TMI Blog2014 (6) TMI 626X X X X Extracts X X X X X X X X Extracts X X X X ..... outside India and the consideration for which stands provided by British Airways UK. The same stands consumed in UK only inasmuch as the Server provided by CRS/GDS companies to IATA agents are connected between the two of them and such services are being utilised by the travel agents. Service is consumed by the persons receiving the same. The service having been provided by a foreign based company to a foreign based head office there cannot be any liability of the present appellant to discharge its service tax, inasmuch as service tax being a destination and consumption based tax cannot be created against the non-consumer of the services. It is also not the Revenue's case that British Airways, India has made any payments for the services so procured by British Airways, U.K. In fact on the contrary, it is admitted position that the entire consideration for the services stand paid by British Airways to the CRS/GDS companies. The appellant in the present case is only appointing IATA agents, dealing with them, collecting sale proceeds of the tickets sold by them and remitting the same to the head office. They are not, in fact, even using the said service directly and as such can ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,95,92,348/- including Education Cess and Higher Education Cess was levied under the first proviso to Sub-section (1) of Section 73 of the Act, along with interest. (ii) Penalty of Rs. 4,95,92,348/- was imposed u/s 78 of the Act. (iii) Penalty of Rs. 5,000/- was levied under Section 77 of the Act. 2. While challenging aforesaid levy by the appellant it was also challenged that extended period of limitation prescribed by proviso to sub-section (1) of Section 73 of the Act was not invokable on the ground that the appellant was not liable to service tax under section 66A of the Act and also appellant had furnished entire information during investigation. BACK GROUND OF THE CASE, INVESTIGATION RESULT AND ADJUDICATION FINDING AS WELL AS CONSEQUENCES THEREOF 3.1 When it came to knowledge of Revenue that certain Airlines operating in India were availing Online information and data base access or retrieval service from foreign based CRS service providers and were liable to service tax as recipient of service, but no service tax due were deposited by them, investigation was made. It was revealed that those Airlines in terms of certain agreements with foreign ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... booking, cancellation, etc. made by the Travel Agents as per terms agreed between the parties to the agreement. Airline specific CRS software was in use and data base was maintained by CRS companies for easy access and use by the Airline as well as Travel Agents for ultimate benefit of each other so as to facilitate sale of products and services of Airlines. Airline appellant in consideration of the receipt of online data base access and retrieval thereof was paying agreed charges to the CRS companies. 3.7 Enquiry was made to ascertain whether the CRS companies viz. M/s Amadeus Marketing S.A.R.L. France, M/s Abacus Distribution system Pvt. Ltd., Singapore, M/s Galileo International Partnership, USA and M/s Sabre- American airlines Inc, USA, had any office in India to determine the person liable to pay such service tax. It was revealed that Indian companies with similar names viz. M/s Galileo (India) Pvt. Ltd., M/s Abacus Distribution systems (India) Pvt Ltd and M/s Amadeus (India) Pvt. Ltd., were functioning in India as separate legal entities. M/s Abacus Distribution System (I) P. Ltd and M/s Galileo India P Ltd function as National Marketing Companies entrusted with the work ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le to levy service tax for provision of service prescribed by clause 3(iii) of the Taxation of Services (Provided from outside India and received in India) Rules 2006 received by the Airlines operating in India through their permanent establishment in India. 3.11 Examining section 65(105)(zh) of the Act, learned Adjudicating Authority opined that it was not necessary that the data/information should be provided to a customer personally or that the computer network should be owned by the service provider as service being accessible or retrievable online in respect of data or information through the computer network as vehicle online. 3.12 Contention of the appellant that the impugned service was provided outside India as the CRS company and their parent company were situated outside India for which there cannot be tax liability of appellant was considered by ld. Adjudicating Authority. But he discarded such plea finding that the CRS companies even if situated outside India were providing service to Appellant having establishment in India which enabled Travel Agents of the appellant to achieve its object. Appellant may not be privy to the contract between CRS/GDS companies. But ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. But no service was received by appellant in India and the appellant has not made any payment to CRS companies. 4.5 Activity of the CRS companies does not constitute online information and data base access or retrieval service within the meaning of section 65(75) of the Finance Act, 1994 read with section 65 (105)(zh) thereof since CRS companies merely enable travel agencies to access the computer system and data base of head office of the appellant. To support such contention, reliance was placed by appellant on the decision of the Tribunal in the case of United Telecom Ltd Vs. Commissioner of Service Tax, Bangalore -2009 (14) STR 212 (Tri - Bang). So also reliance was placed on the stay order passed in the case of Nestle India Ltd. Vs. Commissioner of C. EX. New Delhi - 2011 (22) STR 165 (Tri -Del) 4.6 Reliance was placed on CBEC Circular dated 09/07/2001 to submit that platform which only enables e-commerce transaction to be carried out is not covered by section 65 (75) read with section 65 (105) (zh) of the Finance Act, 1994 (Ref: Page : 353 in para 6). 