TMI Blog2022 (7) TMI 193X X X X Extracts X X X X X X X X Extracts X X X X ..... Agarwal, Advocates for the Appellant Shri Harsh Vardhan, Authorised Representative for the Department ORDER The issue involved in this appeal in the facts the appellant who are Air travel agent accredited by the International Air Transport Association (IATA), and are registered with the Service Tax department and were paying service tax on air travel agent service , whether they are liable to pay service tax under the head Business Auxiliary Service (BAS) on receipt of commission / incentive from CRS companies (computer reservation service and on Performance linked bonus (PLB) from the Airlines. 2. The brief facts are as follows: 1) The Appellant is engaged in rendering air travel agent and other tour related services. Essentially, the air travel industry comprises of the following five (5) key players: i. The airlines , which provide air transport services to passengers. The airlines discharge their service tax liability in terms of Section 65(3b) read with Section 65(105) (zzzo) of the Act; ii . Travel agents which have been accredited by the International Air Transport Association (IATA). These IATA agents are authorized to sell the air travel s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... airlines and commission received from CRS companies. 5. While addressing an identical issue for another IATA agent, it has been categorically held by the Larger Bench of the CESTAT, that PLB and CRS commission are not subject to service tax under the category of Business Auxiliary Services . While the Department was of the view that the PLB Commission and the CRS Commission received by air travel agents were subject to service tax under the category BAS, the Larger Bench observed as follows: 3. IATA agents are persons who have been authorized to sell airline tickets directly from the airlines to passengers/sub-agents. For sale of tickets, the IATA agents receive commission from the airlines. In addition to the said commission received for booking of airline tickets, the airlines also incentivize IATA agents by paying target-based incentives, which are linked to guaranteed booking of a minimum number of airline tickets. In certain cases, sub-agents also book airline tickets through IATA agents. In a situation where a sub-agent achieves a pre-determined target of bookings through a particular IATA agent, the IATA agent pays an incentive to the sub-agent. 4. The CRS Compani ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a passenger to purchase a ticket of a particular airline. The facts reveal that the travel agent is only providing options to the passenger and it the passenger who determines the airline for travel. It is only when the target of having achieved the predetermined number of bookings is achieved that the airline pays an incentive to the travel agent. It cannot, therefore, be said that the travel agent is promoting the services of any airline. Incidentally, the airlines may benefit if more tickets are sold, but this would not mean that the travel agent is providing a service for promoting the airlines. 56. In this connection it would be pertinent to refer to the decision of the Madras High Court in Airlines Agents Association. It was sought to be contented by the assessee that air travel agents were promoting the business of the airlines and in consideration of such services the airlines were paying commission to the air travel agents. It was also the contention that the commission received from the airlines had nothing to do with the services offered by the air travel agents to the passengers. The Madras High Court did not accept this contention advanced on behalf of the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this hurdle is cleared, the very basis of the argument on behalf of the petitioner case goes away. From the specific language of the provisions, particularly of Section 65(3) and Section 65(48)(1), the nature of the service, which is taxed, is absolutely clear. It in only on the basis of the service that is provided which is made taxable. In our opinion, therefore, the commission that the air travel agents get is on account of this service because in the absence of this service being given to the customers, an air travel agent is not to get anything. We may also say that the customer gets the service not for any extra charges. The air travel agents are not supposed to charge anything more than the value fixed for the passages by the airlines. Therefore, the commission that is earned by the air travel agent has a direct nexus with the booking that he makes for the air-travellers. If, in the process, the airlines is benefited and offers some commission that would not change the nature of the service provided by the air travel agent and it cannot be said that the service is provided only to the airlines and not to the air traveller. On the other hand, we may say that it is because th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... promotes the business of the CRS Company. 66. The Department has also contended that in the present case, the demand under BAS is justified as three parties are identifiable, namely, the CRS Company, travel agent and a passenger. 67. The passenger cannot be deemed to be an audience for promotion of the business of CRS Companies, for the passenger can neither book directly through a CRS Company nor can a passenger be influenced by any travel agent to book through a particular CRS Company. 70. The two competing entries are air travel agent service and BAS . It would be seen from the definition of air travel agent that it includes all services connected with or in relation to the booking of passage for travel by air. The services in question are booking of airlines tickets and for achieving a pre-determined target, the air travel agent also receives an additional amount in the form of incentives/commission from the airlines or the CRS Companies. The receipt of incentives/commission would not change the nature of the services rendered by the travel agent. 71. This apart, the definition of BAS would also reveal that the service provider must promote or market the servic ..... X X X X Extracts X X X X X X X X Extracts X X X X
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