2024-VIL-1222-CESTAT-DEL-ST
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SERVICE TAX CESTAT Cases

Service Tax - Travel Agent Service, Receipt of commission, sub-agents - Appellant booked airline tickets for customers and sub-agents, and received commission from the airlines - Department alleged that the appellant had wrongly collected service tax from the sub-agents and failed to deposit it with the Govt - Department invoked Section 73A(2) of the Finance Act, 1994 to recover the alleged amount - Whether the commission received by the appellant from the airlines was inclusive of service tax - HELD - The agreement between the appellant and the airlines was signed in 1994, when there was no concept of service tax. Merely using the term "full compensation" in the agreement did not automatically mean that the commission included service tax - the airlines had issued a certificate stating that the commission did not include service tax. The appellant has also produced a certificate issued by airlines stating that no service tax was included in the commission paid by them to the appellant. It is, therefore, not possible to accept the contention of the department that the Agreement included service tax also under the remuneration clause of the Agreement - unless an amount has been specifically recovered as tax, the phrases such as “full compensation” or “inclusive of all taxes” would not automatically mean that tax has been recovered – Accordingly, the phrase “such remuneration shall constitute full compensation for the services rendered to the carrier” occurring in clause 9 of the PSA Agreement does not mean that service tax is included in the remuneration; The commission received by the appellant from the airlines was for the services provided by the appellant to the sub-agents or the customers. The appellant did not provide any service to the airlines; and The appellant was justified in charging service tax from the sub-agents and this service tax had been deposited by the appellant with the government. Thus, the provisions of section 73A(2) of the Finance Act would not be applicable - the impugned orders are set aside and appeals are allowed - whether the appellant rendered air travel agent services to the airlines as contended by the department or the appellant rendered this service to the sub-agents or customers as contended by the appellant - HELD - the appellant rendered services to the sub-agents and not to the airlines. Relying on the decision of the Madras High Court in Airlines Agents Association vs. Union of India, the Tribunal observed that the commission received by the appellant from the airlines had a direct nexus with the services rendered by the appellant to the sub-agents or customers – the commission that was received by the appellant from the airlines was for the services that the appellant was providing to the sub-agents or to the customers and not because the appellant rendered any service to the airlines. In fact, the commission received by the appellant had a direct nexus with the services rendered by the appellant to the sub-agents – the travel agent services have been rendered by the appellant to the sub-agents, and not to the airlines and once services are provided by the appellant to sub-agents, the sub-agents cannot be said to be providing any services to the appellant - Whether the department was justified in recovering the amount of service tax collected by the appellant from the sub-agents under Section 73A(2) of the Finance Act. HELD - since the appellant had rendered services to the sub-agents and not to the airlines, the appellant was justified in collecting service tax from the sub-agents. The Tribunal observed that Section 73A(2) would not be applicable in the present case, as the appellant had deposited the service tax collected from the sub-agents with the Government. Accordingly, the Tribunal set aside the impugned order and allowed all the appeals.
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