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TMI Blog2024 (9) TMI 1595X X X X Extracts X X X X X X X X Extracts X X X X ..... tion) [the adjudicating authority] . This order directs the appellant, in view of the provisions of section 73A(2) of the Finance Act, 1994 [the Finance Act], to deposit the amount that was collected by the appellant as representing service tax for the period from 01.04.2009 to 31.03.2014 from the sub-agents or customers of airlines. The remaining 26 appeals have been filed by branches of the appellant at various places in the country to challenge the said order as they have also been directed to deposit the amount collected by them as representing service tax. The said branches of the appellant are separately registered with the service tax department and were issued separate show cause notices. 2. The appellant is a travel agent accredited by the International Air Transport Association [IATA]. The appellant claims that it is engaged in the business of booking air tickets of various domestic and international airlines; the appellant and IATA entered into an agreement dated 15.05.1994 [PSA Agreement] titled as "Passenger Sales Agency Agreement" for sale of tickets of member airlines; the appellant also entered into various "Productivity Linked Bonus Agreements" [PLB Agreemen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appellant. It has been stated that when a sub-agent books a ticket for his customer, the customer pays the ticket price to the sub-agent. The appellant raises an invoice on the sub-agent for recovery of the ticket price along with service tax for the services rendered by the appellant to the sub-agent in respect of such booking. The invoice value, however, is reduced to the extent of the commission extended by the appellant to the sub-agent. In other words, the amount paid to the appellant would be equal to the ticket price minus the sub-agent commission, but would include the service tax component and TDS on the commission amount. 7. Investigation was, however, started by the Delhi Zonal Unit of the Directorate General of Central Excise Intelligence and thereafter, a show cause notice dated 09.10.2015 was issued to the appellant alleging that the appellant was rendering services to airlines in lieu of which it received commission from the airlines; this commission formed full consideration for the services and was, therefore, inclusive of service tax, which was paid by the appellant after cum-tax calculation; the sub-agents were providing services to the appellant in relation to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d not to the appellant. The appellant, therefore, pointed out that it had correctly collected service tax from the subjects and that the commission amount received by the appellant from the airlines did not and could not include the service tax element. The appellant placed the relevant agreements and contended that the demand could not have been proposed in the show cause notice. 9. The adjudicating authority, however, confirmed the demand by order dated 30.05.2018, which order has been assailed in these appeals. The relevant portions of the order are reproduced below: "21.1 ***** The essence of these submissions is that the Noticee are rendering service to the Sub agents, the sub agents do not render any service to the Noticee. They further contend that they (Noticee) do not render any service to the Air lines and on the basis of these contentions the Noticee goes on to contend that the Show Cause Notice proceeded on wrong premises. They have relied upon several case laws. 21.2 In this regard, I find that the Noticee's contentions that they do not provide any service to the Airlines and that "they are providing service only to Customer (passenger) and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s regard have been made in Para A and B above. Thus, the question of recovering any service tax from an entity (member Airlines) which is not the service recipient does not arise. They further contend that the Noticee were rendering the said Air Travel Agent services to the passengers through the PSA and PLB Agreements. And it is submitted by them that none of the said Agreements indicate that service tax was being collected from the airlines. 23.3 The contentions made in Para A and B have already been discussed and rejected. Further, the Agreement with the Airlines itself shows that the Noticee themselves have treated the Commission received from the Airlines as inclusive of the element of Service Tax. This conclusion is further supported by the simple fact that the Noticees have discharged the Service Tax liability by treating the Commission as Cum-Tax (by making calculations to make it as Service tax plus the Assessable value equals the Total Commission received). In light of these facts, I reject the contentions C.2 and C.3. ***** 25.12 In the present case, the indisputable fact is that amount in the name of Service tax has been collected by the Noticee (condition N ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -TIOL-159-CESTAT-Del-LB] ; (ii) The department has alleged that the commission received from the airlines was inclusive of service tax and, therefore, the tax paid by the appellant was collected from the airlines. The commission received from airlines was not inclusive of service tax. The agreement was signed with the airlines in 1994. At that point of time there was no concept of service tax, as it was introduced in 1997. Unless an amount has been specifically recovered as tax, mere mentioning of phrases such as "remuneration shall constitute full compensation" or "inclusive of all taxes" would not automatically mean that tax has been recovered. In this connection reliance has also been placed on a certificate issued by airlines stating that service tax was not included in the commission paid by them to the appellant; (iii) Once it is established that the sub-agents are the recipient of services rendered by the appellant, there can be no illegality in recovering service tax from the sub-agents; and (iv) Interest is not leviable under section 73B of the Finance Act in respect of demand raised under section 73A(2) of the Finance Act. 11. Shri Ajay Jain, learned sp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt could not have again collected service tax from the sub-agents. The contention of the appellant is that the commission received from the airlines did not include service tax and in any event since it was not rendering services to the airlines, the question of commission received from airlines being inclusive of service tax does not arise at all. 14. The department has relied on clause 9 of the PSA Agreement to contend that the amount recovered from the airlines was inclusive service tax. This clause reads: "9. Remuneration For the sale of air transportation and ancillary services by the agent under this agreement the carrier shall remunerate the agent in a manner an amount as may be stated from time to time and communicated to the Agent by the Carrier. Such remuneration shall constitute full compensation for the services rendered to the Carrier." (emphasis supplied) 15. The said clause 9 of PSA Agreement merely mentions that the remuneration (commission) paid by the airlines to the appellant would form full compensation for the services rendered