M/s British Airways Vs Commissioner (Adjn), Central Excise Delhi

1. This appeal arose against a question as to whether â€œOnline Database Access or retrieval Serviceâ€ was received by the appellant M/s. British

Airways during the period from 18-4-2006 to 31-5-2008 from foreign based CRS service provider and liable to Service Tax in terms of Section 66A

of the Finance Act, 1994 (hereinafter referred to as â€œthe Actâ€) on reverse charge mechanism basis. Holding against the appellant, following

demand was raised :

(i) Service tax of Rs.4,95,92,348/- 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 invocable 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 â€œOnline information and data base access or

retrieval serviceâ€ 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 based companies viz.

M/s. Galileo International Partnership USA, M/s. Abacus Distribution System Pvt. Ltd. Singapore, M/s. Amadeus Marketing, S.A.

Spain, M/s. Sabre Travels Information Network, USA and others, intended to facilitate reservation and ticket availability position to the Air

Travel Agents in India through online computer system, commonly known as â€œComputer Reservation Systemâ€ (CRS)/Global Distribution

System (GDS) maintained by the above companies.

3.2 Airlines have worldwide operations in terms of agreements entered into by them with CRS/GDS companies as well as Travel Agents. They make

payments to CRS/GDS companies towards consideration on the basis of ticket value for the â€œOnline information and database access or retrieval

servicesâ€ they avail.

3.3 The CRS and GDS facility providing companies maintain data base and structured data relating to ticket reservation and seat availability, fair

structure, flight timings sectors, etc., information supplied to them by Airlines from time to time with right of access and retrieval of data by Airlines

and Air Travel Agents from Master Computer maintained by above CRS companies through on-line computer system facility provided by these

companies. There was quid pro quo between Airlines and CRS/GDS companies to meet the needs of each other.

3.4 Revenue examined agreements entered into by Airlines with the CRS companies at great length which defined their object in clear terms.

Structuring of data base and sharing thereof accessing and retrieving through networking on real time basis was object of the contract. The CRS

companies provided computer terminals and printers to Air Travel Agents with online interconnectivity subject to certain conditions.

3.5 Data received from the Airlines were processed in master computer maintained by CRS/GDS companies and data structure formed for access

and retrieval thereto. Useful information in relation to ticket reservations, seat availability as well as other facility is derived therefrom for ticket

booking for passengers according to availability and preparation of passengers manifest as well as check-in- service documents, etc. No payments

were made by the travellers or the Travel Agents to the CRS companies. But payments were made by service recipient Airlines.

3.6 It was noticed that the Appellant Airline was making payment to the CRS Companies for each 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 of Marketing the

Abacus and Galileo CRS to travel agents in India. Such fact was confirmed from the statements recorded from Shri Ankur Bhatia of M/s. Amadeus

India (P) Ltd. and Shri V. Kesavan, General Manager, M/s. Galileo India P. Ltd. in their statements dated 6-1-2006, under Section 14 of Central

Excise Act, 1944 read with Section 83 of the Finance Act, 1994. Similar was the status of other CRS companies.

3.8 On the basis of result of enquiry, it came to light of Revenue that :

(i) details of available seats, flight schedules and fare applicable to different journey of different dates and sectors were obtained by the CRS

companies from Airlines to create data base and store the same in master computer so as to make that available/displayed online on real time basis for

access or retrieval of the date by Air Travel Agents to enable them to book air tickets or others facilities as well as respond to travel related qurries of

passengers.

(ii) Queries relating to booking or cancellation information sought by Air Travel Agents go to Master Computer of CRS companies through CRS for

interacting with data base of Airlines maintained in master computer to get response on line for booking and cancellation of tickets/facilities.

(iii) Access and/or retrieval to data through the Main Computer System of CRS was in electronic form to enable the Airlines and Travel agents to

access and interact with each other so as to generate useful travel related data/ information for booking tickets/facility or replying to queries of

passengers.

(iv) CRS companies made available of their service to the Airlines to cater to the need of the Travel Agents through CRS. Â

3.9 Revenue ascertained that CRS companies were getting their consideration by way of commissions from appellant and value of ticket sold/service

provided was basis of such consideration. Entire service provided was commercial and under contractual obligations of the parties resulting in carrying

out of economic activity. Appellantâ€™s reliance on the clarification of Board Circular F. No. 137/57/2006-CX.4, dated 18-5-2007 was not

acceptable to Revenue.

3.10 Revenue on the basis of aforesaid common features of the service of aforesaid description provided by CRS companies and availed by Airlines

held that Section 65(105)(zh) read with section 65(75) of Chapter V of the Act was applicable 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 its parent company entered into

contract with CRS/GDS companies to achieve object of the appellant operating in India under RBI permission and service was provided to the

appellant in India. Revenue accordingly viewed that the appellant was ultimate service recipient in India from CRS companies under the

Act.

3.13 Reliance placed on Section 66A(2) by appellant was held by Revenue to be devoid of merit for the reason that appellant had place of business in

India as a service recipient and payment was made by it to CRS companies proving nexus of service received by appellant and service of the

aforesaid description provided by CRS companies. Appellantsâ€™ plea that the service provider has no place of business in India made no sense to

Revenue as such establishment was operating in India as different entity under Reserve Bank of India permission.

Â 3.14 On the aforesaid circumstances it was held that appellant was recipient of â€œOnline data base access or retrieval serviceâ€ from foreign

based service CRS/GDS providers andw as liable to pay Service Tax with effect form 18-4-2006 when Section 66A of the Act came into force.

On the basis of details of consideration paid by the appellant to CRS companies Service Tax was levied. The appellant having failed to deposit the

Service Tax liability and failed to file the returns under law for the impugned period suppressing the value of taxable service evading Service Tax

liability under the Act causing prejudice to Revenue, was subjected to adjudication vas not time-barred and penal consequence of law followed.

ARGUMENTS ON BEHALF OF APPELLANT

4.1 Learned Sr. Counsel while supported arguments of another senior counsel on the point of law in appeal case No. ST/330/2012 of Thai Airways,

summarily submitted as under :

4.2 The appellant in India is a distinct entity from its head office in London for which there was no import of service since entire service of CRS

companies were consumed by head office in London.

4.3 The appellant not entering into contract with CRS companies and not making payment for the service availed by its head office cannot be taxed in

India as recipient of service in India. Payments made outside India find place in pages 69, 70 and 71 of the appeal paper book.

