2021-TIOL-139-SC-ST
CST Vs Khandwala Integrated Financial Services Pvt Ltd
ST - The assessee is registered with the Service Tax Department for providing taxable service under the category of “Stock Broker service” and discharged the service tax liability on providing such taxable service - On adjudication for the relevant period, duty demand was raised on the NSE transaction charges & SEBI turnover fees, holding the same to be includable in the taxable value of Stock Broker service - On appeal, the Tribunal held that the additional charges namely, SEBI Turnover Fees and NSE transaction charges were recovered towards services rendered by the stock exchange and the assessee did not provide any service on such account - The assessee did not earn any income or profit on the amount recovered as the turnover charges or transaction fees, and the amount recovered from the customers were reimbursed in proportion to the statutory authority namely, NSE and SEBI - In view of the settled position of law, the order confirming the adjudged demand against the assessee cannot be sustained for judicial scrutiny.
Held - Notice be issued to the parties in respect of the Civil Appeal, returnable within 4 weeks' time: SC
- Notice issued: SUPREME COURT OF INDIA
2021-TIOL-657-HC-MUM-ST
Anil Bajranglal Agarwal Vs Deputy Commissioner of Central Goods and Services Tax
ST - Petition is filed against a show-cause cum Demand Notice dated 29th December, 2020 issued by Respondent No. 1 demanding service tax of Rs.21,75,701/- for the period October, 2014 to June, 2017 on the legal services provided by the petitioner, an individual Advocate - Respondent has filed an affidavit-in-reply informing that after issuance of SCN and receipt of reply dated 29 th January 2021, verification was done and it is learnt that the petitioner is an individual advocate providing legal services and, therefore, service tax is not applicable on the amounts received by the petitioner; that prima facie , the impugned SCN is not maintainable and the respondents intend to withdraw the same; that the respondent is seeking leave of the Court to withdraw the SCN dated 29.12.2020.
Held: Pursuant to the said affidavit-in-reply, the purpose underlying the petition substantially gets worked out - Writ petition is disposed of: High Court [para 2]
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Petition disposed of :BOMBAY HIGH COURT
2021-TIOL-159-CESTAT-DEL-LB
Kafila Hospitality And Travels Pvt Ltd Vs CST
ST - Issue before Division Bench was - When value of service has been fixed as per Rule 6(7) of the Service Tax Rules, 1994, can Incentive be subjected to service tax as commission under BAS; Whether a demand can be confirmed without specifying the sub-clause of BAS under which the activities are covered; Whether demand of service tax can be confirmed under the taxable category of BAS in absence of the following three parties viz. service provider, service receiver and targeted audience; Whether in cases where value of service is fixed under an option provided under the Rules, such option having been exercised and not withdrawn, is it open for the authorities to demand service tax on other consideration or incentive received, be taxed under another category; Can service tax liability be fastened without specifying the consideration for service as provided under section 67 of the Chapter V of Finance Act, 1994; Can service tax liability be fastened in absence of the relationship of service provider and service receiver -Bench is of the view that the order in case of D.Pauls [ 2017-TIOL-908-CESTAT-DEL ] has been passed without considering and discussing any of the judgments pronounced by various Benches on non-taxability of incentives, without specifying the sub-clause of BAS and the targeted audience before whom the services of Galileo India, Amadeus India and Calleo Distribution were promoted - question was, therefore, referred by the Division Bench to the LB.
Held:
Maintainability of reference to LB [para 38, 40]
++ A perusal of the order [passed by Supreme Court in D Pauls case] clearly indicates that in substance the appellant had made a prayer for withdrawal of the appeal so as to pursue the matter before the Tribunal for reconsideration of the impugned order insofar as the issue with regard to invocation of the extended period of limitation was concerned. The effect of withdrawal of an appeal was examined by the Supreme Court in Rani Choudhury vs. Suraj Jit Choudhuryand it was observed that when an appeal is disposed of as withdrawn, merits of the appeal are not adjudicated upon.
++ It is, therefore, not possible to accept the contention advanced by Authorized Representatives of the Department that the reference made to the Larger Bench is not maintainable for the reason that the Supreme Court had disposed of the appeal filed against the order of the Tribunal in D. Pauls, the correctness of which was doubted by the Division Bench and which had resulted in the reference being made to this Larger Bench.
