Binu Tamta, J
1. Two separate appeals have been filed by New High Flying Travels Pvt. Ltd., the appellant assailing the Order-in-Appeal No. 154-155/ST/APPEAL-II/MK/GGN/2016-17 dated 30.09.2016, confirming the demand of service tax along with interest and penalty.
2. The appellant engaged in providing taxable services in relation to travel and tours is registered under the category of ‘Tour Operator Service’, ‘Air Travel Agent Service’, and ‘Business Auxiliary Service’. The services rendered by the appellant are broadly classified under the following categories:
(a) Domestic
(b) Outbound,
(c) Business Auxiliary Service, BAS.
3. In respect of domestic category, there is no dispute, however, dispute pertains to outbound tours and BAS.
4. Under BAS, the appellant is receiving Computer Reservation System (CRS) incentive for booking of air tickets by using the software and hardware provided by the CRS company Galileo/Amadeus. In case of outbound tours, the appellant organises tours outside the territory of India for Indian tourist to facilitate them to visit various local places outside India.
5. In Appeal No. 50041/2017, Show cause notices dated 17.04.2012 and 22.04.2013 were issued to the appellant for the period 01.10.2010 to 30.09.2011 and 01.10.2011 to 30.06.2012 for Rs. 2,84,406/- and Rs. 3,26,748/- respectively. Similarly, in Appeal No. 50042/2017, SCN dated 24.03.2011 for the period 2005-06 to 2010-11 (upto September 2010) for Rs. 1,37,242/- was issued. On adjudication, the service tax amount as proposed was confirmed along with interest and penalty under section 76,77 and section 78 of the Act. Being aggrieved, the appellant had challenged the same before the Commissioner (Appeals), whereby the impugned order has been passed. SCN dated 22.04.2013 for the period 01.10.2011 to 30.06.2012 was remanded to the adjudicating authority as the service tax liability was not correctly assessed and hence the same is not under challenge. Hence, the present appeal has been filed before this Tribunal.
6. Heard Shri S. K. Wadhwa, learned counsel for the appellant and Shri S. K. Meena, the authorised representative for the Revenue.
7. The issue whether service tax is leviable on the CRS incentive has been decided by the Larger Bench of the Tribunal in the case of Kafila Hospitality & Travels Pvt. Ltd Vs. Commissioner of Service Tax, Delhi, 2021(47) G.S.T.L. 140 (Tri.-LB) in favour of the assessee holding that mere selection of software or exercising of a choice would not result in any promotional activity and the department has not pointed out any activity undertaken by an air travel agent that promotes the business of the CRS company and therefore, the incentives received by service recipient from a service provider cannot be subjected to service tax. The relevant paras of the said decision are as under:
“70. The two competing entries are "air travel agent" service and "BAS". It would be seen from the definition of "air travel agent" that it includes all services connected with or in relation to the booking of passage for travel by air.
The services in question are booking of airlines tickets and for achieving a pre-determined target, the air travel agent also receives an additional amount in the form of incentives/commission from the airlines or the CRS Companies. The receipt of incentives/commission would not change the nature of the services rendered by the travel agent.
71. This apart, the definition of BAS would also reveal that the service provider must promote or market the service of a client. As noticed above, it is not a case where the air travel agent is promoting the service of airlines/CRS Companies. The air travel agent is, by sale of airlines ticket, ensuring the promotion of its own business even though this may lead to incidental promotion of the business of the airlines/CRS Companies. Thus, in terms of the provision of Section 65A(2)(a) of the Finance Act, the classification of the service would fall under "air travel agent" services and not BAS.”
8. The principle of law settled by the Larger Bench squarely applies to the facts of the present case and hence no service tax can be levied on the appellant on account of incentives received from the CRS companies.