4.7 Demand is time barred and no extended period is invocable. 4.8 Ld. Sr. Counsel also supported following su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... companies, the appellant was not service recipient. (E). Appellant is registered under law for which no adverse inference can be drawn to impose penalty as well as tax. (F). Proceeding was time barred for which neither tax nor penalty is leviable. The appellant bonafide believed that it had not incurred tax liability for which extended period is not invocable. In the course of investigation, entire activities carried out by the appellant were made known to the investigation and reply was submitted against the allegations of investigation. When the investigation was well aware of the facts, there was no scope to issue Show Cause Notice. (G). There was no suppression of fact nor there do any deliberate intention to evade tax. ARGUMENTS ON BEHLAF OF REVENUE 5. Per Contra summary of submissions of Revenue were as under: 5.1 While the Appellant created fiction that British Airways UK and British Airways India are two different entities, only British Airways PLC., UK was granted permission by Reserve Bank of India (RBI) to operate in India (Ref: Page - 85 of appeal paper book). Therefore head office of the appellant and appellant in India cannot be two di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a by RBI permission and regulated under FEMA. It had no permanent establishment in India having acted under limited permission granted by RBI. It was recipient of service from CRS companies abroad to make that available to its Travel Agents in India and others for booking tickets etc., and was making payment to CRS companies through regulatory measures of RBI under FEMA by settlement of its account with its head office and cleared the debits made to its accounts for tickets booked in India. Therefore it cannot plead its innocence of no liability under service tax law. 5.6 Inviting attention to letter dated 25/5/2007 of Austrian Lines filed before learned Adjudicating Authority it was submitted that learned Adjudicating Authority in his order under Appeal No. 718/2012 has appropriately held that the appellant therein was recipient of service and liable to service tax. The appellant being in similar footing is also liable to service tax. So also stay order dated 23.08.2012 passed in the case of Continental Airlines Vs. CST vide order No. ST/SO/860/2012 indicates liability incurred by the appellants u/s 65(105)(zh) read with section 65(75) of the Act. 5.7 When the Appellant ough ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the appellant making use of the service of master computer of the CRS company and also examining the considerations paid by the appellant to avail above service during the impugned held that the appellant as a service recipient of taxable service u/s 65(105)(zh) of the Act read with section 65(75) thereof was liable to service tax under section 66A of the Act. Accordingly, he raised demands as set out at the outset. Section 65(105)(zh) of the Act which is the taxing entry reads as under: Section 65 (105) taxable service means any service provided or to be provided, - XX XX XX (zh) to any person, by any person, in relation to on-line information and database access or retrieval or both in electronic form through computer network, in any manner; [Emphasis supplied] 7. The expression on-line information and data base access and retrieval has been defined by section 65(75) of the Act reading as under: Section 65 (75) on-line information and database access or retrieval means providing data or information, retrievable or otherwise, [to any person], in electronic form through a computer network; [Emphasis supplied] 8. The appellan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CRS Company's system was its absolute right being an inevitable necessity to make it available to the Air travel Agents in India to promote its business. Article 4 of the agreement appearing at page 99 of appeal folder dealt with monthly basis charges payable to Galileo by appellant participant for use of the system of the later. 12. The appellant in consideration of availing aforesaid service had paid charges as has been found by learned adjudicating authority. For the service so availed, consideration paid directly or indirectly by the appellant or paid on its behalf in discharge of its liability or settlement by any mode, made no difference to law as theory of equivalence determines value of taxable service through its in built provisions embedded to the rules of valuation in the Finance Act, 1994. 13. Argument of the appellant that the appellant was not a party to the agreement fails to stand for the reason that it is no way different from its head office to operate in India since its head office was only permitted to operate in India which was a party to the agreement aforesaid. It was service recipient from Galileo. So also its Indian office. Modus operandi of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... siness establishment in that country. Explanation 2. - Usual place of residence, in relation to a body corporate, means the place where it is incorporated or otherwise legally constituted.] 15. 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. Appellant misconceived that it was taxed as beneficiary. 