TMI Blog2024 (12) TMI 942X X X X Extracts X X X X X X X X Extracts X X X X ..... he legal position insofar as incentives are concerned and those earned by members of the IATA is no longer res integra and stands authoritatively settled in Kafila Hospitality [ 2021 (3) TMI 773 - CESTAT NEW DELHI (LB)] - the petitioner appears to have a strong prima facie case and that the test of likelihood of success is liable to be answered in its favour. Whether circumstances exist warranting this Court invoking its extraordinary jurisdiction under Article 226 of the Constitution and waiving the condition of pre-deposit as imposed by Section 35F of the Act? - HELD THAT:- On evaluating whether the condition of pre-deposit is liable to be waived, it is necessarily needed have to approach the issue bearing in mind the decision of the Larger Bench of the CESTAT insofar as incentive payments are concerned. Viewed in that light, there are no hesitation in coming to the conclusion that insofar as this part of the demand is concerned, it would clearly qualify the test of rare and exceptional cases. Petition allowed, subject to the petitioner discharging its service tax liability with respect to the demands which stand created and quantified in the Order-in-Original, and more particula ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which stood raised against the petitioner was with respect to commission income and while dealing with this the Adjudicating Authority took note of a letter dated 05 March 2019 in which the petitioner had admitted that it had short paid service tax amounting to INR 1,39, 32,179/-. It was on the aforesaid basis that the Adjudicating Authority proceeded to compute the demand payable in respect thereof. Insofar as the contention of amounts standing in the positive in the shape of CENVAT credit is concerned, the authority had noted that no documentary evidence of existing CENVAT credit had been placed on the record. 5. However, the principal demand appears to have come to be created by virtue of certain incentive payments which were received by the petitioner in connection with the use of the Computer Reservation System and which enabled it to access the online computer booking network. Insofar as this aspect is concerned, the Adjudicating Authority had observed as follows: 25. The Computer Reservation System (CRS) companies, also known as Global Distribution Companies (GDS), provide an on-line computer system which enables exchange of comprehensive information between the airline and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ently. With the increased usage of CRS, business and market share increases. Therefore, as a marketing or sales strategy, CRS/GDS companies give incentive/commission to the assessee in order to increase the use of their CRS facility and thereby augmenting their own revenue. The fact that the CRS is being used by the assessee themselves does not alter the situation as by increased use of CRS in booking the Air tickets etc., the interest of CRS/GDS companies are also promoted. Further, it appears that on adding/booking of tickets of more and more airlines to/from their CRS/GDS companies receive commission from airlines and out of the said commission a part of the commission is paid to the Air Travel Agents who are using their GDS. 30. The assessee appears to be liable to pay Service Tax on such services provided by them as per the provisions of Section 66B of the Act ibid. 31. The tax liability for the period 2013-14 to 2016-17 is calculated as under based on CRS income declared by the assessee vide Table C of letter dated 05.03.2019 (RUD-III supra): Table-10 (in Rs.) Year CRS Income Rate of service tax Tax payable including cess 2013-14 (01.10.2013 to 31.03.2014) 5440609 12.36% 6724 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rovided by the appellant were rightly covered under BAS . In fact, the Division Bench also observed that since the appellant was providing tour operator services, the commission received by them is for BAS under Section 73(1) of the Finance Act. There is no discussion in the decision as to why the commission received would fall under BAS . The decision also does not specify the particular sub-clause of Section 65 (19) of the Finance Act that defines BAS . It also needs to be noted that on behalf of the appellant it was contented that no marketing or promotion was conducted by the appellant since it is the choice of the appellant to choose a particular CRS Company and that the customer also does not even know under which CRS system the ticket was booked, but there is no discussion on this aspect nor is there any discussion on the submission of the appellant that the amount received from the CRS Companies cannot be treated as deemed commission since it was merely an incentive and did not attract service tax. 83. These contentions as to whether the air travel agent is promoting the business of the airlines or the CRS Companies have been dealt with in the earlier portion of this order. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... do something beyond his/her capacity. The purpose behind giving incentive is to encourage someone to increase the productivity. As incentive is directly related to the performance of the individual/company, therefore, it cannot be related as the consideration for service and hence, cannot be treated as value of service for the purposes of levy of tax, because it was contingent on performance. The incentives could not be subjected to service tax. 62.3 On considering the case made out in the SCN on the basis of material placed on record by the noticee and the submissions made by the noticee, I observe that it was the noticee, who while explaining the difference in the amounts of commission received by them commission shown in the Form 26AS and that shown in the balance sheets had, in TABLE E of their letter dated 05.03.2019 had stated that a part of the said difference was PLB/Incentive . Therefore, the burden of proof was on the noticee to prove, with documentary evidence in the form of contracts entered into by the noticee with the airlines and the IATA agents and which were in the possession of the noticee, that those mounts shown under the column of PLB/INCENTIVE represented PLB ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the case law cited by the noticee in respect of the demand under discussion is not relevant to the issue involved. In view of the above discussion, I hold that service tax is leviable on the amounts on which service tax has been worked out in para 37 of the SCN as shown in the Table-11 above. Accordingly, I confirm demand of service tax amounting to Rs. 47,20,541/-. 