4.4 The only basis of demand of Service Tax from appellant is that it is beneficiary of service rendered by CRS companies. 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 â€œonline information and data base access or retrieval serviceâ€ 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. v. Commissioner of Service Tax, Bangalore - (Tri.-Bang.). So also reliance was placed on the stay order

passed in the case of Nestle India Ltd. v. Commissioner of C. EX., New Delhi - (Tri.- Del.).

4.6 Reliance was placed on C.B.E. & C. Circular dated 9-7-2001 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 summary of arguments made in the case of Thai Airways heard analogous with this appeal on the same

day and dealt separately:

(A) That the CRS companies abroad provided service to head Office of the appellant in London and the CRS Companyâ€™s server was

connected to the server of the head office of the appellant for updating and interacting to serve the travel agents through IATA approved

software. Travel Agents in turn were serving the passengers for which the travel agents were liable to service tax. Consequently head office

of the appellant was getting service of CRS companies abroad allowing the latter to exhibit data of the former to travel agents. Accordingly

appellant not being recipient of service u/s 65(105)(zh) read with Section 65(75) of the Act is not liable to Service Tax nor penalty.

(B) Section 66A(2) of Finance Act, 1994 was applicable to immune the appellant from levy of Service Tax. The agreements under which the

head office acted is as per agreements and no agreement between appellant and CRS companies and Travel Agents. Revenue had no

evidence of agreement between CRS companies and IATA. The appellant has suffered tax for providing passenger service. So also Travel

Agents have suffered tax serving the passengers. Proceeding before Tribunal is pending in respect of the service provided by CRS

companies to Travel Agents. Therefore the appellant cannot be called upon to pay tax for the same service.

(C) If the appellant is required to pay tax as a service recipient, it would be eligible to avail Cenvat credit thereof and no revenue gain shall

be made by the Government by adjudication exercise.

(D) Relying on the Circular dated 19-6-2012 and Para 71.1 of the decision of the Tribunal (reference order of third member in reference)

in the case of Paul Merchants reported in 2012-TIOL-1877-CESTATDEL it was submitted that the service recipient is the person on whose

instructions/orders the service is provided, who is obliged to make payment for the same and whose need is satisfied by the provision of

service. A service is an activity carried out by a person for another for some consideration and in case of provision of service; it is recipient

of the service who is obliged to pay for the service to the service provider. Accordingly foreign principal of the appellant being recipient of

service provided by the CRS 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 bona fide 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 behalf 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 distinct entities under law. Appellant fulfilled object of the contract entered into by its head office

with the CRS companies to avail CRS service in India for use by Indian Travel Agents, availing foreign company status under Companies Act, 1956

reporting to the Registrar of Companies in India.

5.2 Section 65(105)(zh) read with section 65(75) is applicable to the appellant as recipient of the service described by that section and without such

service being received in India, travel agents in India shall fail to achieve their object. Learned adjudicating authority on proper interpretation of the

said sections as well as the rules framed under the Act brought the appellant to the purview of Section 66A of the Act and levied the demand which is

sustainable.

5.3 Section 66A(2) of the Act is not applicable to the case of the appellant. According to that sub- section â€œwhere 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 sectionâ€. Facts situation of the case make clear that existence of

appellant in India without its head office is impracticable and existence in India is only to fulfil object of its head office (in UK) and act on its behalf in

India under limited permission granted by RBI and in essence and substance it is one and the same.

5.4 The appellant as a business entity was supposed to be covered by Part XI of Companies Act, 1956 which prescribes rules regarding companies

incorporated outside India and governed by mandatory requirement of Accounting Standard 17 for segment reporting by the appellant and was also

governed by mandatory requirement of Accounting Standard 18 i.e., making related party disclosure. Therefore it was covered by Section 66A(1)

without being covered by Section 66A(2) of the Act read with the Taxation of Services (Provided from Outside India and Received in India) Rules,

2006 and liable to Service Tax.

5.5 Appellantâ€™s existence being solely attributable to the existence of the principal abroad and Reserve Bank of India only having recognized the

head office of the appellant by the permission letter, there is no reparability of appellant from its head office. The appellant was only allowed to have

place of business in India 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 23-8-2012 passed in the case of Continental Airlines v.

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 ought to have been registered under the Act, and required to file its returns under law, failing to do so, there cannot be any

waiver of penalties imposed in adjudication.

5.8 There is nothing on record that the appellant had no connectivity with CRS companies to respond to its Travel Agents in India for booking tickets

for the appellantâ€™s Airline.

5.9 Entire exercise of head office of the appellant was to carry out business in India through appellantâ€™s temporary establishment in India to

achieve its object for which it took RBI permission. Therefore it cannot go out of ambit of taxation in India arguing that it was taxed under reverse

charge mechanism in UK.

5.10 If appellantâ€™s argument that travel agents make remittance to IATA is accepted then there was no necessity for the appellant to operate in

India taking RBI permission. Entire pleading of the appellant is to confuse the Tribunal for a misplaced sympathy which has caused prejudice to the

interest of Revenue.

5.11 When remittances made by the appellant came to record, there cannot be any plea that such remittances were for no cause while remittances

made by appellant was to make its revenue contribution against the extent of service provided by CRS/GDS companies to serve Indian Travel Agents.

Therefore no service provided by CRS/GDS companies to appellant is misconceived by appellant. Taxation of passenger service is a different subject

by a separate taxing entry and taxing service received or provided by travel agents does not exonerate appellant from its liability when event of levy of

the appellant arose under law.

5.12 Show Cause Notice provided basis of allegation bringing home the appellant to charges and that could not be defended by the appellant for which

no interference to adjudication is desirable. Adjudication should be sustained without any concession on time-bar plea. Tax and penalty imposed by the

learned adjudicating authority should remain untouched by Tribunal.

Finding and conclusion of Tribunal

6. Learned adjudicating authority considering role of the appellant and operating in India under RBI permission at the place of business establishment

in India having its head office in London and availing â€œonline information and data base access and retrievalâ€ service provided by CRS companies

abroad for booking air tickets by its Air Travel Agents in India for 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 period 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 :

â€œSection 65(105) â€œtaxable serviceâ€ means any service provided or to be provided, -

xx Â Â Â Â Â Â Â xx Â Â Â Â Â Â Â 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;â€ [Emphasis supplied]

7. The expression â€œon-line information and data base access and retrievalâ€ has been defined by Section 65(75) of the Act reading as under:

Section 65(75) â€œon-line information and database access or retrievalâ€ means providing data or information, retrievable or otherwise,

to any person, in electronic form through a computer network; [Emphasis supplied]

8. The appellant pleaded before learned Adjudicating Authority that it was branch of its head office in London. Copy of letter issued by Reserve Bank

of India to British Airlines PLC, UK at page 85 of the appeal folder exhibits that it was allowed to carry on airline activities in India. It operated in

India having a place of business in India under limited permission of Reserve Bank of India (RBI) and regulated by FEMA in view of foreign currency

transactions involved. It had place of business in India in terms of section 66A(1)(b) of the Act during the impugned period.