16. When the appellant falls u/s 66A (1)(b) of the Act as recipient of the description of service charged to tax by section 65(105)(zh) read with section 65(75) of the Act, its plea that it is immune from service tax in India is ill founded. Appellant in India has its existence under RBI permission. Section 66A (2) of the Act recognizes only different situs under law but the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appellant. Appellant further relied on the decision of Nestle India Ltd. V. CCE, New Delhi -2011 (22) STR 165 (Tri-Del). That was an interim order not laying down the ratio in appeal decision. Therefore that has no application by the very nature of the order which is liable to be varied or vaccated. 19. Appellant's plea that it shall get Cenvat credit of service tax levied by the adjudication order does not exonerate it from the liability it has incurred under the law. Grant of Cenvat credit arises only if service tax is paid by the appellant and such grant is not otherwise disallowed by law. Without undergoing scrutiny of law as to admissibility of Cenvat credit, appellant's hypothetical argument has no sense in the eyes of law. 20. Appellant's reliance on Paul Merchants case (supra) is of no use to it as the issue involved therein was whether there was an export of service made by Paul Merchants from India. Present case of appellant is not export of service from India but an import of service into India by virtue of right of access of the appellant to the online data base and retrieval thereof. Nor also reliance on the Board Circular (supra) has any force as ci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ferred to as B.A UK ) are an airline engaged in providing the service of transportation of passengers and cargo by air and having operations all over the world. On the basis of their application dt. 19.10.2005 for grant of permission to establish a branch office in India for the purpose of undertaking the activity of operating air services between India and United Kingdom, the RBI granted the necessary permission in terms of the provisions of Regulation 5 of the Foreign Exchange Management (establishing in India a branch or office or other place of business) Notification No.FEMA-22/2000 RBI dt. 03.05.2000. A copy of this letter is reproduced below:- FE.CO.FID/10.90.845/2005-2006 BY AIR MAIL/REGISTERED A.D. British Airways PLC, Registered Office Waerside P.O. Box-365, Harmondsworth UB7 OGB United Kingdom. Dear Sir, SUB: Permission to establish a Branch Office in India for operating Air Services Please refer to your application in Form FNC 1 dt. 19.10.2005 on the captioned subject. 2. Reserve Bank of India hereby grants you permission under Foreign Exchange Management (Establishment in India of a branc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s) Notification No. FEMA. 22/2000-RB dt. 3rd May 2000 and shall not be taken in any way as regularizing condoning or in any manner validating any irregularities, contraventions or other lapses, if any, under the provisions of any other law for the time being in force . 25.2. On the basis of the above permission granted by the RBI, the 'BA, U.K.' have set up an office in India at DLF Plaza Tower, DLF City., Phase-I, Gurgaon-122002, (Haryana) [hereinafter referred to as BA, India ]. The demand of service tax along with interest and penalty by the impugned order is against BA, India and it is the BA, India who is the appellant, [para 27 of the impugned order in original]. 25.3. The appellant as branch office of the 'BA, U.K.' provided the services of air transportation of passengers and cargo for which they have service tax registration. For the purpose of sale of air tickets to passengers, BA, India have appointed IATA Agents who issue and sell the air tickets to the passengers, collect the air fare from them, and remit the same to BA, India after deducting their commission. There is no dispute that IATA Agents are paying service tax on the Air Travel Agent' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... U.K.' would attract service tax which would be recoverable from Appellant BA, India under reverse charge mechanism of Section 66A of the Finance Act, 1994 read with Rule 2(1)(d)(iv) of the Service Tax Rules, 1994. On this basis, a Show Cause Notice dt. 24.10.2008 was issued to the Appellant for demand of service tax of Rs 8,98,20,174/- along with interest in respect of period from 01.04.2003 to 31.05.2008 and also for imposition of penalty on them. The Show Cause Notice was adjudicated by the Commissioner vide order-in-original dt. 08.11.2011 by which the Commissioner holding that the service provided by CRS/GDS Companies based abroad has been received by the appellant BA, India, confirmed service tax demand of Rs. 4,95,92,348/- along with interest for the period w.e.f. 18.04.2006. The demand for the period prior to 18.04.2006 was dropped as during that period, there was no provision in the Finance Act, 1994 to charge service tax under reverse charge mechanism from the service recipient in India on the import of services. The above demand was confirmed by invoking first proviso to Section 73(1) of Finance Act, 1994 upholding the allegation that the appellant have suppressed re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /GDS Companies; and (c) the payments for the services rendered by the CRS/GDS Companies have been received by them directly from BA(U.K.) and as such the entire payments for the services, in question, have been made outside India [para 24.3 of the impugned order dt.24.10.2008]. The dispute is only on the point as to whether the Appellant BA, India can be treated as an entity separate and distinct from their head office 'BA, U.K.' in terms of the provisions of Section 66A(2) and whether BA, India the Appellant, can be treated as recipient of the service provided by CRS/GDS companies and on this basis, subject to service tax under reverse charge mechanism of Section 66A. Another point of dispute is regarding classification of the service being provided by CRS/GDS Companies. 