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Tribunal by Majority order sets aside demand of service tax on British Airways - Holds appellant is not liable to pay tax under reverse charge on services of online database access by overseas reservation Cos

By TIOL News Service

NEW DELHI, JUNE 10, 2014: THERE is a demand of service tax on British Airways under Section 66A in respect of services received from outside India from computerized reservation system companies (CRS). Due to difference of opinion between the Member (J) and the Member (T), the matter was referred to the Third Member. Please see 2013-TIOL-1161-CESTAT-DEL

The Member (J) opined:

The appellant having its place of business in India was recipient of online data base access and retrieval thereof to promote its business in India ensuring error free information to the travel agents in India. Who makes payment to the service provider is immaterial and no free service was provided by service provider. What that is material is service received by the appellant which in essence and substance was established. Revenue's arguments that appellant's remittances came to notice of investigation proved quid pro quo is well founded

On limitation also the Member (J) held that the extended period was rightly invoked by the department.

However, the Member (T) held:

For the purpose of Section 66A, the airline head office -'BA, U.K.' and its Indian branch office - BA, India cannot be treated as one entity in view of the provisions of Sub Section 66A, but have to be treated as two different persons. Therefore, it would be wrong to treat the services received from CRS/GDS companies by 'BA, U.K.', as the services received by their Indian branch-BA, India. Similarly the payments made to CRS/GDS companies by 'BA, U.K.' cannot be treated as payments made to CRS/GDS Companies by BA, India or on behalf of BA, India, unless it is proved that the services provided by CRS/GDS companies were Indian branch specific services which satisfied the business needs of BA, India and the role of 'BA, U.K.' was of facilitator only.

On limitation, the Member (T) held that extended period is not attracted.

In view of the difference of opinion, the matter was referred to Third Member. The Third Member held:

M/s British Airways, India has to be treated as a separate person. If that be so, in view of the admitted position that the contract between CRS/GDS companies is not with M/s British Airways, India and is only that M/s British Airways, UK, the present appellant cannot be held to be recipient of the services so as to make him liable to pay service tax, on reverse charge basis, in terms of the provisions of Section 66A. I am in full agreement with Member (T)

On limitation also, the Third Member agreed with the findings of the Member (T).

Accordingly, by majority order, the Tribunal allowed the appeal.

(See 2014-TIOL-979-CESTAT-DEL)


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