9. As a ""participant"" to the CRS agreement, the appellant was coordinator of information relating to computer reservations under the terms of the

agreement for storage by CRS company so as to make that available to the subscribers of the said companies. While doing so, its object was to ensure

storage of accurate and error free information relating to passenger service, schedules, space availability, fares and fare information in the CRS

system of the CRS companies so that its objects of promotion of air transport business was not defeated by Air Travel Agents in India.

10. In the course of hearing attention was drawn to a tripartite agreement dated 17/12/2003 at page 88 of the appeal folder entered into by head office

of the appellant as participant with GALILEO International LLC., a CRS company. Appellant signed the agreement on 17.12.2003 and Galileo

International LLC signed the same on 08.01.2004. The agreement was further signed by Galileo Nederland B. V., on 09.01.2004. The agreement thus

does not speak on which date that came to see the light of the day.

11. According to the above said agreement, Galileo provided computerized ticketing and other services and the appellant participant wished to receive

such services from that service provider. Appellant participant at its own cost was required to provide Galileo International complete data timely,

accurate and advantageous to fulfill object of the agreement between the parties. Its duties and obligations were prescribed by Article 3 of the

agreement. Under Article 2.A. of the agreement Galileo International was to maintain and operate the system to provide to the participant appellant

various standards of services for a consideration agreed between the parties. Online data base access and retrieval of the data by the appellant from

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 appellant came to record proving its existence to fulfill object of the agreement

with Galileo carrying out the mandate of RBI permission letter aforesaid. Ticket reservations were done by Air Travel Agent for the appellant making

use of the services received by the appellant. It was recipient of the impugned service in India from CRS Company located abroad through computer

network online.

14. Section 66A read with section 65(105)(zh) and section 105(75) of the Act which brought the appellant to the fold of law at the material period read

as under:

SECTION [66A. Charge of service tax on services received from outside India. (-1 ) Where any service specified in clause (105) of section

65 is, -

(a) provided or to be provided by a person who has established a business or has a fixed establishment from which the service is provided

or to be provided or has his permanent address or usual place of residence, in a country other than India, and

(b) received by a person (hereinafter referred to as the recipient) who has his place of business, fixed establishment, permanent address or

usual place of residence, in India, such service shall, for the purposes of this section, be taxable service, and such taxable service shall be

treated as if the recipient had himself provided the service in India, and accordingly all the provisions of this Chapter shall apply:

Provided that where the recipient of the service is an individual and such service received by him is otherwise than for the purpose of use in

any business or commerce, the provisions of this sub-section shall not apply:

Provided further that where the provider of the service has his business establishment both in that country and elsewhere, the country,

where the establishment of the provider of service directly concerned with the provision of service is located, shall be treated as the country

from which the service is provided or to be provided.

(2) 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.

Explanation 1.- 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.

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(l)(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 said sub-section does not grant immunity from taxation in India once incidence to

tax arises in India. Appellant's operation in India was to achieve its object of serving Air Travel Agents in India. To do so, it had reserved its right of

access to data base of CRS companies to ensure that those travel agents do not frustrate its object and the appellant operates in India competing with

other airlines. Its reliance on Board Circular is of no use since service received by appellant was consumed in India and that was proved from the

material facts and evidence on record. Revenue did not tax the appellant for the service received by its head office out of India. What that was taxed

in the adjudication was services received in India under reverse charge mechanism.

17. Each economic activity being distinct and separate, appellant ensuring service to Travel Agents in India was consumer of ""online data base access

and retrieval"" service. Taxation of the service on reverse charge mechanism abroad is of no relevanru to Indian Tax System in absence Double

Taxation Treaty under Finance Act, 1994. For no immunity granted by section 66A of the Act, incidence to tax in terms of taxing entry 65(105)(zh)

read with section 65(75) of the Act read with the relevant rules made thereunder, arose. Legislature has wide latitude in the matter of taxation to pick

and choose event of levy, nature of services and different aspect of services in a series or cluster of services. So also pendency of appeal in Tribunal

in respect of service provided by CRS companies to Travel Agents or taxation of passenger service provided by the appellant does not alter the

taxability of service received by the appellant under reverse charge mechanism u/s 66A of the Act.

18. Appellant relied on the decision of the Tribunal in the case of Uniter Telecom Ltd Vs. Commissioner of service Tax, Bangalore - 2009 (14) STR

212 (Tri - Bang). In that case in Para 7 of the order, Tribunal found that United Telecom evolved wide Area Network (WAN) to make the

communication between State head quarter and district head quarters possible. Such service was held to be telecommunication service. In the present

case, appellant as a recipient of service has been brought to tax while in that case service provider was brought to tax. Both cases are on different

footings. Therefore that decision is not profitable to the 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 circular

cannot override the law. Appellant has thus misplaced the cited decision.

21. When the appellant failed to be registered under the Act and file returns periodically, its plea of bonafide belief does not arise sine it escaped

scrutiny of law. There was deliberate breach of law to cause evasion. Had there been no investigation, appellant's liability would not have been

unearthed. Breach of law is neither eroded by lapse of time nor defiance thereof unpunishable. Bonafide should be patent from conduct and a mere

plea of bonafide does not make the believer riskless in fiscal administration. Adjudication was not time barred when suppression of fact and intention

to evade was detected by investigation. Liability of the appellant arose under law. Had the appellant sought registration and filed nil returns with notes

appended to that explaining its belief, it would have provided foundation for its belief to be bonafide. But the appellant had not done so. An assessee

either may voluntarily come to record seeking registration or may be brought to record by process of law or investigation. Upon investigation, when

liability of the appellant was determined, learned adjudicating authority was right to invoke extended period of limitation and levy the tax and penalty

followed by interest under law. It cannot claim immunity from taxation.

