sevakarahmedabad.nic.insevakarahmedabad.nic.in/doc/addl/oio52-2012-13n.doc · web viewm/s riya...

2 OIO No. 52/STC/AHD/ADC(JSN)/2012-13

BRIEF FACTS OF THE CASE

M/s Riya Travels & Tours (I) Pvt. Ltd., Empire Tower, Unit No. 6 & 7, Nr. Associated Petrol Pump, C.G. Road, Ahmedabad-380 006 (hereinafter referred to as “the said assessee”) is engaged in providing Air Travel Agency Service and registered with the Service Tax Department under the category of “Air Travel Agent Service” and “Business Auxiliary Service” as defined under Section 65 of the Finance Act 1994, holding Service Tax Registration No.AAACR3178BST006. In respect of Air Travel Agent Service, the assessee has opted to pay service tax on basic fare, as provided in Rule 6 (7) of the Service Tax Rules, 1994.

2. A letter F. No. STC/AR.X/2010-11 dated 13/07/2010 and reminders dated 27-09-2010 and 11-10-2010 was issued by the Range Superintendent requesting the said assessee to provide the income figures for the period from 01.04.2009 to 31.03.2010 in respect of Voiding charges, Cancellation charges, Processing charges, Hotel sales, service charges, overseas insurance, visa service charges, Incentive ACM-BSP, Car rental charges, No show charges and Domestic tour income etc. for the above said period. The service provider has submitted the figure vide their letter dated 13.10.2010 the details of which are mentioned below:- TABLE- I

Sr. No. Head of Income 2009-101 Voiding charges /cancellation/No show charges 11,10,2652 Service Charges 17,4503 Overseas Insurance 6,97,2504 Visa Service Charges 3,35,6305 Incentive-ACM BSP 006 Car Rental Charges 007 Processing charges 12,94,6348 Domestic Tour Income 009 Hotel sales 0010 Rail service charges 00

Total >>>>> 34,55,229 (Source : Letter dated 13-10-2010 of the assessee)

3. The service provider had submitted that they had paid service tax on Visa Service charges income.

4. Whereas it appeared that the said assessee had not paid the service tax on following income of year 2009-10 and service tax payable was worked out as under :-

Sr.No.

Head of income Income Rs. Service tax payable (10%)

Education Cess payable Rs.

SHEC payable Rs.

1 Voiding charges/cancellation charges/No show charges

11,10,265 1,11,027 2,221 1,110

2 Processing charges 12,94,634 1,29,463 2,589 1,2953 Service charges 17,450 1,745 35 174 Overseas insurance charges 6,97,250 69,725 1,395 697

Total >>>>> 31,19,599 3,11,960 6,240 3,119

5. Based upon the information provided by the said assessee , a show cause notice bearing No. SD-02/Riya/SCN/61/AR-X/2010-11 dated 15-10-2010 was issued to M/s Riya Travels & Tours (I) Pvt. Ltd., Ahmedabad by the Assistant Commissioner of Service Tax, Division-II, Ahmedabad demanding service tax of Rs. 3,21,319/- on various service income of Rs.31,19,599/- for the year 2009-10.

6. Further, audit of the said assessee was conducted in the month of January 2011 for the period from 2009-10 by the officers of Audit Section of the Service Tax, Ahmedabad. During the course of audit of the records of the said assessee, it was observed that gross amount collected as per Ledger for the year 2009-10 was not tallied with the details of service charges income furnished by the said assessee to the department which was the basis of said show cause notice dated 15-10-2010 issued by the Assistant Commissioner, Service Tax, Division-II, Ahmedabad. The actual amount was reconciled by the audit party based on the documents


available with the said assessee. These facts and figures were not shown by the said assessee in their letter dated 13.10.2010 to the Range Superintendent. The correct figures compiled by the audit party based on their ledger account for the year 2009-10 was as under :-

Particulars Gross amount collected as per Ledger

Amount covered in Show cause notice

Differential amount

Voiding/ Cancellation charges

13,31,813 11,10,265 2,21,548

Processing charges 13,09,553 12,94,634 14,919Service charges 17,450 17,450 00Overseas Insurance 57,08,399 6,97,250 50,11,149Visa Charges 3,35,930 00 3,35,930Total 87,03,145 31,19,599 55,83,546

7. Out of the above differential amount of Rs.55,83,546/-, an amount of Rs.3,39,101/- had already been shown by the assessee in the ST-3s filed by them during 2009-10 and service tax also had been paid, so the service tax on the remaining amount of Rs.52,44,445/- was required to be recovered from them with interest.