29. Coming first to the question of classification of the service, the activity of the CRS/GDS Companies is maintaining online information on real time basis about the flight schedules, fare, seat availability etc. of the flights being operated by BA,U.K. all over the world, for which CRS/GDS Companies have linkage with the computer system of BA, U.K. and provider access in respect of this inf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ally entitled to receive the goods, in case of a service transaction, the service recipient would be the person on whose instructions the service is provided, who is legally entitled to receive the service and is liable to make the payment or makes the payment and whose need is satisfied by the Provision of the service i.e. who consumes the services, or in other words, is the buyer of the service. Thus, for existence of a service transaction between two persons - A (Service provider), and B (Service recipient), not only there must be an activity performed by A for B, but there must also be flow of consideration, cash or other than cash, direct or indirect from B to A and the provision of Services must satisfy some need of B, which may be his personal need, the need of his business or need to discharge some legal obligation regarding provision of some services to another person C. Thus When a manufacture A, who has sold some goods manufactured by him to B and is under obligation to provide free repair services to B during warranty period and engages C to provide the service of free repairs service to B for which he pays to C, the recipient of the service provided by C is A, not B. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndia and through another permanent establishment in a country other than India, such permanent establishments shall be treated as separate person for the purpose of this section. Thus for the purpose of section 66A, the Head Office of a multinational company incorporated or legally constituted in a Country A and its branches in Countries B,C and D would be treated as separate persons. In term of 1st Proviso to Section 66A(1) the provisions of this sub-section are not applicable to an individual in respect of service received by him from abroad unless the service is for use in any business or commerce. Another important Provision of Section 66A is that when the service provider has his business establishment in more than one country, say A and B, the service recipient located in country C will be treated as having received the service from that establishment of the service provider which is directly concerned with the Provision of service [2nd Proviso to Section 66 A(1)]. In my view, the underlying principle behind this Proviso will also be applicable for determining as to who is the service recipient, when a service provider A located abroad, has provided service to a Company havin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o the person who has consumed the service. (4) Conceptually the Export of Service Rules, 2005 together with Taxation of Services (Provided from outside India and received in India) Rules, 2006, are basically the Rules for determining the place of service recipient/service consumer, and for this reason only, in the budget of 2012-13, these Rules have been replaced by Place of Provisions of service Rules, 2012, the Rule 3 of which states that the place of Provisions of a service shall be the location of the service recipient (who is the service consumer). (5) Export of Service Rules, 2005 and Taxation of Service (Provided from outside India and received in India) Rules, 2006, put together, are the rules for the purpose of determination of the location of service recipient and the same divide the services into three categories and prescribe different criteria in this regard for each category. In respect of services in relation to an immovable property, as enumerated in these rules, the same are treated as having been received at the location where the immovable property is located. In respect of performance based services, as enumerated in these rules, the same are treat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t BA, India, therefore have to be treated as a branch office in India of 'BA, U.K.' and in terms of Explanation to Section 66A, BA, India, would have to be treated as 'Business Establishment' of 'BA, U.K.' in India, which as discussed above, has to be treated as a 'Permanent business establishment' of BA,U.K. in India. By virtue of Sub-Section (2) of Section 66A, BA, India, who are a permanent business establishment in India of 'BA, U.K.' (head office), are to be treated as a person separate from the head office and they can not be treated as part of the head office for the purpose of Section 66A. In this case, there is no dispute that:- (a) agreements are between 'BA, U.K.' and the CRS/GDS companies (located outside India and not having any branch or business establishment in India); and (b) the entire payment to CRS/GDS Companies have been made directly by the head office located outside India and no part of payment has been made by the branch office i.e. BA, India. 