22. For the aforesaid reasons, Revenue's contentions have force and adjudication findings are well founded on facts as well as law. It can thus

irresistibly be concluded that the appellant was recipient of online data base access and retrieval service from the service provider abroad and falls

under section 66A of the Act and was liable to the consequence of adjudication rightly made by learned adjudicating authority. Appeal of the appellant

thus fails.

23. In the result, appeal is dismissed.

(Pronounced in the open court on 19/07/2013)

(RAKESH KUMAR) Â Â (D. N. PANDA)

TECHNIC MEMBERÂ Â JUDICIAL MEMBER

Anita

24. I have gone through the order recorded by my Id. brother which was received on 03.7.2013. Since I do not agree with his conclusions I am

recording an separate order.

25. However, before the coming to the issue involved in this appeal it would be worthwhile having a brief look at the facts of this case.

25.1. M/s. British Airways PLC. with their registered office at ""Waterside, P.O. Box 365, Harmondsworth UB7 0GB, United Kingdom"" (hereinafter

referred 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 0GB, 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 branch or office or other

place of business) Regulation 5 of Notification No. FEMA 22/2000- RB dt. 03.05.2000 for establishing Branch in India, for the purpose of undertaking

the activity of operating Air Services between India and the United Kingdom of Great Britain on the specified route, as given in the air services

agreement dated September 17th 2004 between the Government of India and the Government of United Kingdom of Great Britain and in terms of the

operating permit No. 7/93/2005-IR dt. 10th October 2005 granted by Director General of Civil Aviation (DGCA) and to open additional office at Bang

lore.

3. Please note that permission has been granted subject to same conditions stipulated in our letter No. EC.CO.FCS 1290/845(Act) 77 dt. 1t8h May

1977 and also following condition.

i The operation of air services in or through India shall be carried in accordance with and subject to such terms and conditions specified by DGCA.

ii Collection and remittance outside India of passenger/freight charges by or on behalf of your company shall be subject to the relevant exchange

management regulation in force.

iii Except the air services referred to above the company shall not without the prior approval of the Reserve Bank of India, carry on by itself or in

partnership or otherwise in association with any others any activity of a trading, commercial or industrial nature in India.

iv Reserve Bank's permission mentioned above shall remain valid for the period for which the relative operating permit has been issued by DGCA and

the Company shall approach RBI for renewal in the future.

v In case you desire to open a Head Office account in the books of your branch office in India, we hereby grant you our approval to maintain such an

account credits to the account should represent the funds received from Head Office through normal banking channels for meeting the expenses of

the office and for expenses incurred by the Head Office on behalf of the Branch Office and profit made by the Branch Office Debits to this account

could be raised for the expenses incurred by the Branch Office and losses incurred by the Branch Office.

4. It is clarified that the permission granted hereby is limited to Regulation 5 of the Foreign Exchange Management (Establishing in India of a branch

office or other place of business) Notification No. FEMA. 22/2000-RB dt. r3d 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 â€˜BA, U.K.â€™ have set up an office in India at DLF Plaza Tower, DLF City.,

Phase-I, Gurgaon-122002,(Haryana) [hereinafter referred to as â€œBA, Indiaâ€]. 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 â€˜BA, U.K.â€™ 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's services taxable under Section 65(105)(1) being provided by them, on the commission being

earned by them. The appellant on receipt of the sale proceeds of the tickets minus IATA Agent's commission, remit the same to their head office in

United Kingdom i.e. to â€˜BA, U.K.â€™ There is no dispute that the appellant have been paying the service tax on the services of air transportation

of passengers and cargo being provided by them and which are taxable under Section 65(105)(zzn) and 65(105)(zzzo) read with Section 65(36) of the

Finance Act, 1994.

25.4. â€˜BA, U.K.â€™ have entered into agreements with Galileo International Partnership USA, M/s. Abacus Distribution Pte Singapore, M/s.

Amadeus Marketing S.A.R.L., M/s. Sabre Travel Information Network, USA and others (hereinafter collectively referred to as collectively

CRS/GDS Companies) for maintaining a database regarding their flight schedules, fares, seat availability on flights etc. on real time basis and making

this information available to IATA Agents of British Airways all over the world. The CRS/GDS Companies are located outside India and none of

them have any branch office or any establishment in India. In terms of the agreements, the CRS/GDS Companies provided hardware also to the

IATA Agents for providing the connectivity with their network. The IATA Agents using the information retrieved from the database being maintained

by CRS/GDS Companies issued the tickets for sale to passengers. In terms of the agreements, the CRS/GDS Companies get payment from 'BA,

U.K.' based on the number of tickets issued by the IATA Agents using the database being maintained by them. There is no dispute that the entire

payment is made by â€˜BA, U.K.â€™ to the CRS/GDS Companies and no amount is charged by the CRS/GDS Companies from IATA Agents. The

Department was of the view that the service being provided by the CRS/GDS Companies is â€œonline database access and/or retrieval serviceâ€

taxable under Section 65(105)(zh) read with Section 65(75) & Section 65(36) of the Finance Act, 1994 and since the same has been used by the

Appellant's IATA Agents in India for selling of tickets of British Airways, the services provided by the CRS/GDS Companies have to be treated as

received and consumed in India by the BA, India and hence the remunerations received by the CRS/GDS Companies abroad from 'BA, 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 relevant facts from the Department and for the same reason, penalty of equal amount was also imposed on the appellant

under section 78 of the Finance Act, 1994. Besides this, another penalty to Rs 5,000/- was imposed on the appellant under section 75 ibid.

25.5. Against the above order of the Commissioner, this appeal has been filed.

26. Since the arguments made on behalf of the appellant and on behalf of the Revenue, have been recorded in the order prepared by my Id. brother,

the same are not repeated by me in this order.

27. I have considered the submissions from both the sides and perused the records. While the case of the Department against the appellant is that the

CRS/GDS Companies located abroad are providing services of ""online data base access and/or retrieval"" taxable under section 65(105)(zh) read with

section 65 (75) and Section 65(36) of the Finance Act, 1994 and the same has been received by the appellant BA, India in India and, therefore, the

Appellant would be liable to pay service tax in respect of the same in terms of Provisions of Section 66A of the Finance Act, 1994 read with Rule 2(1)

(d)(iv) of the service tax Rule 1994, the main contentions of the appellant are that - firstly no service has been received by the appellant, who are a

branch office of the 'BA, U.K.' in India, as the entire transaction is between their Head Office in UK and the CRS/GDS Companies located abroad

and in terms of the Provisions of sub-section (2) of 66A, their Indian branch office BA, India has to be treated as a person separate and distinct from

the head office 'BA, U.K.' and, therefore, in respect of the service transactions between the CRS/GDS Companies located abroad and BA(U.K.), the

Appellant BA, India can not be treated as the service recipient, and secondly the service being provided by the CRS/GDS Companies is not covered

by the definition of ""online information and data base access and/or retrieval"" service as defined in Section 65(105)(zh) read with Section 65 (75) and

Section 65(36) of the Finance Act, 1994 and hence the same is not taxable.