8. As per Section 67(1) (i) of the Finance Act, 1994, “Where service tax is chargeable on any taxable service with reference to its value, then such value shall, in a case where the provision of service is for a consideration in money, be the gross amount charged by the service provider for such service provided or to be provided by him”.

9. And as per Rule 5(2) of the Service Tax (Determination of Value) Rules, 2006, “Subject to the provisions of sub-rule (1), the expenditure of costs incurred by the service provider as a pure agent of the recipient of service shall be excluded from the value of the taxable service if all the conditions given hereunder are satisfied”. Moreover, as per the Service Tax (Determination of Value) Rules, 2006, “Pure agent means a person, who receives only the actual amount incurred to procure such goods or services”.

10. In view of the above, in the instant case it was observed that the said assessee had collected certain amount from the customers/passengers on account of Voiding Charges/ Cancellation charges / No show charges, Processing Charges, Service Charges and Overseas Insurance Charges, but the entire amount had not been debited to the concerned Airlines, on whose behalf these collections were made, instead a portion of the same had been retained by them as had been shown as Income in the books of accounts, thus they do not fulfill the condition of being a “Pure Agent”. When asked by the Range Superintendent vide letter dated 11.10.2010 about the details of such amounts collected by them, the said service provider vide their letter dated 13.10.2010 provided the net amount retained by them and not the Gross amount charged by them from the customers/passengers.

11. A statement of Shri Saumil Hasmukhbhai Patel, Manager (Accounts) of M/s Riya Travel & Tours (India) Pvt. Ltd., Ahmedabad was recorded on 22-07-2011 under Section 14 of the Central Excise Act, 1944 read with Section 83 of the Finance Act, 1994. On being shown their letter dated 13-10-2010, he stated that they have provided the details of various service charges income of the said Company for the year 2009-10 to the Service Tax Department. He was also shown Audit Report No.182/2010-11 dated 3-03-2011 issued by the Assistant Commissioner (Audit) Service Tax, Ahmedabad in respect of M/s Riya Travel & Tours (India) Pvt. Ltd., Ahmedabad for the year 2009-10. In the Revenue Para-1 of the said Audit Report, Audit Party had pointed out gross amount collected as per Ledger in respect of Voiding/ Cancellation charges, Processing charges, Service Charges, Overseas Insurance, Visa Charges etc. for the year 2009-10. The details of gross amount collected as per Ledger as pointed out by Audit Party and figures of various service charges income provided by them vide their letter dated 13-10-2010 are as under :-

Particulars Gross amount collected as per Ledger

Income intimated by M/s Riya Travel & Tours (India) Pvt Ltd vide letter dated 13-10-2010 addressed to

Difference between gross income as per ledger and details submitted to the


Supdt. S.T. Range-X. Service Tax Deptt.Voiding/ Cancellation charges

1331813 1110265 221548

Processing charges 1309553 1294634 14919Service Charges 17450 17450 0Overseas Insurance 5708399 697250 5011149Visa Charges 335930 335630 300

11.1. On being asked about difference in gross income as per Ledgers and income figures intimated to the Service Tax Department vide letter dated 13-10-2010 for the year 2009-10, he stated that the various service charges income figures provided by them vide letter dated 13-10-2010 are net income figure after deducting amount passed on to the customers or paid to airlines whereas Audit Party has taken gross income figure from credit side of income ledgers. Thus, there is a difference between gross income as per ledgers and data provided by them to the Service Tax Department. On being asked about non payment of service tax on Voiding/ Cancellation charges and Processing charges, he stated that taxability on such charges has already been decided by the Commissioner (Appeals) vide OIA No. 305/2010(STC)/MM/Commr.(A)/Ahd. dated 16-09-2010 and held that such charges are not includible in the taxable value of Air Travel Agent service. On being asked about nature of service provided in respect of Service Charge income, he stated that in some cases for, ticket re-validation, date change, any other alteration in air ticket terms, they have to visit airline office and for that service they have collected some charges from the customers and said income is booked as Service Charge income in their books of accounts. They are not disputing taxability under Business Auxiliary Service on such Service Charge income and will pay up service tax payable for the year 2009-10 shortly.

