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2020 (10) TMI 286 - AT - Service TaxExport of services or not - intermediary, commission and marketing service fee received - period from 1st July 2012 to 31st March 2016 - time limitation - HELD THAT:- The activity of an ‘intermediary’ is not envisaged as any less of ‘service’ than contemplated by section 65B(44) of Finance Act, 1994 and this is evident from its definition in rule 2(f) of Place of Provision of Service Rules, 2012. While ‘main service’ on own account, implying adequate autonomy to negotiate ‘consideration’ to be passed on in the value chain to the next ‘provider’ and onwards until the sum of consideration is recovered in entirety from the ultimate consumer, is also no more and no less than ‘service’, the antithesis thereof, characterized by divesting of such autonomy and to be inferred from the nature of the ‘consideration’, will relegate the corresponding activity to that of ‘intermediary’ which is subordinate to a ‘main service’ on own account within which it is rendered. By designating of the activity of ‘intermediary’ as ‘service’ but not on its own account to be distinguished by provision of ‘main service’ on own account, it would appear that while being ‘provider’ – one of the two essential determinants of ‘service’ – the ‘consideration’ received, as it must for coverage under Finance Act, 1994, by the ‘intermediary’ is lesser than, or subordinate to, the consideration that corresponds to performance of the ‘main service’ on own account. Here, irrespective of the delivery of the ‘main service’ in the ‘taxable territory’ or otherwise, the ‘consideration’ received by the ‘provider’ in India is deemed to have been for service rendered in India. From this would emerge a pattern in which ‘services’ coalesce within a ‘main service’ detracting from independent existence of each of them except for the description corresponding to ‘consideration’ of the coalesced ‘main service’ rendered on own account which is characterized by the recipient of service acknowledging only one provider for contractual consideration but yet carrying on business with other entities with whom the recipient of consideration has entered into separate contracts. There is no broader span of activity than the ticketing/booking for access to service that is offered by the airline operator/hospitality provider to the traveler. It is common ground that the assessee was contracted by the overseas entity to promote and market the Abacus ‘computer reservation system’ (CRS) software among travel agents for enabling access to the offerings of airline operators and hospitality providers who had separately contracted with the overseas entity for access to the system at the other end. The assessee undertook the responsibility of identifying travel agents who were designated as subscribers of Abacus ‘computer reservation system’ upon successful concluding of agreements with them. Thus are the subscriber and the airline operator/hospitality provider facilitated for providing travel solutions to the public. Upon the successful closure of booking, the overseas entity was recompensed with commission per transaction. Travel agents were, in turn, compensated by the overseas entity on per transaction basis to incentivize usage of the Abacus system. The consideration received by the assessee from the overseas entity for the contracted undertaking is also computed on per transaction basis. It is this networking of activities – the channel that links the airline operator/hospitality provider and the traveler - that pushes forward the business of travel, and hospitality, industry - The airlines/hotels and the travel agents are not bound to each other and nor do either contract for exclusive use of the Abacus system. It is upon the volumes generated by the subscriber on Abacus that the licencee of the software is paid and it is from this payment that the assessee, as well as subscribing travel agent, are compensated by the licencee which flows from the agreement of the licencee with the assessee and of the assessee with the travel agent. In all of these multiple transactions that enable a traveler to fly or occupy accommodation, the fare and tariff is in the public domain and the airline/hotel offers commission on that to the parent company of the appellant; ‘consideration’ for all other transactions pertaining to the ticketing/booking are constrained within this consideration to derogate from autonomy of negotiation and progressive summation of consideration to paid by the ultimate consumer thus derogating from the hallmark of ‘main service’ on own account. Consequently, the activity of the assessee-appellant rendered is ‘intermediary service’ taxable in the hands of the provider. Assessee-appellant is provider of the service and, hence, liability devolves on them in terms of rule 9 of Place of Provision of Service Rules, 2012. The impugned order has taxed two streams of consideration: ‘commission’ based on passenger bookings and fixed ‘marketing service fee’ and, while the former is consideration for ‘intermediary service’ as set out above, the nature of the latter is not clear. Though the adjudicating authority has not given much thought to its computation, it would appear from the invoices, that these have been billed as a standard amount. Nevertheless, in the narration of facts, the adjudicating authority has recorded that the dues under this head are netted; as netting out involves adjustment of flows in both directions and there is no ostensible reason for the assessee to pay the overseas entity, we are unable to decide the legality of subjecting the ‘marketing service fee’ to tax - Furthermore, in the context of our finding on the taxability of ‘commission fee’, with consequent denial of refund of accumulated credit, the assessee may be entitled to utilise such CENVAT credit in the discharge of tax liability. While upholding the finding in the adjudication order, arising from the proposal to recover tax, to the extent of the confirmation that ‘commission fee’ is consideration for service rendered in India, we remand all other issues back to the respective original authorities for disposal in accordance with the law as set out by us and the directions recorded. The assessee is at liberty to raise their contentions pertaining to bar of limitation, invoking of section 80 of Finance Act, 1994 and entitlement to CENVAT credit before the adjudicating authorities concerned - Appeal disposed off.
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