28.There is no dispute that:-

(a) the service providers i.e. the CRS/GDS Companies are located abroad and they do not have any office in India ;

(b) the agreements for providing service are between the Appellant's head office at U.K. i.e. 'BA, U.K.' and the CRS/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 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 Section 65(75) read with Section

65(36) of the Finance Act, 1994 and this service, if provided or deemed to be provided in India, would attract service tax under section 65(105)(zh)

ibid. In this regard, I do not accept the Appellant's contention that the activity of CRS/GDS Companies is e-commerce and therefore, not taxable, as

there is no sale of tickets by the CRS/GDS Companies. The Tickets of British Airways are sold through IATA agents by using the

information/database maintained by the 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 Section 65(105)(zh) read with Section 65(75), is also

not acceptable, as there is no such requirement in Section 65(105(zh), Section 65(75) or section 65(36) of the Finance Act, 1994.

30. Next comes the main point of dispute in this case whether the Appellant, can be treated as recipient of the service provided by the CRS/GDS

Companies located abroad or whether 'BA, U.K.' are to be treated as the services recipient. Before coming to this question, it is necessary to have a

look at certain basic features of the service tax in India, which, in brief, are as under:-

(1) while the term ""service"" is not defined in the Finance Act, 1994, assuming that a service transaction is akin to a transaction of sale of goods, it can

be treated as an activity carried out by a person (service provider) for another person for some consideration -the consideration can be in cash or

other than cash, whether paid directly or indirectly. Just as in 'case of a sale transaction, the buyer is the one who is obliged to make the payment or

makes the payment for the goods purchased and is legally 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. The B is only the beneficiary of the service provided by C. However when there is

no legal obligation of A to provide any service to B and still on his instructions C provides service to B for which C receives payment from A and

circumstances indicate that A has acted merely as facilitator or agent for B and has made payment on behalf of B, flow of consideration from B to

the service provider C can be presumed and it is B who will be treated as the recipient of the service.

(2) Services mentioned in various clauses of Section 65(105) of the Finance Act, 1994 attract service tax under section 66 ibid. However:-

(a) When the service provider as well as the service recipient, both, are located in India (except the state of Jammu & Kashmir), the service tax is

charged from the service provider, except for the services notified under section 68 for reverse charge, where the service tax is charged from the

service recipient;

(b) When there is export of service, as defined in Rule 3 of Export of Service Rules 2005 i.e. while the service provider is located in India , the service

is received abroad, no service tax is chargeable from the service provider in India (Rule 4 of the Export of Service Rules), 2005;and

(c) When the service provider is located abroad, that is, he is a person having a business or fixed establishment from where the service is provided or

his permanent address or usual place of residence, outside India and the service recipient is located in India i.e. is a person having his place of

business, fixed establishment, permanent address or usual place of residence in India, in term of the Provisions of Section 66A(l) read with Rule 2(1)

(d)(iv) of the Service Tax Rules, 1994, the service recipient in India is deemed to have provided the service in India and he is treated as ""the person

liable to pay service tax"" and the service tax is recovered from him. For this purpose, in case of a body corporate, the place where it is incorporated or

is ""otherwise legally constituted is treated as its ""usual place of residence"" [explanation 2 to Sec. 66A] and a person carrying on a business through a

branch or agency in any country, is to be treated as having ""business establishment"" in that country [explanation 1 to Section 66A] Under section

66A(2), when a person carries 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 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(l) 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 66A(l)]. 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 having head office outside India and a branch office in India

and in such a situation for the purpose of Section 66A, it will be reasonable to treat the establishment most directly concerned with the use of the

service provided as the recipient of the service provided by A.

(3) Thus irrespective of the location of service provider- whether in India or outside India, service tax is charged in India if the service recipient is

located in India i.e. the service has been received and, hence, consumed in India, and if service recipient is located abroad i.e. the service has been

received and, hence, consumed abroad, there is no liability of the service provider in India to pay the service tax. This is in accordance with the

principle of equivalence mentioned in the Apex Court's judgment in the case of All India Federation of Tax Practitioner reported in 2007

TIOL-149-SC-ST and Association of Leasing and Financial Service Companies reported in 2010 (20) STR-417 (SC, )wherein it was held

that -

(a) there is no difference between the production or manufacture of saleable goods and production of marketable/ saleable services in form of an

activity undertaken by the service provide for consideration, which stands consumed by the service receiver;

(b) consumption of goods and consumption of service is similar as the both satisfy human needs;

(c) service tax is a value added tax, which, in turn is a destination based consumption tax on the service that is levied on commercial activities and is

not a charge on business, but is a charge on the consumer of the service; and

(d) It is this principle of equivalence which is inbuilt into the concept of service tax under the Finance Act, 1994.

The implication of the above ruling would be that service provided by a service provider located abroad, not having any branch or business

establishment in India, would be taxable in India only if the consumer of the service, who is the same as the recipient of the service, is located in India.

Here it may also be clarified that unlike a transaction of sale of goods, in a transaction of provision of service, the receipt and consumption goes

together, as the provision of service satisfies the need of the service recipient and, thus, stands consumed by him. In other words in case of a service

transaction, the service recipient is also 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 treated as having been received at the place where the same have been performed. For the purpose of export of a performance

based service, service partly performed outside India is treated as performed outside India and for the purpose of import of performance based

service, the service partly performed in India is to be treated as performed in India. In case of the service availed for use in relation to business or

commerce, the same are deemed to have been received at the place where the recipient using the service in his business is located. Thus, when the

service provider is located in India and the service recipient is located outside India, there will be export of service and there would be no taxation in

India and if service provider is located outside India and service recipient is located in India, there will be import of service in respect of which the

service recipient in India would be liable to pay the tax If, however, the service provider is located outside India and the person receiving the service

of category (iii) for use in his business is also located outside India, there would not be any import of service into India and, therefore, no taxation in

India.

30.1 The question as to whether the service provided by CRS/GDS Companies located abroad can be treated as having been received by the

Appellant in India has to be decided keeping in view the above features and legal Provisions of taxation of service in India.

