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Air Travel Agent Services [Sec 65(105)(l)]
Effective upto 30th June, 2012
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Landmark Service Tax Judgment - Air Travel Agent Services

INTRODUCED: With Effect From 1st July 1997
 
Contents
Scope
Exemption
Relevant Notifications / Circulars
Landmark Judgements
Accounting Code
Service Tax 00440032
Interest
00440033
Penalty 00441304
 
DEFINITION:

According to Section 65 (105) (l) any service provided or to be provided to any person, by an air travel agent in relation to the booking of passage for travel by air is a taxable service.

According to Section 65 (4) ‘air travel agent’ means any person engaged in providing any service connected with the booking of passage for travel by air.

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SCOPE:
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As regards the services rendered by the air travel agents, the person responsible for collecting the Service Tax will be the air travel agents and the measure of the tax is the commission received by the air travel agent from the air lines for booking of air tickets. 

Air travel agents receive certain commission for domestic tickets and for international tickets from the airlines. The details of the commissions payable by any airlines is indicated in the agency agreement entered into between the airline and the air travel agent. The travel agent files a fortnightly return to the airlines indicating the details of tickets booked, the fare collected, the commission earned along with other particulars. After adjusting the commission, be remits the balance amount to the airlines. This fortnightly return could be made the basis for assessment of Service Tax in respect of air travel agents.

However, an option is also being provided to the Breitling Avenger replica watches air travel agent to pay the Service Tax at the rate of 0.60% of the basic fare in the case of domestic tickets and 1.20% of the basic fare in the case of international tickets towards discharge of his Service Tax liability instead of paying tax at the normal rate of 12%(From 24-02-2009 10%) on the actual commission received from the air lines. 

“Basic fare” is defined as that part of the fare on which commission is payable by the airlines.   

 

Cancellation or modification of tickets is a very common and frequent feature in air travel. The air travel agent in his fortnightly return gives the particulars of tickets cancelled or modified and adjusts the commission accordingly subject to final approval by the airlines. Since the commission is adjusted automatically and the Service Tax is paid on the net commission received, the question of separately claiming refund of Service Tax may not arise.

 
SERVICE TAX EXEMPTIONS:
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(a)  Small service providers whose aggregate value of taxable services rendered in the previous year has not exceeded the limit of Rs. 10,00,000/-  (Service Tax Notification No. 8/2008-ST dated 01.03.2008)

(b)  Services provided to the United Nations or International Organisations

(c)  Services provided to Special Economic Zones (SEZ) units (including unit under construction) and SEZ developers

(d)  Services which are exported as per ‘Export of Services’ Rules

(e)  Services provided for official or personal use of foreign diplomatic missions and family members of diplomatic missions.

(f)  Services provided by Reserve Bank of India

(g)  Out of total value of service provided proportionate value of goods and material provided by the Service Provider

 
SERVICE SPECIFIC EXEMPTION:

The portion of the value received from the airline for booking of passage for travel by air which is in excess of the commission received is exempt for air travel agent.

 
RELEVANT SERVICE TAX NOTIFICATIONS:
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Service Tax Notification No. 22/97-S.T., dated 26-06-1997

 
RELEVANT SERVICE TAX CIRCULARS/INSTRUCTIONS/TRADE NOTICES:
Service Tax CBEC Instruction Letter (F. No. 334-1-2008), dated 29-02-2008

Service Tax Circular No. 96/7/2007-S,T., dated 23-08-2007

  Service Tax Trade Notice No. 47/CE (Service Tax)/97, dated 27-06-1997 of the New Delhi Commissionerate
 
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Case Laws Related

  • STO 2013 CESTAT 1022
  • Air Travel Agent or Business Auxiliary Service: Commission received by appellant from IATA: Held: Classification of the services rendered by the sub-broker or sub-agent remains the same as that of main broker: Revenue’s appeal dismissed.

  • STO 2013 CESTAT 475
  • Air Travel Agent: Commission/Incentive given by Amadeus or Galileo for using their software for booking of tickets: Service tax payable under Business Auxiliary Service as promotion activity: Directions issued for pre deposit.

  • STO 2010 CESTAT 143
  • Service Tax: CHA Service: Cenvat Credit: Pre-deposit: CHA services are utilised by the appellant either for import of the goods or export of the goods. Prima-facie the service tax paid on the services are eligible for cenvat credit. Application for waiver of pre-deposit of amounts demanded is allowed and recovery thereof stayed till the disposal of the appeal (para 3)

    Service Tax: Air Travel Service: Cenvat Credit: Pre-deposit: As regards the service tax paid on the air travel service, it has been held recently that the said service will be considered as expenses in the course of business. The applicant has made out a prima-facie case for waiver of pre-deposit of the amounts adjudged by the lower authorities.. (para 3)

  • STO 2009 CESTAT 976
  • Natural Justice: There is violation of principles of natural justice as the appellants were not supplied with the documents on the basis of which revenue had calculated the Service Tax liability. Matter remanded back.

