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2016 (8) TMI 989 - CESTAT MUMBAI

2016 (8) TMI 989 - CESTAT MUMBAI - 2016 (44) S.T.R. 465 (Tri. - Mumbai) - Demand of tax, interest and penalty airlines business - classification - online information and database access or retrieval service service received from foreign based service provider - computer reservation system reverse charge mechanism Section 66A of the Finance Act, 1994 definition of service - Section 65 (75) of the finance act, 1994 definition of taxable services - 65 (105)(zh) of the Finance Act, 1994 .....

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tuation arises wherein appellant pays the tax and takes the credit. It is trait law that question of Revenue Neutrality is a good ground, more so when the tax liability is being discharged under reverse charge mechanism. This very plea of revenue neutrality in an identical issue was raised in British Airways case and decided in favor of appellant. appeal disposed off decided in favor of appellant. - ST/87494 to 87498/13 - A/88840-88844/16/STB - Dated:- 29-7-2016 - Mr. M.V. Ravindran, Membe .....

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t length for three days i.e. 16th March, 28th March and 5th April of 2016. The issue in brief is that appellant herein is engaged in running an airlines having operations all over India as well as outside India. Based on intelligence that the appellant is evading service tax on the services availed under the category of online information and database access or retrieval service (herein after referred to as services ) from foreign based service providers and is not depositing the tax liability o .....

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puter Reservation System (CRS) based upon a facility called as Global Distribution System (GDS). Advantages of CRS Company is that they are able to display the real time availability of flights, reservation availability and all the details related to the movement of flights. The CRS Companies are located outside India and collect the data i.e. real time data from the main server of the Jet Airways, the appellant herein. It was noticed by the investigating authorities that functioning of the syst .....

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e basis and the ticket for each passenger is generated and issued. As per the agreements entered by the appellant with CRS Companies, the appellant is required to pay an amount for each ticket issued by any travel agent. Coming to a conclusion that the appellant herein having paid these CRS Companies an amount towards the issue of tickets of the passengers embarking from India, show-cause notice was issued demanding differential tax, interest thereof and also seeking to impose penalties and that .....

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is case and the services cannot be categorized as falling under online information and database access or retrieval service. The adjudicating authority after following due process of law, did not agree with the contentions raised by the appellant and confirmed the demands raised along with interest and imposed penalties. The adjudicating authority however, dropped the demands raised for the period 01.04.2003 to 17.04.2006 on the ground that the provisions of Section 66A for demanding service tax .....

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ion 65 (75) and Section 65 (105)(zh) for the meaning taxable services . He would submit that for classification under taxing entry of the services there are four requirements - (i) providing data or information, (ii) retrieval or otherwise, (iii) to any person and (iv) in electronic form through a computer network, 4.1 It is his submission that the data or information, which is provided must either be owned by the service provider or at the very least must not be owned by service recipient himse .....

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axing entry as has been decided by the Tribunal in the case of United Telecom v. CST Bangalore - 2009 (914) STR 212 and State Bank of India v. CCE Chennai - 2015 (37) STR 340. It is his further submission that in the issue of applicability of reverse charge mechanism is to be considered in the case in hand. He would submit that the CRS Companies are situated abroad and issued tickets to the passengers who book the same through Travel Agent. He would submit the service recipient in this case is n .....

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the taxable service any activity connected with the access/retrieval of online information, when the said taxing entry explicitly requires the provision of data / information and if the entry is interpreted so widely, it would cover activities such as maintenance of servers, upgrading of interface software, provision of manpower for operation of the interface etc., when in fact these activities were only brought to tax under other taxable entries at a subsequent point of time without any simulta .....

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ction, which is not liable to service tax. For the proposition that e-commerce transaction are not liable to service tax, he relies upon the judgement of the Apex Court in the case of All India Federation of Tax Practioners vs. UOI - 2007 (7) STR 625 (SC) and Circular No. MOF. F.No. B-11/1/2001-TRU dated 9th July 2001. It is his further submission that the person liable to pay tax are the CRS Companies as they have offices in India through which they are conduct the business and these can be con .....