31. In this case, as is clear from the RBI's letter, BA, India are a branch office of 'BA, U.K.' permitted for operating air service. There is nothing in

this letter from RBI from which it can be inferred that the branch office is only a temporary establishment for some limited purpose. A temporary

establishment in India of a Company based abroad would be that establishment which is for a particular project after completion of which, it would get

wound up. The 'BA, U.K.' have been allowed by RBI to set up branch office in India for operating air services subject to conditions as mentioned in

the letter and the RBI's letter does not mention any period of validity of the permission or that the permission to set up branch, once granted, can not

be renewed. Therefore the Department's contention that branch office of 'BA, U.K.' in India is not a permanent establishment is without any basis.

The Appellant 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 65(105)(zh), read with Section 65(75) and Section 65(36) of the Finance Act, 1994 and this service is covered by Rule 3(iii) of the Taxation of

Services (Provided from outside India and received in India) Rules, 2006. This service provided from outside India, would be treated as received in

India, only if it has been ""received by a recipient located in India for use in relation to business or Commerce"". The dispute is as to whether the

Appellant, the branch office of 'BA, U.K.' in India is the recipient, as contended by the Department, or as pleaded by the Appellant, their head office

at UK, which has entered into agreements with the CRS/GDS Companies for Provisions of Service and has made payment for the services provided,

is the recipient of the service. For deciding this question, in view of the Provisions of Section 66A(2), the branch office (BA, India) and the head office

(BA,U.K.) are to be treated as two separate persons. The Revenue's plea is that as the service provided by the CRS/GDS Companies has been used

by the IATA agents in India appointed by the Appellant (BA, India) for sale of the Airline's Tickets, it is the Appellant who have to be treated as the

service recipient, not their head office in UK.

31.2 I am of the view that the Revenue's stand that it is the Appellant, the branch office of 'BA, U.K.', who are the recipient of the service provided

by the CRS/GDS Companies, is totally incorrect for the following reasons.

(1) During the period of dispute, there was no definition of â€˜service recipientâ€™ in the Finance Act, 1994 or in the Rules made there under. Even

in negative list based regime of service tax in force since 2012, there is no definition of 'service recipient', though there is definition of 'service'.

Therefore, the meaning of 'Service' and 'Service Recipient' during the period of dispute has to be ascertained from the nature of the service

transactions. As discussed in para 30 above, a service transaction is akin to a sale transaction. Just as sale of goods, which attracts sales tax, is

transfer of property in goods by a person (seller) to another person (buyer) for some consideration, a service transaction, generally, is carrying out of

an activity by a person (service provider) for another person for some consideration, which may be cash or other than 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 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 â€˜BA, U.K.â€™ with CRS/GDS Companies, it is seen that there is nothing in

these agreements from which it can be inferred that the CRS/GDS Companies were required to provide location specific service to the branches of

â€˜BA, U.K.â€™, all over the world. There is neither allegation nor evidence that â€˜BA, U.K.â€™ have charged any amount from the appellant

either directly or indirectly by the way of debit/credit notes, account adjustment or by other indirect means, for any services provided by the CRS/GDS

Companies.

(2) In this case, from the agreements between the appellantâ€™s Head Office at UK and the CRS/GDS Companies, it is clear that the CRS/GDS

Companies were not providing any Indian branch specific service. It is the Head Office at UK which, in order to promote its business by facilitating

the booking of air tickets though IATA agents all over the world, had negotiated with the CRS/GDS Companies and had entered into contacts with

them for storage of updated data on real time basis regarding their flight schedules, fares, seat availability, etc., and making the same accessible to

their IATA agents. The appellantâ€™s job is only appointing the IATA agents in India, collection of sale proceeds of tickets sold by IATA agents and

remitting the same 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)(c) 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 cannot 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 business needs are satisfied by the services provided by CRS/GDS Companies, it is the Head

Office which has to be treated as the recipient of the service provided by the CRS/GDS companies.

3. When neither any service has been received by the appellant nor there is any evidence or even any allegation that any payment was made directly

or indirectly by the appellant to CRS/GDS Companies nor any presumption in this regard can be made, the appellant cannot be treated as recipient of

the service provided by the CRS/GDS Companies.

4. Merely because the IATA agents appointed by the appellant in India used the services provided by the CRS/GDS Companies from abroad, the

appellant do not become the recipient of the service. For being treated as recipient, a person, in addition to being user of the service to satisfy his need,

must also be the person legally liable to receive the service and the person liable to make the payment/person making the payment for the service. In

this case, there is neither evidence, nor even allegation of the Department that the appellant is the person liable to make payment to CRS/GDS

Companies for their services or have made payment to them directly or indirectly. In this regard it would be absolutely incorrect to treat the payments

made by â€˜BA, U.K.â€™ to CRS/GDS Companies for the services provided by them, as the payments made by BA, India as for the purpose of

Section 66A in view of the provisions of Section 66A(2), â€˜BA, U.K.â€™, the head office and its Indian branch BA, India have to be treated as two

separate persons.

5. When the service has been received by the Head Office of the appellant at UK against its agreements with CRS/GDS Companies and as accepted

in the impugned order, entire payment has been made abroad by the Head Office directly to CRS/GDS Companies and when in view of the

provisions of Section 66A(2), the appellant-BA, India and their Head Office at UK, BA, UK are to be treated as separate persons, the entire

transaction of provision of service has to be treated as having taken place outside India and the service received by the Head Office at UK cannot be

treated as service received by the appellant, in India.

6. In my view, the only situation where in respect of the service provided by a service provider A located outside India against an agreement/contract

with Head Office of a company â€˜Bâ€™, incorporated outside India i.e. located outside India, the Service Tax can be charged from the branch

office â€˜B-1â€™ in India of the Company â€˜Bâ€™ when :-

(a) the Headquarter of the Company â€˜Bâ€™ has entered into a framework agreement/contract with the service provider â€˜Aâ€™ 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.', all over the

world. There is neither allegation nor evidence that 'BA, U.K.' have charged any amount from the Appellant either directly or indirectly by the way of

debit/credit notes, account adjustment or by other indirect means, for any services provided by the CRS/GDS Companies.