  • STO 2008 CESTAT 25
  • Penalty set aside: Provisions of section 80 of the Finance Act, 1994  invoked and penalty set aside on finding that the appellant rendering the services of Air Travel Agent did not pay service tax on the tickets booked by Haji Pilgrims.

  • STO 2008 P&H 155
  • Rectification of Mistake : Section 74 of the Act pertains to rectification of the mistake in the order and a rectification can only be made by the same Authority if the mistake is apparent on the record.  This contention not raised before the Tribunal. No question of law arises from the Tribunal and the High Court could entertain and decide only those question of law which arise from the Order of Tribunal.

  • STO 2007 CESTAT 284
  • Service Tax: Air Travel Agent: Adjustments of the tax paid on cancelled tickets, towards tax payable: The impugned order is contrary to the circular dated, 26-6-1997 of the Board which specifically permitted the said adjustment. The present order is contrary to the view taken in the appellant's own case in jurisdiction of Jaipur (Order No. 128/06 dated 28-2-2006 STO 2006 CCEA 555. The circular on the subject may be read: Cancellation or modification of tickets is a very common and frequent feature in air travel. The air travel agent in his fortnightly return gives the particulars of tickets cancelled or modified and adjusts the commission accordingly subject to final approval by the airlines. Since the commission is adjusted automatically and the service tax is paid on the net commission received, the question of separately claiming refund of service tax need not arise. No adjustment of commission for the period prior to 1st July, 1997(when no service tax was leviable) will be made from the commission payable from 1st July, 1997 onwards". Clearly, the order is contrary to the provisions of the circular.(Para 3,4,5).

    Appeal allowed.

  • STO 2007 CESTAT 400
  • Service Tax: Air Travel Agent: Refund on account of cancellation of air tickets: There is no dispute as regards the payment of Service tax for Rs. 37,552/- for issue of air tickets which were cancelled later. The appellants are entitled to receive refund of the said amount. The appellants are in possession of documentary evidence to substantiate their claim that they had returned the airfare and Service tax to their clients. The passengers had acknowledged receiving refund of the fare and Service tax paid when they had cancelled their tickets. In the circumstances, the case is remanded to the original authority to examine the case afresh and to allow refund(Para 3).

    Appeal allowed by way of remand.

  • STO 2007 CESTAT 240
  • Service Tax: Standard / supplementary Commission: Liability: Apparently, both the above commissions were paid in this manner like trade discount. Ld. counsel has referred to exemption Notification No. 22/97-ST dt. 26-6-97, which exempted from the levy of service tax, that portion of the value of taxable service which was in excess of the commission received by the air travel agent from the airlines for booking of passage for travel by air. For claiming this exemption, the appellants should show that the 'supplementary commission' was an amount received in excess of the commission envisaged in the Notification. They have not been able to establish this. (Para 3,4).

    Pre-deposit ordered.

  • STO 2007 CESTAT 209
  • Condonation of Delay: The delay has not been satisfactorily explained by the appellants. In the result, the application gets dismissed.

  • STO 2006 CESTAT 176
  • Service Tax: Air travel agency service: Penalty u/s 76: Division Bench of the Tribunal held in the case of Mass Marketing & Advertising Services Pvt. Ltd. v. CCE, Bangalore reported in STO 2006 CESTAT 72 that even interest is not leviable when service tax was paid before issuance of SCN. Similarly, in the case of CCE, Bhopal v. Bhojpur Club reported in = STO 2006 CESTAT 191, the Commissioner had dropped penalty proceedings in view of the fact that the appellant had deposited the tax before issuance of SCN and in view of the scheme of September, 2004 for payment of service tax arrears and waiver of penalties.(Para 6).

    Appeal allowed.

  • STO 2006 CESTAT 757
  • Service Tax: Air travel agent: Opening of assessment u/s 74: Appellant's returns were assessed finally during the period July, 1998 to April, 1999. Lower authorities while exercising the powers under Section 74, did not indicate what was the mistake apparent on the record. The allegation in the show cause notice against the appellant is that they had not produced any documentary proof regarding actual payment of service tax by the principal party. This aspect of fact could have been gone into at the time of final assessment of returns, the revenue cannot take up this point to reopen the assessment under the Provisions of Section 74. In the case of Onkar Travels (Pvt.) Ltd. Onkar Travels (Pvt.) Ltd. v. CCE, Jalandhar as reported as STO 2005 CESTAT 403, Tribunal in para '7' has held as :- "It can be seen from the above provision, if there is a mistake apparent from the record than only the provisions of the Section 74 can be invoked. The question of "mistake apparent from the record" is now a settled law and this cannot be invoked to open an assessment which has become final under Section 71. If this kind of view is taken, then it would amount to a back door entry, to circumvent the provisions of law under Section 85. That is to say, if an appeal is not filed within time under Section 85, the opportunity to reopen the assessment cannot be read in to provisions of Section 74." The issue involved in this case is squarely covered by the ratio of the order of the Tribunal, in the case of Onkar Travels case(Para 4,5).
    Appeal allowed.

