2026-VIL-572-CESTAT-CHD-ST
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SERVICE TAX CESTAT Cases

Service Tax - Taxability of CRS/GDS Incentives - The appellants, who are engaged in the business of air ticket booking, received incentives from CRS/GDS companies for achieving pre-determined booking targets - Authorities alleged that these incentives were taxable under 'Business Auxiliary Service' – HELD - The larger Bench of the Tribunal, in the case of Kafila Hospitality & Travels Pvt Ltd, has overruled the earlier decisions relied upon by the impugned order and held that the air travel agent is promoting its own business and not the business of the CRS/GDS companies, and the incentives received for achieving targets are not leviable to service tax - The passengers cannot be deemed to be an audience for the promotion of the business of CRS Companies, as the passenger cannot directly use the CRS software and the travel agent is not engaging in any promotional activity before the passenger. In terms of the provisions of Section 65A of the Finance Act, the classification of the service would fall under "air travel agent" services and not 'Business Auxiliary Service' - The demand on this count is set aside - Inclusion of Fuel Surcharge in the "Basic Fare" under Rule 6(7) - The Revenue authorities alleged that the appellants were required to include the fuel surcharge in the "basic fare" for the purposes of payment of Service Tax under Rule 6(7) of the Service Tax Rules, 1994 – HELD - The issue is no longer res integra and has been decided in favour of the appellants by the Chennai Bench of the Tribunal in the case of BCD Travels India Pvt Ltd. The "basic fare" as specified in Rule 6(7) does not include the fuel surcharge and the appellants have rightly paid the Service Tax only on the basic fare by exercising the tax payment option under Rule 6(7). The demand on this count is set aside - Denial of Abatement under Notification 1/2006-ST - The Revenue authorities denied the benefit of abatement under Notification No. 1/2006-ST dated 01.03.2006 and No. 26/2012-ST dated 20.06.2012, on the ground that the appellants availed Cenvat credit on common input services – HELD - The reversal of Cenvat credit amounts to not availing the credit, as held in various judicial precedents. The Tribunal found that the appellants made reversal on a pro-rata basis, considering the taxable value of the services as a reasonable basis, as no specific method was prescribed under the law. Even after the formula was prescribed under Rule 6 of the CCR, 2004, w.e.f 01.04.2011, the Revenue authorities continued to issue Show Cause Notices in the same language as in old Show Cause Notices, without appreciating the legal and factual position. The Tribunal held that the demand is not sustainable and the appellants are eligible for the abatement under the said notifications - Adjustment of Excess Service Tax Paid under Rule 6(4A)/(4B) - The Revenue authorities alleged that the appellants made unauthorized adjustments of excess service tax paid in previous months against their service tax liability for subsequent months, without fulfilling the conditions laid down in Rule 6(4B) of the Service Tax Rules, 1994. HELD - The benefit of adjustment of excess payment of service tax cannot be denied on the grounds of procedural lapses such as non-filing of intimation, adjustment of an amount exceeding one lakh etc. The Tribunal observed that the excess payment is like an advance payment of service tax, whose incidence has not been passed on to the customers, and the Government cannot retain the excess tax paid by the assessee by refusing its adjustment against his tax liability during other months. The demand on this count is liable to be set aside - Eligibility of CENVAT Credit on Gateway Charges - The Revenue authorities alleged that the appellants wrongly availed CENVAT credit of service tax paid on gateway charges, as the charges were reimbursed by the airlines and the appellants did not bear the economic burden of the same – HELD – There is no restriction under the CENVAT Credit Rules that credit cannot be availed if the expenses are reimbursed. The moot question is whether the gateway charges are an input service for the appellants, and the same is not disputed by the Revenue authorities. The Tribunal held that the grounds on which the credit is denied have no legal backing, and the demand on this count is liable to be set aside.
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