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ST - Remuneration received towards sale of JP Miles to business partners to promote business is not BAS - Pre-deposit waived: CESTAT

By TIOL News Service

MUMBAI, NOV 14, 2014: AGAINST a Service Tax demand of Rs.1.40 crores confirmed by the Commissioner of Service Tax, Mumbai-I , the applicant is before the CESTAT with a Stay application.

Before we move to the case, a few definitions worth noting -

Terms & Conditions for Jet Privilege:

2.6 'JP Miles' means the miles accumulated by a member into his/ her Jet Privilege membership account

(i) for flying on any Jet Airways, JetKonnect qualifying flight or

(ii) for using Jet Privilege Programme Partners' services as the case may be and appearing in both cases on a statement issued by Jet Privilege.

2.2 'Jet Privilege programme' means the award-winning loyalty and rewards programme owned, managed and operated by Jet Privilege Private Limited offering benefits, facilities or arrangements to members by reason of their membership in the programme.

The main demand pertains to Business Auxiliary Service of Rs.1.30 crores. As per the agreement between the applicant and the applicant's trade partners, the applicant being an airline issued Jet Privilege (JP) miles to their business partners and to the persons utilizing the services of the business partners. Revenue is of the view that these JP Miles are being given by the business partner free of cost, therefore, in these circumstances the applicant is promoting the business of business partners.

Out of the balance ST demand, the applicant has already paid Rs.6,74,818/- and Rs.4,89,138/- towards interest.

Before the CESTAT the applicant submitted that the applicant is not promoting business of their business partners and they are selling JP miles to their business partners. They are selling JP miles to their business partners to promote business by JP miles free of cost to the customers, therefore, the applicant is nowhere in picture for providing any service to their business partner as the customer of the business partners is not known to the applicant. Inasmuch as the demand under the category of BAS is not sustainable, submitted the applicant.

The AR reiterated the findings of the adjudicating authority.

The Bench observed that it was not convinced by the argument of the AR that the applicant is providing any business service to their business partners and that the remuneration received towards sales of JP Miles by the applicant is covered under the Business Auxiliary Service. Noting that for the remaining demand the applicant had paid substantial amount, the CESTAT waived the requirement of pre-deposit of the balance service tax, interest and penalties and stayed recovery.

(See 2014-TIOL-2268-CESTAT-MUM)


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