31.1 As held in para 29 above, the service provided by the CRS/GDS Companies is Online Database access and/or retrieval service taxable under Section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in cash, direct or indirect. Just as in case of sale of goods, it is the buyer who is obliged to pay or pays for the goods and is entitled for delivery of the goods to him or his intended beneficiary, in case of Provision of Service, it is the recipient who would be the person obliged to make the payment or pays for the service and would be entitled for Provision of service to him or his intended beneficiary. However unlike a transaction of sale of goods where a person may buy the goods for further sale, in case of service, the recipient consumes the services simultaneously with the performance of the service and, hence, the recipient and the consumer of the service are the same person. Thus, the recipient of a service is the person who is legally entitled for Provision of service, is the person obliged to make the payment or pays for the same and the person whose need is satisfied by the Provision of service, the need, as discussed above, may be his personal need, the need of his business or the need to discharge some legal obligation for provision to service of another person. Thus in a service transaction between A and B, against Provisions of service by A to B, there would be a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ame to Head Office and as such there is nothing to show that they are not involved in taking key business decisions for the entire company. Therefore, applying the underlying principle of 2nd proviso of Section 66A(1) discussed in para 30(2) above, it is the Head Office i.e. BA, UK which has to be treated as the recipient of the Service provided by the CRS/GDS Companies as it is the Head Office which is most directly concerned with the use of the Service provided by the CRS/GDS Companies as the Head Office has used the service provided by the CRS/GDS Companies for promoting the sales of the Airlines tickets all over the world and it can not be said that only the Indian branch (Appellant) has benefited from the Service provided by the CRS/GDS Companies. Besides this, from the agreements it is also clear that this is not a case where the Head Office can be said to have acted only as a facilitator to negotiate the agreements with CRS/GDS Companies on behalf of branches for provisions of service to them. When it is the Head Office which has received the service and it is Head Office which is liable to pay for the service and has actually made payment and it is the head office whose bu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of a company 'B', incorporated outside India i.e. located outside India, the service tax can be charged from the branch office 'B-1' in India of the Company 'B' when:- (a) the Headquarter of the Company 'B' has entered into a framework agreement/contract with the service provider 'A' by the way of centralized sourcing of service for Provision of service at various branches located in different countries including India; and (b) the service has been provided at the branch in India and the role of the Headquarter is only as a facilitator. In such a situation service tax can be charged from the branch office in India by treating it as service recipient even if the payment for the service received was made by the head office, as in such a situation, the Indian branch office can be treated as having made the payment indirectly. But in this case, as discussed above, from the agreements of 'BA, U.K,' with CRS/GDS Companies, it is seen that there is nothing in these agreement from which it can be inferred that the CRS/GDS Companies were required to provide location specific service to the branches of 'BA, U.K.&# ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... yment for the service provided is not material for determining as to which has received the service, is also not correct, as an discussed in para 31.2(l) above, the service recipient in the person, who is legally entitled to receive the service and hence is liable to make the payment or makes the payment whether directly or indirectly and whose need is satisfied by the provision of service, whether it is his personal need or need of his business or his need to discharge some obligations to provide some service to another person the payment, and this person need not always be the beneficiary of the service. 31.4 By virtue of Section 66A(2), a branch office in India of a multinational company having its registered office abroad, can be charged service tax on any taxable service received by it from an off-shore service provider including the service received from its head office. There would be no difficulty in identifying the receipt of service by the branch office in India when the service has been provided by the off-shore service provider in terms of instructions given by the branch office or a contract entered into between the Indian branch office and the off-shore service pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t by the way of availability of credit to the buyer of the assessee's manufactured goods [para 13(b) of the judgment], longer limitation period under Proviso to section 11A (1) of Central Excise Act, 1994 would not be applicable. The ratio of this judgment is squarely applicable to the facts of this case, as the Provisions of Section 11A (1) of Central Excise Act, 1944 are in pari-materia with the Provisions of section 73 (1) of the Finance Act, 1994. Since in this case, intention to evade the tax is absent, the penalty under section 78 of Finance Act, 1994 would not be attracted. 33. In view of the above discussion, the impugned order is not sustainable. The same is set aside. The appeal is allowed. Rakesh Kumar) (T) AND (D. N. Panda) (J) 34. Since there is difference of opinion between Member (Judicial) and Member (Technical), the Registry is directed to place this matter before Hon'ble President in accordance with the Provisions of Section 129 C(5) of Custom Act, 1962, as made applicable to service tax matters by Section 35D(1) of Central Excise Act, 1944 read with Section 86(7) of the Finance Act, 1994, for deciding the following points of difference. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appeal on merits as also on limitation whereas ld. Member (Technical) Shri Rakesh Kumar has allowed the appeal on merits as also on the point of time bar. 37. I have heard both the sided duly represented by ld. Advocates for the appellant and Shri A. Jain, ld. D.R. for Revenue. Further, written submissions stand filed by the appellant as also by the Revenue, which I have gone through. 