11.2. On being asked about nature of Overseas Insurance income, he stated that the Company has an agreement with these insurance companies like Bajaj Alliance, Tata AIG and Reliance Insurance etc. for providing outsource services for permitting the use of infrastructure like computer systems, office premises and the staff of the Company. In consideration for these services, Company receives service charges on monthly basis which is based on the number of insurance policies that are issued from their offices located across India. However the service charges is received only in Mumbai Head Office for the consolidated business done for all the branches and service tax on such service charges are collected from these insurance companies and the same is paid from Mumbai Head Office under the category Business Auxiliary Services. The Overseas insurance income appeared in the books of their Ahmedabad Branch is received from Mumbai Head Office, which is only a distribution of service charges to branch office and the service tax on the same has already been paid by Head Office situated at Mumbai. In this regard he submitted Overseas Insurance income ledger of their Head Office at Mumbai and their Branch Office at Ahmedabad for the period 1-03-2010 to 15-03-2010, copy of MOU dated 8-03-2010 with M/s Bajaj Allianz General Insurance Company Limited, photo copy of Invoice No. 15 dated 8-02-2010 issued by their Head Office at Mumbai to M/s Bajaj Allianz General Insurance Company, Mumbai, photo copy of Certificate dated 17-02-2011 issued by M/s P. S. Sanghvi & Co., Chartered Accountants. On being specifically asked whether they are authorized agent of Insurance Companies for issuing Insurance Polices, he stated that they are not authorized agent of any Insurance Company and income of Rs.57,08,399/- is not insurance commission but referral/ facilitation charges as per agreements. On being specifically asked that gross Overseas insurance charges income as per ledger for the year 2009-10 is Rs.57,08,399/- whereas the income details provided vide letter dated 13-10-2010 is Rs.6,97,250/- and there is huge difference of Rs.50,11,149/-, he stated that the differential amount of Rs.50,11,149/- has been passed on to the customer and net income comes to Rs.6,97,250/-. On being asked, he stated that service tax is chargeable on the gross amount received towards taxable service provided and not on the net amount after passing on certain income to the customers.

12. Out of total gross income of Rs.87,03,145/-, the assessee had paid up service tax on the amount of Rs.3,39,101/- under Business Auxiliary Service and hence service tax not paid was


required to be demanded on Rs.83,64,044/- which comes to Rs.8,61,497/-. Out of service tax recoverable Rs.8,61,497/-, a show cause notice demanding service tax of Rs.3,21,319/- had already been issued. The amount of service tax short demanded comes to Rs.5,40,178/-.

13. The details of various services charges income for the year 2009-10 was furnished by the assessee vide their letter dated 13-10-2010 and show cause notice demanding service tax of Rs.3,21,319/- was issued by the Assistant Commissioner, Service Tax, Division-II, Ahmedabad whereas on the basis of actual gross income pointed out by the Audit Party, service tax recoverable came to Rs.8,61,497/- which fell under the competency of the Joint/Additional Commissioner, Service Tax, Ahmedabad and show cause notice was required to be issued by him.

14. Again, the Range Superintendent vide letter dated 28.09.2011 asked the assessee to furnish details various Income for the year 2010-11. The assessee vide their letter dated 07.10.2011 submitted the details of Incomes for the year 2010-11 as under:

Sr. No.

Description of Income Gross Amount collected as per ledger (2010-11)

Service Tax payable Service Tax paid

1. Voiding /CNC/No show charges 2762754 NA NA2. Service Charges 39831 4103 41033. Overseas Insurance 16377770 NA NA4. Visa Service Charges 1234210 127124 1253735. Incentive-ACM BSP 2613803 NA NA6. Car Rental Charges NIL NIL NIL7. Processing Charges NIL NIL NIL8. Domestic tour Income NIL NIL NIL9. Hotel Sales 12460 1283 1283

10. Rail Service Charges NIL NIL NIL11. Hotel Booking Commission

IncomeNIL NIL NIL

Total 23040828 (Source: Letter dated 07-10-2011 of the assessee)

15. Out of total gross income of Rs.2,30,40,828/- for the period 2010-11, the assessee had paid up service tax on Rs.52,291/- under Business Auxiliary Service and hence service tax not paid / short paid was required to be demanded on Rs.2,29,88,537/- which came to Rs.23,67,819/. Out of the said income, the assessee had paid service tax of Rs.1,25,373/-, hence, the service tax required to be recovered came to Rs.22,42,446/- as per Annexure-B.