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/ information is displayed on the CRS servers which are located outside India and the services are therefore not provided / rendered within India would be unconstitutional hence tax liability would not arise. It is his submission that the CRS companies are providing necessary access to software and on-line connectivity to the subscriber but in this case is Travel Agent who obtain information, make reservations and issue documents as to the travel related services. It is his submission that the .....

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n the show-cause notice is dated 23.10.2008 issued for the period 01.07.2003 to 31.03.2008 and in one show-cause notice which is dated 21.10.2011 for the period 01.04.2010 to 31.03.2011 is time barred as this show-cause notice was issued for taxing entry under Business Support Services ; subsequently corrigendum dated 19.03.2012 was issued for the same period seeking to order the classification to the current classification of the services. It is his further submission that in a revenue neutral .....

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to access data while the impugned order holds that the benefit of services goes to the appellant which is very week and there is no specification of the service receiver and the person who receives the benefit cannot be said to be service recipient. He would submit in the absence of service provider, service recipient relationship between he appellant and the CRS Companies, service tax liability cannot be critical qua the appellant need reverse charge mechanism. He would further submit that ther .....

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t, cannot be subjected to service tax under the entry of taxable services. 5. Learned Commissioner would submit that there is no dispute that the appellant has entered into contract with CRS Companies for enabling them to allow to accesses of the data of Jet airways seat availability, flight schedule for rendering services of on-line information and data base services. It is his further submission that the Travel Agent accesses the data through CRS Company and book the ticket which are of the ap .....

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to availability of flight schedule, fare, seat etc. operated by the appellant all over the world. He would submit that the contract of appellant with CRS Companies clearly indicate that while Jet airways is required to provide data, CRS Company would be providing information regarding fare, seat availability etc and the relevant paragraphs of the contract was read through and indicated that the information so provided is being used by the CRS Companies for transmitting the same to the travel age .....

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for the availment of CENVAT credit if an assessee provides exempted as well as taxable services. As an example he would submit that the appellant is not discharging service tax on the transport of passengers by economy class within India while the service tax on transporting of a particular passenger whenever they travel abroad. He would submit that the definition of exempted services needs to be gone into but there was no challenge to legality of the framed rules regarding taxation and the ser .....

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held that the services provided by the CRS Companies are covered within the scope of on-line information and data base access or retrieval service . As regards the demand by invoking extended period he would submit that the extended period has been correctly invoked as the appellant has not filed any return or gave any information regarding the payment of an amount to CRS Companies. 6. In rejoinder, learned Sr. Advocate submits that the reliance placed by the learned Commissioner (A.R.) on the d .....

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put him in a position to charge the recipient for access/retrieval of that data/information. He would submit that the adjudicating authority is faulted and did not consider the fact that the appellant is clearly being invoiced on the basis of charging event i.e. the booking of a ticket and not for any access of data or information. He would submit that the judgement of this Tribunal in the case of United Telecom (supra) and State Bank of India (supra) were directly on the issue. He would submit .....

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d in India and undertaking its activity in India. As per the standard procedures on the international as well as domestic airline ticketing, appellant had entered into an agreement with various companies like M/s Abacus, M/s. Galileo International , M/s Amadeus, M/s Infini etc., to avail the facility of Computer Reservation System (CRS) as provided by these Companies and as per the agreement they are required to pay these Companies an specific amount on each and every ticket booked. The CRS Comp .....

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rough the relevant entries and also various case laws. We find from the argument put forth by the learned Sr. Counsel for the appellant that the said activities of CRS Companies would not fall under the category of online information database access or retrievable services seems to be incorrect on merits, as an identical issue is decided by three judgements of this Tribunal by majority order. 9.2 We find that in the case of British Airways - 2014-TIOL-979-CESTAT-Del which was decided on 23.05.20 .....

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he 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 information to the IATA agents appointed by British Airways which is used by them for selling of air tickets of British Airways. I agree with the findings of my learned brother that this activity of the CRS/GDS Companies is covered by the definition of "Online Database access and/or retrieval" service, as given in .....

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CRS/GDS Companies and it is the IATA agents who collect payments from the passengers. Another plea of the Appellant that for taxing a service under section 65(105)(zh) read with section 65(75), as "Online Database access and/or retrieval service", the data stored in computer system to which access is provided, must belong to the service provider and since in this case, the data belongs to British Airways not to the CRS/GDS Companies, the activity of CRS/GDS Companies is not covered by .....

