2024 (3) TMI 859 - AT - Service Tax

Levy of Service tax - Business auxiliary service - commission retained/earned towards the service rendered by them to the co-GSA/IATA - extended period of limitation - HELD THAT - On going through the explanation given under Section 65(19) commission agent means a person who acts on behalf of as a person and causes sale or purchase of goods provision or receipt of services for a consideration and includes any person who does some of the things while acting on behalf of another person. It is alleged that the appellants are commission agents for their co-operators and are earning commission for the same and therefore they are rendering business auxiliary service to their co-operators. However the practice of the trade if observed closely would indicate that the appellants are buying tickets on behalf of their customers/clients and not definitely on behalf of their co-operators. The entire surmise in the show cause notice is ill conceived. The relation between the appellant and the co-operators appears to be one of the principal-to-principal basis. If at all the appellants are presumed to be acting on behalf of somebody else for a commission it is their customers/clients for whom they are buying tickets from other GSA/IATA operators. However this is not the allegation in the show cause notice. Therefore there are no principal and agent relationship between the other GSA/IATA operators and the appellants. Tribunal had an occasion to deliberate on the very same issue wherein Tribunal came to the conclusion that purchase and sale tickets for a commission between two agents operating under GSA/IATA does not amount to rendering any service exigible to service tax. Tribunal in the case of C.S.T. SERVICE TAX- AHMEDABAD VERSUS M/S OM AIR TRAVELS PVT. LTD. 2019 (6) TMI 1022 - CESTAT AHMEDABAD held that In the fact that the appellant is purchasing the ticket on discounted price and selling the same at higher price to the customer the difference in our view is a trade margin during the process of sale and purchase of the tickets. Therefore we do agree with the contention given by the Ld. Commissioner (Appeals). Accordingly the demand raised on trade margin of purchase and sale of the tickets shall not be taxable. Invocation of Extended period of Limitation - HELD THAT - There is considerable force in the arguments of the Ld. counsel for the appellants; revenue did not bring about any evidence to allege suppression etc. with intent to evade payment of service tax; moreover it is found that when regular audits were conducted revenue having raised the issue in subsequent audits cannot take recourse to invoke extended period. The inevitable conclusion one can draw is that the appellants are not rendering any Business Auxiliary Service to the other GSA/IATA operators and therefore the commission earned by them is not exigible to service tax as proposed in the show cause notice and confirmed in the impugned order. Therefore the impugned order is not legally sustainable and is liable to be set aside - Appeal allowed.

Summary

Issues Involved:
1. Classification of Services: Whether the commission retained by the appellant qualifies as "Business Auxiliary Services" or "Air Travel Agents Services".
2. Time-Barred Show Cause Notice: Whether the show cause notice was issued within the prescribed time limit.
3. Simultaneous Penalty: Whether simultaneous penalties under Section 76 and Section 78 of the Finance Act, 1994, can be imposed.
4. Principal-Agent Relationship: Whether there exists a principal-agent relationship between the appellant and other GSA/IATA agents.

Summary:

1. Classification of Services
The Tribunal examined whether the commission retained by the appellant qualifies as "Business Auxiliary Services" or "Air Travel Agents Services". The appellant argued that they buy tickets from other GSA/IATA agents and sell them to their customers, and are not agents of these GSA/IATA agents. The Tribunal found that the relationship between the appellant and the co-operators is one of principal-to-principal, not principal-agent. Therefore, the commission earned is not for rendering "Business Auxiliary Services" but is part of a trading activity. This conclusion aligns with previous Tribunal decisions in cases like Om Air Travels Pvt. Ltd. and Akbar Travels of India Pvt. Ltd.

2. Time-Barred Show Cause Notice
The appellant contended that the show cause notice was time-barred as it was issued beyond the one-year limit from the date the periodic return was to be filed. The Tribunal agreed, noting that regular audits had been conducted, and there was no evidence of suppression, mis-statement, collusion, or fraud with intent to evade tax. Hence, the extended period for issuing the show cause notice could not be invoked.

3. Simultaneous Penalty
The appellant argued that simultaneous penalties under Section 76 and Section 78 of the Finance Act, 1994, cannot be imposed. The Tribunal did not specifically address this issue in the judgment, but the overall ruling in favor of the appellant implies that the penalties were not upheld.

4. Principal-Agent Relationship
The Tribunal found no principal-agent relationship between the appellant and other GSA/IATA agents. The appellant was found to be buying tickets on behalf of their customers/clients, not on behalf of the co-operators. Therefore, the commission earned by the appellant does not qualify as "Business Auxiliary Services".

Conclusion
The Tribunal concluded that the appellants are not rendering "Business Auxiliary Services" to other GSA/IATA operators. Therefore, the commission earned is not subject to service tax as proposed in the show cause notice. The impugned order was set aside, and the appeal was allowed with consequential relief as per law.