as the order impugned therein will have to be decided on merits. 48. The referral bench at Mumbai also sought opinion of larger bench on the provision of service by appellant within the taxable territory. As seen from the facts of the case, the dispute in its entirety pertains to the period prior to April 2011. The then prevailing regime of tax on services was limited to enumerated activities rendered to a person (or designated recipient) by a person and there was no requirement for determining taxable territory for levy of tax; as long as both receiver and provider were in India, such services were taxable. With the transition in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Tribunal held that the incentives received cannot be subject to levy of service tax. It was observed that mere selection of software or exercising a choice of software would not result in any promotional activity. This decision was followed by the Tribunal in the case of Asveen Air Travels (P) Ltd versus Commissioner of GST C. Ex, Chennai 2022 (64) G.S.T.L. 551 (Tri. Mad) (21.04.2022). In the appellant s own case the Tribunal vide Final Order No.51822/2021 dated 17.09.2021 has set aside the demand. It is prayed that the demand raised under Business Auxiliary Services may be set aside. 20. The Ld. Counsel argued on the grounds of limitation also. It is submitted that the show cause notice dated 07.10.2008 has been issued invoking the extended period pursuant to the audit conducted by the department for the period 10.09.2004 to 31.12.2007 under Tour Operator Services and for the period 01.07.2003 to 31.03.2008 under Business Auxiliary Services. The department has not alleged any specific act of suppression with intend to evade payment of service tax against appellant. None of the ingredients under proviso to Section 73 of the Finance Act 1994 has been stated in show cause notice. Mor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... conducted by the officers of the department. The appellant had not informed that they had received incentives from M/s Amadeus India Limited and also had not informed that they have received charges towards outbound tours from their customers. These acts are suppression of facts with intent to evade payment of duty. The invocation of extended period and the penalties imposed are therefore, legal and proper. It is prayed that appeals may be dismissed. 25. Heard both sides. 26. The issues to be decided are:- (i) Whether the appellant is liable to pay service tax under Tour Operator Services on charges received for outbound tours? (ii) Whether the appellant is liable to pay service tax under Business Auxiliary Services on incentives received for use of Amadeus software? 27. The relevant statutory definitions of tour , tour operator service has been reproduced earlier. As per the definition, tour means, a journey from one place to another, irrespective of the distance between such places. In the present case, undisputedly, the tour has taken place outside India. The main contention put forward by the Ld. AR is that, since the planning, scheduling, organizing of the foreign tour happen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bject to levy and collection of service tax. The Coordinate Bench of the Tribunal set aside the demand raised on outbound tours. By judicial discipline, following the decision in the case of M/s Weldon Tours Travels Pvt. Ltd. dated 02.05.2024, we hold that the demand of service tax for the disputed period on outbound tours cannot sustain and requires to be set aside. 31. The second issue is with regard to the demand of service tax on incentives received by the appellant for use of Amadeus software. The said issue is settled by the Lager Bench in the case of M/s. Kafila, Hospitality Travels Pvt. Ltd.,(supra). The relevant para reads as under:- 72 . The contention advanced by Learned Counsel of the interveners is that incentives cannot be construed as consideration and if it is so, no service tax can be levied on this amount because under Section 67 of the Finance Act, service tax is leviable on consideration , which is the gross amount charged by the service provider for rendering a particular taxable service. 73 . It would, therefore, be appropriate to examine the scope of the term incentives . Incentives are generally given to encourage performance of a party. The factual position ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ther amount which is calculated not for providing such taxable service cannot be a part of that valuation as the amount is not calculated for providing such taxable service. This, according to the Supreme Court, is the plain meaning attached to Section 67, either prior to its amendment on 1 May, 2006 or after this amendment. 77 . Consideration, which is taxable under Section 67 of the Finance Act, should be transaction specific. Incentives, on the other hand, are based on general performance of the service provider and are not to be related to any particular transaction of service. It needs to be noted that commission, on the other hand, is dependent on each booking and not on the target. If the air travel agent does not achieve the predetermined target, incentives will not be paid to the travel agents. 32. The decision in the case of M/s. Kafila, Hospitality Travels Pvt. Ltd., was followed by the Tribunal in the case of Asveen Air Travel (P) Ltd., versus Commissioner of GST CE, Chennai 2022 (64) G.S.T.L. 551 (Tribunal Chennai). After appreciating the facts and following the decision of the Larger Bench in the case of M/s. Kafila, Hospitality Travels Pvt. Ltd., we are of the consid ..... X X X X Extracts X X X X X X X X Extracts X X X X
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