9. The second issue relating to the activity of providing services in relation to outbound tour in locations outside the territory of India, including the operation of tours and planning, scheduling, organising, or arranging of such tours falls within the ambit of ‘tour operator service’, as defined under section 65(115) of the Finance Act, 1994, the Act and thereby assessible to service tax under the provisions of the Act has now been considered by the Larger Bench of the Tribunal in M/s Cox and Kings Ltd, Order dated 19.10.2023 passed by the Tribunal by Interim Order No. 104/2023, in the light of the amended definition of ‘tour operator’, w.e.f. 10.09.2004. The basic contention raised therein by the assessee was that all the activities like planning, scheduling, organising or arranging tours by the appellant are aimed at the client enjoying the tour outside India and therefore as the services are consumed outside India service tax would not be leviable. The situs of tour operator service, in case of outbound tour is outside India. The Bench observing that the definition of ‘tour operator service’ underwent a change w.e.f. 10.09.2004 when the amended definition introduced the services such as planning, scheduling, organising, or arranging towards arrangements for accommodation, sightseeing, or other similar services as to operator service. Though the tour itself was not a taxable event, but the activities related to arrangement of a tour would fall within the said definition. Having held so, the reference was answered as under:
i) the taxability of activity undertaken by the appellant will have to be decided on the facts peculiar to the case and in accordance with intent of section 65, section 66 and section 67 of the Finance Act.
ii) the dispute in this appeal, i. e., from 01.04.2005 to 31.03.2011, pertaining to the period prior to the ‘negative list’ regime does not have to consider ‘taxable territory’ as affecting the decision thereon.
10. Applying the principles laid down by the Larger Bench to the facts of the present case, we need to examine whether the appellant was involved in rendering the other services as scheduled in the definition of the ‘tour operator service’, which will result in the liability to discharge the service tax under the Act. We find that the appellant vide their letter intimated the department that they were receiving the amount on account of providing the international hotel booking, car services, U-rail or rail services, and Visa services under the category of international tour package. The nature of services provided by the appellant are not restricted to the tour itself but are extended to include other activities which in terms of the amended definition of ‘Tour Operator Service’ are taxable. Moreover, the claim made by the appellant that the services rendered by them being executed outside the country would amount to export of services under the Export of Service Rules, 2005 is not sustainable as the same has not been found favoured with the Larger Bench in M/s. Cox & Kings. In the present case, more imporatntly one of the prerequisites for determining a service to be export service is that payment for rendering such service is received in convertible foreign exchange is not satisfied. The adjudicating authority has categorically recorded a finding that the appellant is not receiving the payment against the provision of outbound tours in foreign exchange and therefore the provisions of Export of Service Rules, 2005 are not applicable.
11. In view of our discussion above, we conclude as under:
(i) that no service tax is leviable on the CRS incentives received by the appellant.
(ii) the services of planning, scheduling, organising, or arranging tours, arrangements for accommodation, sightseeing, or other similar services as to operator service rendered by the appellant are chargeable to service tax under the Act.
12. Having held that, the appellant is liable to pay service tax on outbound tours service which they have not paid/short paid during the period, 2010-12, they are liable to pay interest in terms of section 75 of the Act.
13. The show cause notice dated 17.04.2012 covering the period 01.10.2010 to 30.09.2011 is within the normal period. The earlier show cause notice dated 24.03.2011 covering the period 2005 September to 2010 was the extended period of limitation. The facts of the present case shows that that Adjudicating Authority has recorded a finding that the appellant had contravened the provisions of the Service Tax Act and the Rules. Referring to the various provisions of the Act, it was noticed that the obligation cast on the appellant by the statutory provisions required them to file proper periodical returns and discharge the service tax liability accordingly, which the appellant had failed to do so. Further, the present case had initiated because of the enquiry conducted by the officers of the department and in the absence thereof, the evasion of tax would not have come to light. The extended period as provided under the proviso to Section 73(1) of the Act has been rightly invoked and no interference is called for therein. In view of these facts, the penalties imposed under section 76, 77 & 78 respectively in the two appeals is also affirmed.
14. The impugned order is, therefore, modified to the extent indicated above. We remand the matter back to the adjudicating authority to compute the service tax liability of the appellant in view of our decision above. The appeal is, accordingly, disposed off.
(Order pronounced in the open court on 04.11.2024)