  • STO 2006 CESTAT 719
  • Service Tax: Air travel agent: Adjustment of service tax which was paid on the cancelled tickets: Appellant has tried to follow the Board's Circular dated 27-6-97 by making adjustment and as regards the service tax paid on the cancelled tickets. He produced voluminous records to substantiate his claim. Since this proof of substantiation was not before the Commissioner (Appeals), hence remanded the matter back to Commissioner (Appeals) to consider all the documents and pass afresh order on merits.(Para 5).

    Appeal allowed by way of remand.

  • STO 2006 CESTAT 508
  • Service Tax: Air travel agents service: Demand: Period of limitation: The demand of tax is hit by bar of limitation. The relevant show-cause notice was issued on 8-6-2004, demanding tax for the period from April 1998 to October 2003. The appellants and similar travel agents had filed Writ petitions in the High Court challenging Rule 2(d) (viii) of the Service Tax Rules, 1997 (as amended) against the above levy of Service tax. The Hon'ble High Court granted stay of operation of the said rule and accordingly, the department was not in a position to demand service tax on the aforesaid service. The Writ petitions were dismissed on 30-4-2001, till which date there was stay of operation of the above provision of law. The Commissioner of Central Excise and other jurisdictional officers were respondents to the Writ petitions and, therefore, they were aware of the facts of the case. Even after dismissal of the Writ petitions, they took more than three years to issue the subject show-cause notice. The demand raised is beyond the normal period of limitation and in the absence of suppression of facts, the extended period of limitation was not invokable in this case.(Para 1).

    Pre-deposit waived and stay granted.
     

  • STO 2006 CESTAT 481
  • Service Tax: Adjustment of against cancelled air tickets: Stay: The demand of Service Tax is being confirmed in respect of the tickets, which were got cancelled, and adjustment was made by the applicant in pursuance to the Board's Circular dated 26-6-1997. Board circular provided such adjustment in respect of the Service tax collected and in respect of the service not provided as the air tickets were subsequently cancelled.(Para 1).

    Stay application allowed.
     

  • STO 2006 CESTAT 718
  • Service Tax: Air Travel Agent: Adjustment of Service Tax payable: There is a Board Circular which authorizes Air Travel Agents to adjust the commission and the Service Tax thereon automatically. The issue is arguable one.(Para 2).
    Pre-deposit waived, stay allowed.

  • STO 2005 CESTAT 237
  • Service Tax: Air Travel Agent: Demand: Appellants margin from the sale of ticket alone can constitute his agency commission and a tax is to be levied on that commission. Appellant was selling tickets to passengers and remitting the amounts realized from passengers to the airline after taking a margin of about Rs. 200/- to Rs. 300/- per ticket. This margin alone can be treated as agency commission, though the airline has certified that they are not giving any commission. Appellant's relationship with the airline was that of an agent and the margin in the transaction constituted agency commission. "Taxation service" in relation to "Air Travel Agent" has been defined as any service provided to a customer in relation to the booking of passenger. In the present case, the appellant was not receiving any further commission from the airlines beyond the margin in selling tickets.(Para 4).

    Appeal allowed.

  • STO 2002 CESTAT 8
  • Service Tax: Air Travel Agent Services: Refund: Section 11B: The Appeal is, remanded with the direction to re-examine the entire issue in the light of the Tribunal's decision in the case of Omega Alloys Castings (P) Ltd. v. C.C.E., Bhopal reported in 2000 (121) E.L.T. 336 wherein it was held that question of time-bar does not arise in case of consequential relief, and in the light of the clarification given in the Trade Notice No. 6/97, dated 1-7-97 issued by Mumbai-I Commissionerate clarifying that assessee need not file separate refund claim in respect of each tickets cancelled or modified, and then pass appropriate orders in accordance with law after providing the appellant an opportunity of being heard in person.(Para 3,4 and 6).

    The Appeal is allowed by way of remand.

  • STO 2001 Mad 182
  • Air Travelt Agent: Section 67(k) does not in any manner alter the nature of tax and does not shift it from the top quality replica watches online service rendered to the customer to the service rendered to the airlines: there is absolutely no breach of any fundamental rights by passing Rule 6(7).

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