38. As the facts of the case stand detailed in the order proposed by ld. Member (Judicial) as also by ld. Member (Technical), the same are not being repeated so as to avoid redundancy. As per the undisputed fact, M/s British Airways is British Airlines operating from its head office located at London. Under the permission granted by the Reserve Bank of India, they have opened an office in India. For the sake of brevity, i.e. two offices would be referred to a British Airways, UK and British Airways India. The demand of service tax in the present appeal is against British Airways India on the finding that they have received the services from M/s Galileo International, USA, M/s Abacus Distribution System Pvt. Ltd, Singapore, M/s Amadeus Marketing, S.A. Spain, M/s Sabre Travels Information Network ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ys, UK outside India only. 42. In the light of the above undisputed position, the legal issue which arises is as to whether British Airways, India has to be considered as an extension of British Airways UK or the same has to be treated as a separate legal entity in terms of the provisions of Section 66A(2). The provisions of Section 66A(2) are to the effect that 'where a person is carrying on a business through a permanent establishment in India and through another permanent establishment in a country other than India, such permanent establishments shall be treated as separate persons for the purposes of this Section. The Explanation 1 appearing below the said sub-section is to the effect a person carrying on a business through a branch or agency in any country shall be treated as having a business establishment in that country . 43. Ld. DR appearing for the Revenue has strongly contended that British Airways, India cannot be treated as a separate legal entity in terms of the said provisions of Section 66A (2) inasmuch as British Airways, India cannot be held to be a permanent establishment of British Airways, UK. The same is only a branch office of British Airways, UK. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... permission granted to British Airways, UK is to establish a branch office in India for operating air services. But whether such establishment in India is to be considered as permanent establishment in terms of provisions of Section 66A and as such to be treated as a separate person, is the issue required to be decided. The British Airways, India has appointed IATA agents who issued and sold air tickets to the passengers, collected the air fare from them and remit the same to British Airways, India, after deducting their commission. The said earnings collected by British Airways, India are remitted to their head office in UK. 45. Going back to the provisions of Section 66A read with the explanation to sub-section (2) of the said Section, a person carrying on a business through a permanent establishment, is required to be treated as separate person for the purpose of the said Section. If that be so, the issue as to whether British Airways, India is to be treated as a separate person or not, is required to be addressed in the light of the said provisions of law as contained in Section 66A. Whether the same is a permanent establishment or not in the light of the other laws, in my v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... etween the two of them and such services are being utilised by the travel agents. 48. I also find myself in agreement with the observations and findings arrived at by ld. Member (Technical) that the service is consumed by the persons receiving the same. The service having been provided by a foreign based company to a foreign based head office there cannot be any liability of the present appellant to discharge its service tax, inasmuch as service tax being a destination and consumption based tax cannot be created against the non-consumer of the services. 49. Ld. Member (Technical) has also discussed in para-31 of the proposed order as to how the British Airways India a branch office of British Airways, U.K. cannot be considered as a temporary establishment. The same is not for a particular project after the completion of which the same would get wound up. The same has been specifically permitted by RBI to carry on the air transportation activities and has to be held as a permanent establishment, in which case on account of the provisions of Section 66A, it has to be treated as a person separate from its head office. 50. It is also not the Revenue's case that British Air ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the demand stands confirmed, against an assessee, who is even challenging the same on merits, he can always take an alternative plea of availability of the demand as Cenvat credit to him leading to Revenue neutral situation. As such, even on this count, the appellant is bound to succeed. 52. I am also of the view that the demand, having been raised by invoking the longer period of limitation is hit by the provisions of Section 11A of the Act. My ld. Brother Shri D.N. Panda in his proposed order has held that inasmuch as the appellant was not registered under the Act and failed to file return periodically their plea of bona fide belief does not arise and there was a deliberate breach of law to cause evasion. I am afraid that I do not find myself in agreement with the said observations made by my brother. If non-registration and non-filing of returns is the criteria for rejecting the appellant's plea of bona fide belief and holding against them, the plea of limitation would not be available to any assessee, inasmuch as the service tax liabilities would arise only in those cases where the appellants are not registered and are not filing the returns. Coming to the bona fide ..... X X X X Extracts X X X X X X X X Extracts X X X X
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