On Merits:
Following two main issues arise for determination :-
1. Whether service tax can be levied under the category of “business auxiliary service” on target based incentives paid to the travel agents by airlines by alleging that the travel agents are promoting and marketing the business of the airlines; and
2. Whether the commission paid by CRS Companies to travel agents can be subjected to service tax under the category of “business auxiliary service” by alleging that the travel agents are promoting and marketing the business of such companies. Whether the air travel agent is promoting its own business and not the business of the airlines
++ For an activity to be considered as promotional, it is necessary that a service provider must "promote" or "endorse" the service of the client. It has, therefore, to be seen whether in the present case the travel agent is encouraging a passenger to purchase a ticket of a particular airline.
++ The facts reveal that the travel agent is only providing options to the passenger and it is the passenger who determines the airline for travel. It is only when the target of having achieved the pre-determined number of bookings is achieved that the airline pays an incentive to the travel agent.
++ It cannot, therefore, be said that the travel agent is promoting the services of any airline. Incidentally, the airlines may benefit if more tickets are sold, but this would not mean that the travel agent is providing a service for promoting the airlines. [para 55]
++ Thus, by rendering of services connected to travel by air, a travel agent would render "air travel agent" services, which services cannot be said to be for 'promotion or marketing' for the airlines. [para 58]
Whether the air travel agent is promoting the business of CRS companies
++ CRS Companies provide online portal through which the travel agents book the tickets of various airlines for the passengers. The contention of the appellant/interveners is that the use of CRS software is to enhance the business of the travel agents, while that of the Department is that the travel agents promote the services of the CRS Companies. [para 59]
++ It is seen that the CRS commission is paid to a travel agent if he is able to attain an agreed level of segments to be booked. A passenger is not aware of the CRS Company being utilized by the travel agent for booking the segment nor can a passenger influence a travel agent to avail the services of a particular CRS Company. What is important to notice is that for an activity to qualify as "promotional", the person before whom the promotional activity is undertaken should be able to use the services. The passenger cannot directly use the CRS software provided by the Company to book an airline ticket. It cannot, therefore, be said that a travel agent is promoting any activity before the passenger. [para 60]
++ The Board Circulardated April 16, 2010, reinforces that if the audience of an alleged promotional service is unaware of the service of the client, no "promotional or marketing services" can be said to have been provided. [para 63]
++ Mere selection of software or exercising of a choice would not result in any promotional activity. The Department has not pointed out at any 'activity' undertaken by an air travel agent that promotes the business of the CRS Company. [para 65]
++ The passenger cannot be deemed to be an audience for promotion of the business of CRS Companies, for the passenger can neither book directly through a CRS Company nor can a passenger be influenced by any travel agent to book through a particular CRS Company. Therefore, the demand under BAS is not justified. [para 67]
Classification - Section 65A of the Finance Act
++ 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 incentives commission would not change the nature of the services rendered by the travel agent. [para 70]
++ This apart, the definition of BAS would also reveal that the service provider must promote or market the service of a client. As noticed above, it is not a case where the air travel agent is promoting the service of airlines/CRS Companies. The air travel agent is, by sale of airlines ticket, ensuring the promotion of its own business even though this may lead to incidental promotion of the business of the airlines/CRS Companies. Thus, in terms of the provision of section 65A (2)(a) of the Finance Act, the classification of the service would fall under "air travel agent" services and not BAS.[para 71]
Whether Incentives paid for achieving targets are taxable?
++ In view of s.67 of the Finance Act, 1994 only such amount is subject to service tax which represents consideration for provision of service and any other amount which is not a consideration for provision of service cannot be subjected to service tax. [para 75]
++ The Supreme Court [in Union of India vs. Intercontinental Consultancy and Technocrats = 2018-TIOL-76-SC-ST ] observed that the authority has to find what is the gross amount charged for providing "such" taxable services and so any other 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." [para 76]
++ 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 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. [para 77]
++ It, therefore, clearly transpires from the aforesaid decisions that incentives paid for achieving targets cannot termed as "consideration" and, therefore, are not leviable to service tax under section 67 of the Finance Act. [para 80]
Conclusion: [para 84]
(i) Air travel agent is promoting its own business and is not promoting the business of the airlines;
(ii) Air travel agent is not promoting the business of the CRS Companies;
(iii) In any view of the matter, the classification of the service would fall under "air travel agent" service and not "BAS" in terms of the provisions of section 65A of the Finance Act; and
(iv) The incentives paid for achieving the targets are not leviable to service tax.
- Reference answered :DELHI CESTAT |