31.3 In the order recorded by my learned brother, BA, India and â€˜BA, U.K.â€™ have been treated as one entity, specifically observing in para 13

of the order that :-

â€œArgument 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 Appellant came to record

proving its existence to fulfil object of the agreement with Galileo carrying out the mandate of RBI permission letter aforesaid. Ticket

reservations were done by Air Travel Agent, for the Appellant making use of the services received by the Appellant. It was recipient

of the impugned service in India from CRS company located abroad through â€œcomputer network onlineâ€

Earlier in para 12 of his order, he has observed that â€œthe Appellant in consideration of availing aforesaid service has paid charges as

has been found by learned Adjudicating Authorityâ€.

31.3.1 In my view, as discussed earlier paras, for the purpose of Section 66A, the airline head office - â€˜BA, U.K.â€™ and its Indian branch office -

BA, India cannot be treated as one entity in view of the provisions of Section 66A, but have to be treated as two different persons. Therefore, it would

be wrong to treat the services received from CRS/GDS Companies by â€˜BA, U.K.â€™, as the services received by their Indian branch-BA, India.

Similarly the payments made to CRS/GDS companies by â€˜BA, U.K.â€™ cannot be treated as payments made to CRS/GDS Companies by BA,

India or on behalf of BA, India, unless it is proved that the services provided by CRS/GDS Companies were Indian branch specific services which

satisfied the business needs of BA, India and the role of â€˜BA, U.K.â€™ was of facilitator only.

31.3.2 Similarly in my view, the observations of Honâ€™ble Member (J) in para 15 of his order that who makes payment for the service provided is

not material for determining as to which has received the service, is also not correct, as and discussed in para 31.2(1) above, the service recipient is

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 provider. But

when the Head Office located abroad, has entered into contract with some off-shore service provider, the test for determining as to whether the

service has been received by the branch office in India or by the head office abroad, as discussed in earlier para above, would be :-

(a) whether the service provided is specific to the Indian branch and or at least Indian branch is most directly concerned with the use of the services

and the head office has acted merely as facilitator in arranging the provision of service; and (b) payment for the service to the service provider has

been made by the Indian branch either directly or indirectly, in this regard flow of consideration to the service provider can be presumed even if the

payment has been made by the head office, if the conditions in (a) and satisfied.

When the above conditions are not satisfied, merely because the service provided by an off-shore service provider in terms of contract with the head

office of a multinational company has benefited its branches including its branch in India, the Indian branch cannot be treated as service recipient, and

subjected to Service Tax under reverse charge mechanism of Section 66A.

31.5 In view of the above discussion, the appellant, the branch office in India of â€˜BA, U.K.â€™, cannot be treated as recipient of the service

provided by the CRS/GDS Companies, in pursuance of their agreements with the appellantâ€™s Head Office at UK, and, therefore, no Service Tax

can be charged from the appellant.

32. As regards the question of longer limitation period under proviso to Section 73(1) of the Finance Act, 1994, the same would not be available to the

Department, as no intention to contravene the provisions of Finance Act, 1994 and of the rules made thereunder can be attributed to the appellant for

the reason that even if they are required to pay 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, 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 and not by the way of availability of credit to the buyer of the

assesseeâ€™s manufactured goods [para 13(b) of the judgment], longer limitation period under proviso to Section 11A(1) of Central Excise Act, 1944

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)

Member (Technical)

34. Since there is difference of opinion between Member (Judicial) and Member (Technical), the Registry is directed to place this matter before

Honâ€™ble President in accordance with the provisions of Section 129C(5) of Customs 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.

1. â€œWhether on the facts and in the circumstances of the case, the appellant permitted by Reserve Bank of India (RBI) to carry out air transport

activity in India was a branch in India and was recipient of â€œonline Database Access or retrieval Serviceâ€ from CRS/GDS service provider

abroad and liable to Service Tax in terms of Section 65(105)(zh) read with Section 65(75) of Finance Act, 1994 on reverse charge mechanism basis

u/s 66A of the said Act w.e.f. 18-4-2006 or exempt in terms of Section 66A(2) thereofâ€

1. â€œIf Service Tax is payable by the appellant in respect of the service provided by the CRS/GDS Companies, whether longer limitation period

under proviso to Section 73(1) of Finance Act, 1994 would be available to the Department for recovery of tax and whether penalty on the appellant

u/s 78 ibid would be attracted?â€

(Pronounced in the open Court on 19-7-2013)

Shri Rakesh KumarÂ Â Â Â Â Shri D.N. Panda

Member (Technical)Â Â Â Member (Judicial)

S.Kaur

Per Archana Wadhwa

35. The following difference of opinion stand referred to me as a Third Member:

â€œSince there is difference of opinion between Member (Judicial) and Member (Technical), the Registry is directed to place this matter before

Honâ€™ble President in accordance with the provisions of Section 129C(5) of Customs 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

1. â€œWhether on the facts and in the circumstances of the case, the appellant permitted by Reserve Bank of India (RBI) to carry out air

transport activity in India was a branch in India and was recipient of â€œOnline Database Access or retrieval Serviceâ€ from CRS/GDS

service provider abroad and liable to Service Tax in terms of Section 65(105)(zh) read with Section 65(75) of Finance Act, 1994 on reverse

charge mechanism basis under Section 66A of the said Act w.e.f. 18-4-2006 or exempt in terms of Section 66A(2) thereof.â€

2. â€œIf Service Tax is payable by the appellant in respect of the service provided by the CRS/GDS companies, whether longer limitation

period under proviso to Section 73(1) of Finance Act, 1994 would be available to the Department for recovery of tax and whether penalty

on the appellant under Section 78 ibid would be attracted.â€

36. As is seen from above, ld. Member (Judicial) Shri D.N. Panda has rejected the 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 sides 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 USA. All these companies have provided services relating to the

reservation of ticket availability position through online computer system, commonly known as â€˜Computer Reservation Systemâ€™ or (hereinafter

referred to as CRS or GDS). The said services stand provided by CRS Companies to British Airways in terms of the agreement entered into between

them and the British Airways, London.

39. Both the Members have agreed that the services in dispute are covered by the definition of â€œOnline 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 relatable to the fact as to whether British Airways, India, has received the service provided by the CRS/GDS companies located abroad

or whether British Airways, UK have to be treated as recipient of the said services.

40. In terms of the provisions of Section 66A of the Finance Act, 1994, which stands reproduced in the proposed order, a recipient in India, of a

service from a person, who has his business or fixed establishment or his permanent address or usual place of residence, in a country other than India,

has to be treated as a person as if he has himself provided the service in India. As such, according to the deeming provision, as a service recipient, he

has to discharge his Service Tax liability accordingly. In a simple language, a person in India, who has received the services from a foreign service

provider and has consumed the services in India, is required to pay Service Tax on the same. The difference of opinion has to be answered in the light

of the provisions contained in Section 66A of the Act.