to the airlines. This clause cannot be construed to mean that the commission paid to the appellant includes service tax. The PSA ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t accredited by IATA had necessarily to purchase tickets for their customers only through IATA agents, like the appellant. According to the appellant, since the sub-agents increased the business of the appellant as the appellant would have to purchase more tickets from the airlines, the appellant paid a certain percentage of the commission to the sub-agents. The appellant further claims that the customers of the sub-agents would pay the ticket price to the sub-agents, but it is the appellant who raises an invoice on the sub-agent for recovery of the ticket price with service tax for the services rendered by the appellant to the sub-agent in respect of the bookings. However, the appellant reduces the amount in the invoice to the extent of the commission that the appellant would provide to the subagent. This would mean that the amount that the sub-agent would have to pay to the appellant would be the ticket price minus the commission of the sub-agent, but would include the service tax component and TDS on the commission amount paid by the appellant. 20. The issue that arises for consideration is whether it is the appellant that is providing service to the sub-agents or the sub ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ant provides air travel services to the airlines for which it receives commission as consideration from the airlines. The sub-agent also provides services to the appellant for which the sub-agent receives commission from the appellant as consideration. Thus, the service tax paid by the appellant could not have been recovered from the sub-agents as no service has been provided by the appellant to the sub-agents. 29. The contention of the learned counsel for the appellant is that no illegality was committed in recovery of service tax from the sub-agents. 30. What would transpire from the contentions of the appellant is that the four parties involved enter into the transaction in the following manner: 31. The following aspects can be identified from the aforesaid: (i) Air travel agency services are rendered by the appellant to the sub-agents; (ii) The consideration for such air travel agency services rendered by the appellant to the sub-agents is the commission paid by the airlines to the appellant; (iii) Service tax is paid by the appellant on the commission amount either on the Commission Model or on Basic Fare Model; and (iv) The appellant recovers the service tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that is not the case pleaded before us. Therefore, unless the air travel agents book the tickets and thereby unless they provide the services to the customers, they do not become entitled to any commission. Their commission is entirely depended on and connected with the passage they book for the customers. It cannot, therefore, be said that the commission that the air travel agents get from the airlines is independent of and distinct from the services that they provide to the air-travellers and are relatable to the business that they provide to the airlines. On the other hand, since there is no guarantee money given or no fixed commission given, which has no nexus with the bookings that an air travel agent achieves for the airlines, it has to be said that the air travel agent's commission is integrally connected with the booking that he makes and is the process the services that he gives to the customers. Once 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 o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 36. Section 65(3) of the Finance Act, as it stood in 2000, defines "air travel agent". It is reproduced: "65(3) "air travel agent" means any person engaged in providing any service connected with the booking of passage for travel by air." 37. Section 65(48) of the Finance Act defines "taxable service". The relevant portion is reproduced: "65(48) "taxable service" means any service provided,- ***** (l) to a customer, by an air travel agent in relation to the booking of passage for travel by air" Prior to 2006 38. Section 65(4) of the Finance Act defines "air travel agent" as follows: "65(4) "air travel agent" means any person engaged in providing any service connected with the booking of passage for travel by air" 39. Section 65(105)(l) of the Finance Act defines "taxable service" to mean any service provided or to be provided as follows: "65(105) "taxable service" means any service provided or to be provided,- ***** (l) to a customer, by an air travel agent in relation to the booking of passage for travel by air" 40. It needs to be noted that prior to the enactment of the Finance Act 2006, the valuation provision ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... clude‚ - ***** (iv) the commission received by the air travel agent from the airline; (2) Subject to the provisions contained in sub-rule (1), the value of any taxable service, as the case may be, does not include - ***** (ii) the airfare collected by air travel agent in respect of service provided by him" (emphasis supplied) 44. It is also clear from the above valuation provisions that commission received from the airlines is deemed as a part of the consideration for services provided to the sub-agents. As Amended on 16.05.2008 45. Section 65(4) of the Finance Act, as amended on 16.05.2008, defines "air travel agent" as follows: "65(4) "air travel agent" means any person engaged in providing any service connected with the booking of passage for travel by air" 46. Section 65(105)(l) of the Finance Act, as amended on 16.05.2008, defines "taxable service" to mean any service provided or to be provided. The relevant portion is as follows: "65(105) "taxable service" means any service provided or to be provided,- ***** (l) to any person, by an air travel agent in relation to the booking of passage for travel by air" 47. It needs to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act has carved out two situations which are distinct from each other. Section 73A(1) applies to cases where a person, who is liable to pay tax, has rendered a taxable service to a service recipient, but has collected service tax in excess, which has not been deposited with the government. This means that section 73A(1) mandates the existence of a service provider and a service recipient relationship and tax has been collected in excess of the applicable levy. On the other hand, section 73A(2) deals with a situation where any person, not being a service provider, has collected an amount from another person representing as service tax. This provision applies only to those cases where there is no service provider and service recipient relationship between the person collecting an amount as service tax and the person paying such amount. It is for this reason that sub-section (2) of section 73A has been invoked by the department. 53. The contention of the appellant is that it rendered services to the sub-agents and not to the member airlines of IATA and so the appellant was entitled to collect service tax from the sub-agents, who were the service recipients. The burden of tax is borne ..... X X X X Extracts X X X X X X X X Extracts X X X X
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