11. However, and undisputedly the legal position insofar as incentives are concerned and those earned by members of the IATA is no longer res integra and stands authoritatively settled in Kafila Hospitality. 12. We have also been shown an order passed by the Supreme Court on 15 May 2023 in Civil Appeal 3702/2023 and where it took on board the statement of the learned Additional Solicitor General, who had conceded to the fact that no appeal had been preferred by the Revenue against the judgment of the CESTAT in Kafila Hospitality. 13. All of the above, leads us to conclude that the petitioner appears to have a strong prima facie case and that the test of likelihood of success is liable to be answered in its favour. 14. That only leaves us to examine whether circumstances exist warranting this Court invoking its ext ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment made to Section 35-F of the Central Excise Act, 1944 (hereinafter referred to as the CE Act ) (which section is pari materia to Section 129-E of the Act and also requires a pre-deposit in the case of an appeal), held that prior to the amendment of Section 35-F of the CE Act, a discretion was available to the Central Excise and Service Tax Appellate Tribunal (hereinafter referred to as Cestat ) to consider financial hardship and accordingly determine the pre-deposit amount post the amendment, a direction of waiver of the pre-deposit would be contrary to the express legislative intent of the amendment. However, it further held that the jurisdiction of the High Court under Article 226 cannot be taken away and that such power should be used only in rare and deserving cases where a clear justification is made out for such interference as follows: 9. A direction, therefore, to the Cestat that it should waive the pre-deposit would be contrary to the express legislative intent expressed in the amended Section 35-F with effect from 6-8-2014. While, the jurisdiction of the High Court under Article 226 of the Constitution to grant relief notwithstanding the amended Section 35-F cannot po ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... E of the Act was challenged by the appellant. While discussing the judgment in Pioneer Corpn. case [Pioneer Corpn. v. Union of India, 2016 SCC OnLine Del 6758 : (2016) 340 ELT 63] , a Coordinate Bench of this Court recognised the existence of the power available to the court under Article 226 of the Constitution albeit under rare and compelling circumstances. The court, thus, directed that a pre-deposit be made in the sum of Rs. 5 lakhs in addition to the token pre-deposit already made by the appellant therein. The relevant extract is below: 10. Given the aforesaid facts, while we are inclined to accept the preliminary objection of the respondents on the alternative remedy, we are also inclined to interfere and relax the condition of pre-deposit. We would direct that on the petitioner making a pre-deposit of Rs. 5,00,000 in addition to Rs. 3,70,008, the appeal which would be filed by the petitioner would be entertained by the first appellate authority. The pre-deposit would abide by the result of the appeal. First appeal, if preferred within 21 days, would not be rejected on the ground of limitation. 11. In Pioneer Corpn. v. Union of India [Pioneer Corpn. v. Union of India, 2016 SC ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t cannot be regarded or held as being arbitrary or as violative of Article 14. Above all, as the Supreme Court held in Shyam Kishore v. MCD [Shyam Kishore v. MCD, (1993) 1 SCC 22] the High Court under Article 226 of the Constitution is vested with the jurisdiction in an appropriate case to dispense with the requirement of pre-deposit and the power of the court under Article 226 is not taken away. This was also held by the Supreme Court in Govt. of A.P. v. P. Laxmi Devi [Govt. of A.P. v. P. Laxmi Devi, (2008) 4 SCC 720] in which the Supreme Court observed that recourse to the writ jurisdiction would not be ousted in an appropriate case . (emphasis supplied) xxx xxx xxx 34. A Coordinate Bench of this Court in Dish TV India Ltd. case [Dish TV India Ltd. v. Union of India, 2020 SCC OnLine Del 2580], in a matter concerning the import of satellite/viewing cards by the petitioner company, upheld the mandatory pre-deposit in view of the amendment to the Act. The aforesaid judgment while discussing the amendment of Section 129-E of the Act noted the fact that the petitioner's annual turnover for Financial Year 2018-2019 was more than Rs. 6000 crores and that the mandatory pre-deposit wo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Union of India which had held that whether the invocation of the jurisdiction of the High Court under Article 226 of the Constitution is merited or not would be one which would have to be considered on the basis of the facts obtaining in individual cases. 6. Mohd. Akmam Uddin Ahmed thus constitutes an authoritative precedent for the proposition that Section 129E of the Act as it stands presently, would not detract from the powers of a High Court in appropriate cases to absolve assesses of the financial burden flowing from the requirement of a pre deposit. However, the judgment enters a note of caution by holding that the said power would be liable to be invoked in rare and deserving cases or where extraordinary situations and circumstances warrant the exercise of that discretion. 7. While affirming the principles that were enunciated in Narender Yadav v. Joint Commissioner of Customs (Exports), the Court in Mohd. Akmam Uddin Ahmed reaffirmed the principle that the writ jurisdiction would be liable to be exercised in rare but compelling and deserving cases, when the cause of justice requires such reduction . We are thus left only to consider whether the case of the petitioner would ..... X X X X Extracts X X X X X X X X Extracts X X X X
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