41. Before I go to the said Section, it would be worthwhile referring to certain undisputed facts. The CRS/GDS companies are admittedly located

outside India and do not have any office in India; â€œonline data based access/or retrieval serviceâ€™ stands provided by the said CRS/GDS

companies in terms of the agreement entered between them and British Airways, UK and the payment for the said services stand made by British

Airways, UK. As such, the service provider is located in a foreign land, service is being mainly provided to British Airways UK, which is also located

outside India and the payment for such services are being made by British Airways, 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 â€˜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.â€ 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 countryâ€.

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. My attention has been drawn to the various provisions of the Companies Act, 1956, which deal

with the law relating to companies and their other associations. A company which is incorporated outside India and wishes to conduct business within

India can do so by following Section 592(1) of the Companies Act read with the other relevant Sections like Section 594, etc. By referring to various

other Sections of the Companies Act, it stands contended that any foreign company having its place of business in India is required to prepare annual

accounts and balance sheets in terms of Sections 210 and 211. The Notification dated 7-12-2006 issued by the Ministry of Company Affairs lays

down that accounting standards should be followed by all companies whether incorporated in India or not. The accounting standard 17 relates to the

Segment Reporting whereas Para 5.2 of the same tax arid geographical segments. The entire accounts from their Indian operations stand debited by

the head office along with the expenses incurred by the corporate office in relation to operations in India and which includes the payment of CRS debit

for tax sold in Indian ticketing. Further the foreign company will not be able to sue in India however they can be sued by any person. As such, it

stands contended that the scheme of the Companies Act which primarily deals with the legal status of corporate bodies makes it abundantly clear that

there is no legal distinction between the foreign companies with its parent office abroad and their local subordinate branch office in India. It was in

these circumstances that British Airways, UK was given permission by the RBI to open its branch office in India. As a consequence, of this facility

provided to the foreign company for operating in India, by opening an office, the corporate office directly controls its office in India not as a holding

company but as an office with administrative flow over of their operations including appointment of employees, control over expenses and obligation of

evidence as long as that is not in conflict with Indian laws. As such, ld. DR submits that British Airways, UK and British Airways India is the same

legal person as its branch office in India.

44. While dealing with an identical submission of the Revenue, ld. Member (Technical) has referred to the permission dated 3-5-2000 granted to

British Airways, UK. No doubt, the 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 views, would not be proper,

especially when the explanation attached to the said sub-section further clarifies the scope of the expression â€˜Business Establishmentâ€™. Though,

the said explanation is to the effect that 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 and does not expressly deals or explains that a person located outside India and carrying on a business through a

branch in India shall be treated as having a business establishment in India but the reasonable construction of the same would lead to only one

inevitable conclusion that permanent establishments in India are also required to be treated as separate persons. A cumulative reading of sub-section

(2) of Section 66A read with explanation 1 makes it clear that the permanent establishment whether in India or outside India have to be treated as

business establishments. If that be so, they have to be treated as separate persons for the purposes of Section 66A. In fact, by treating the branch

office of foreign companies, as a separate person the service transacted between the head office outside India and their branch office in India would

become tenable. Similarly, if the branch office receives any service from an outside India service provider, he will have to be treated as service

recipient, being a separate person in view of the said Section 66A.

46. In view of the foregoing discussions, M/s. British Airways, India has to be treated as a separate person. If that be so, in view of the admitted

position that the contract between CRS/GDS companies is not with M/s. British Airways, India and is only that M/s. British Airways, UK, the present

appellant cannot be held to be recipient of the services so as to make him liable to pay service tax, on reverse charge basis, in terms of the provisions

of Section 66A. The said issue stands discussed by the ld. Member (Technical) in his impugned order, by giving example with which I am in full

agreement.

47. The above discussions leads to the factual position of British Airways, UK having received the services, which stands provided by CRS companies

located 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.

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 Revenueâ€™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, by no stretch of imagination held to be service

recipient in India so as to pay any Service Tax.

51. I also find favour with the appellantâ€™s contention that the entire situation is Revenue neutral. Admittedly British Airways, India is discharging

its Service Tax liability in respect of air transportation tickets sold by them. The present demand confirmed against them, was admissible to them as

Cenvat credit, which could have been further utilised for discharge of their Service Tax liabilities. I do not agree with the reasoning adopted by ld.

Judicial Member that inasmuch as the tax has not been paid by them, the credit would not be available. The said finding is contrary to the law laid

down by various Courts, including the Honâ€™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 utilising the same for discharge of admitted Service Tax liability, leading

to Revenue neutral situation. The question of availability of credit in a subsequently raised confirmed demand would arise only at the time of

finalisation of the demand itself. Reference in this regard can be made to the Honâ€™ble Supreme Courtâ€™s decision in the case of Formica India -

(S.C.), wherein the Honâ€™ble Supreme Court has held that when an assessee is contesting the correctness 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 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

appellantâ€™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 belief of

the assessee, there are number of factors which are required to be considered. The issue involved is a complicated issue of legal interpretation and

cannot be held to be a settled law. The fact that there is difference of opinion between the two Members of the original Bench, itself establishes the

fact that the legal issue is complex issue requiring legal expertise to settle the same. In such a scenario, if an assessee entertained a bona fide belief

that inasmuch as the service is not being received by him, and he is not required to pay any tax, he cannot be blamed for the same. Further the fact

that the entire exercise was Revenue neutral is also one of the factors to be considered in support of the appellantâ€™s plea of bona fide belief. If the

appellant would have paid the said tax, they would have been entitled to the credit of the same and would have been in a position to use the same in

discharge of their admitted Service Tax liabilities. In such a scenario, there are plethora of judgments by various Courts that no mala fide can be

attributed to an assessee so as to invoke the longer period of limitation. Accordingly, I agree with the ld. Member (Technical) that the demand is

barred by limitation and is required to be set aside along with setting aside of penalty.

53. In view of the foregoing, I agree with the ld. Member (Technical) that the impugned orders are required to be set aside and the appeal is required

to be allowed with consequential relief to the appellant.

54. File is sent back to the Original Bench for recording the majority order.

(Pronounced in Court on 16-5-2014)

MAJORITY ORDER

55. The appeal is allowed.

(Pronounced on 23-5-2014 in open Court)

M/s British Airways Vs Commissioner (Adjn), Central Excise Delhi

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