By TIOL News Service

MUMBAI, JUNE 29, 2013: THE appellant are an International Air Transport Association (IATA) agent and also they are General Sale Agent (GSA) for foreign airlines namely HANNAIR, S.N. Brussels and Iceland Airlines. While acting as IATA agent, they provide the service of issuing air tickets to passengers for which they receive commission and on this commission they are paying the service tax. Beside this, they also receive 3% commission from the Airlines in respect of the ticket sold on flown basis, in their capacity as their General Sales agents (GSA).

The dispute in this case is as to whether the appellant are liable to pay service tax on the 3% commission received by them from the airlines - HANNAIR, S.N. Brussels and Iceland Airlines. There is no dispute that these airlines do not have any office or establishment in India.

The department has taken a view that these services have been provided by the appellant to the airlines mentioned above and have been delivered in India, the same would be taxable and that the same cannot be treated as export of service even though the commission is received by the appellant from the foreign airlines in convertible foreign currency.

The Additional Commissioner confirmed the service tax demand of Rs. 14,91,248/- along with penalties and interest and this order was upheld by the Commissioner (Appeals).

So, the appellant is before the CESTAT.

It is submitted that the service provided by the appellant is BAS taxable u/s 65(105) (zzb) r/w s 65(19) of the FA, 1994 and in terms of the provisions of Rule 3 of Export of Service Rules, the services have to be treated as export of service as these services have been received by the foreign airlines located abroad and have been used by them in their business. Reliance is placed on the decision in Paul Merchants Ltd. - (2012-TIOL-1877-CESTAT-DEL) and it is submitted that the appellant have a strong prima facie case for waiver of pre-deposit.

The Revenue representative submitted that the majority decision in the cited case has not been accepted by the department and an appeal has been filed against the same and in these circumstances for safeguarding the interests of the Revenue waiver of pre-deposit cannot be granted.

The Bench observed -

"6. The only point of dispute in this case is in respect of taxability of the commission which the appellant receive as GSA from the foreign airlines whom they represent in India and whose products are being marketed by them. There is also no dispute that the commission is being received in convertible foreign currency and that the airlines do not have any office or establishment in India. Prima facie we are of the view that the issue involved in this case is covered by the judgment of the Tribunal in the case of Paul Merchants Ltd. (supra) and accordingly the services being provided by the appellant to the foreign airlines have to be treated as export of service in terms of Rule 3 of the Export of Service Rules. Therefore, the appellant have a strong prima facie case and, hence, the requirement of pre-deposit is waived for hearing of the appeal and recovery thereof is stayed till the disposal of the appeal…."

In fine, the stay application was allowed.

(See 2013-TIOL-980-CESTAT-DEL)