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o discharge the service tax liability on reverse charge mechanism or otherwise. The matter was referred to the 3rd Member. The 3rd Member in the said decision at paragraph 39 held as under:- 39. Both the Members have agreed that the services in dispute are covered by the definition of 'Online Data Based Access and/or retrieval service' as defined in Section 65(75) read with Section 65(36) of the Finance Act, 1994, and attracts service under Section 65(105)(zh). The point of difference is .....

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which would require revisit of the said views as held by the Tribunal. We note that identical views were expressed by the Bench in the case of Austrian Airways - 2014-TIOL-1574-CESTAT-Del and Thai Airways International Public Company Ltd.. 2013-TIOL-1117-CESTAT-Del. 9.4 We find that all these three judgements as cited hereinabove are difference of opinion decided by a 3rd Member. All these three judgements categorically record and hold that the activities rendered by CRS Companies are classifiab .....

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t the judgement of the Tribunal in the case of United Telecom Ltd. (supra) and SBI (supra) needs to be considered for coming to the conclusion as to the taxability of the services as ownership of data is not the CRS Companies but the appellant. In our considered view this argument also fails on the face of the fact that an identical issue has been decided by the Tribunal in the case as reproduced herein above. 10. On the issue of revenue neutrality, very many arguments were put forth by both sid .....

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ENVAT credit as per the provisions of Cenvat Credit Rules, 2004 and Cenvat Credit Rules need to be gone into detail as to come to a conclusion whether the appellant is eligible for the entire CENVAT credit. 10.1 We find that the arguments put forth by learned Sr. Counsel on the Revenue neutrality may merit acceptance for more than one reason. 10.2 Firstly, it is undisputed that the service tax liability on the payments made by appellant to CRS Companies is on reverse charge mechanism as if the a .....

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x is paid and utilized for rendering such output service. 10.3 Secondly, it is nobody s case that the service tax liability on online information and database access or retrieval service is paid by the appellant in respect of the tickets issued which are directly linkable to the output services provided by the appellant. 10.4 In our considered view the appellant could have availed CENVAT credit of the service tax paid on reverse charge mechanism as they are liable to pay tax on output service he .....

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e so when the tax liability is being discharged under reverse charge mechanism. This very plea of revenue neutrality in an identical issue was raised in British Airways case and decided also. It is settled law when an issue is raised and decided in a judgement, the ratio applies. 10.5 Thirdly, it has to be recorded that to uphold against the appellant on merits, we have relied upon the decisions of the Tribunal in the case of British Airways, Thai International Public Co. Ltd. and Austrian Airwa .....

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ay service tax on the service, in question, provided by CRS/GDS Companies, the entire service tax paid would be immediately available to them as Cenvat Credit and collection of service tax from the Appellant would be a revenue neutral exercise. A Larger Bench of the Tribunal in case of Jay Yushin Ltd. reported in 2000(119) ELT -718, has held that in such circumstances where revenue neutral situation comes about in relation to the credit available to the assessee himself of the duty paid by him a .....

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ade the tax is absent, the penalty under section 78 of Finance Act, 1994 would not be attracted. Learned Member (Judicial) in his order held that the revenue neutral situation does not arise. 10.6 The third Member on hearing the reference made held that the revenue neutral arguments merit acceptance. The specific findings of the learned Member (Judicial) as is under:- 51. I also find favour with the appellant's contention that the entire situation is Revenue neutral. Admittedly British Airwa .....

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luding the Hon'ble Supreme Court. Admittedly, the demands stand raised by invoking the longer period of limitation and during the relevant period, there was no service tax being paid by M/s British Airways India and as such the question of availability of credit of the same would become relevant only once the demands stand raised subsequently on a disputed issue. Had they been paying the service tax during the relevant period, they would have been availing the credit of the same and utilisin .....

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ctness of the demand, he could not have followed the procedure of Rule 56A (erstwhile) for the claim of set-off, which has to be extended, if the demand is ultimately upheld. It is only when after 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 .....

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