16. As per the provisions of Section 65 (19 ) of the Finance Act, 1994 the term “ Business Auxiliary Service” has been defined as-

“ Business Auxiliary Service means any service in relation to,-(i) Promotion or marketing or sale of goods produced or provided by or belonging to

the client; or(ii) Promotion or marketing of service provided by the client; or(iii) any customer care service provided on behalf of the client; or

(iv) Procurement of goods or services, which are inputs for the client; or Explanation:- For the removal of doubts, it is declared that for the purpose of this sub-clause, “ inputs” means all goods or services intended for use by the client.(v) Production or processing of goods for, or on behalf of, the client; or(vi) Provision of service on behalf of the client; or(vii) A service incidental or auxiliary to any activity specified in sub-clauses (i) to (vi),

such as billing, issue or collection or recovery of cheque, payments. Maintenance of accounts and remittance, inventory management, evaluation or development of prospective customer or vendor, public relation services, management or supervision,


and includes services as a commission agent, but does not include any activity that amounts to “ manufacture” of excisable goods.

17. The said assessee, apart from commission from Air Lines, have received income from (i) voiding charges, (ii) cancellations charges which a portion of amount retained by the said assessee in respect of air tickets cancelled by their customers, (iii) processing charges is a portion of amount retained by the said assessee received from their customers and subsequently paid to the airlines towards processing of documents, (iv) service charges is an amount charged by the service provider for ticket re-validation, date change or any other alteration in air ticket terms(v) overseas insurance charges income is not commission received from Insurance Companies for issuing Insurance Policies as they are not authorized agent of Insurance Companies but actually these income is towards providing outsource services for permitting the use of infrastructure like computer systems, office premises and the staff of the service provider to the Insurance Companies. In short Overseas Insurance charges income is towards referral and facilities provided by the service provider to the various Insurance Companies. However, it is observed that the said service provider had failed to pay service tax on amounts collected as voiding charges/cancellation charges ,processing charges, service charges, overseas insurance charge, which appeared to be covered and taxable under “Business Auxiliary Services as defined under Section 65 (19) of the Finance Act, 1994 (as amended).

18. As per sub-clause (ii) of clause (19) of Section 65 of the Finance Act, 1994, promotion or marketing of service provided by the client is taxable under Business Auxiliary service. The Overseas Insurance Charges were received from Insurance Companies for promotion and marketing of business of Insurance Companies and hence becomes covered under Business Auxiliary Service under sub-clause (ii) of clause (19) of Section 65 of the Finance Act, 1994.

19. Voiding charges and cancellation charges income are charges which were retained by the assessee in respect of tickets which were cancelled by the customer, whereas processing charges were a portion of amount retained by the assessee from what they received from their customers and paid to the airlines for processing of documents. No show charges were the amount which was retained by the assessee when the passenger could not fly. Service charges is an amount charged by the assessee for providing service to get alteration in air tickets done by visiting office of the airline. Such charges were collected from the customers towards services provided on behalf of the Airline and some portion of such charges is retained by the assessee. Provision of service on behalf of the client is taxable under the Business Auxiliary service under sub-clause (vi) of clause (19) of Section 65 of the Finance Act, 1994. The services provided by the said assessee appears to be covered and taxable under sub-clause (vi) of clause (19) of Section 65 ibid under Business Auxiliary Service.

20. As per Section 68 of the Finance Act, 1994, every person providing taxable service to any person shall pay service tax at the rate specified in section 66 in such manner and within such period as may be prescribed. As per Rule 6 of Service Tax Rules, 1994, the service tax is required to be paid by the 5th day of the month, immediately following the calendar month in which the payments are received, towards the value of taxable services. The assessee is failed to pay service tax within the stipulated time limit and contravened the provisions of Section 68 of the Finance Act, 1994 read with Rule 6 of the Service Tax Rules, 1994.

21. As per Section 70 (1) of the Finance Act, 1994, every person liable to pay the service tax shall himself assess the tax due on the services provided by him. As per Rule 7 of the Service Tax Rules, 1994, every assessee shall submit the half-yearly return by the 25 th of the month following the particular half-year. The assessee failed to self assess correct service tax liability under the category “Business Auxiliary Service” and to declare correct value realized towards providing Business Auxiliary Service in the ST-3 Returns filed with the department and contravened the provisions of Section 70 (1) ibid read with Rule 7 of the Service Tax Rules, 1994.


22. In view of above, it appeared that M/s Riya Travel & Tours (India) Pvt. Ltd., Ahmedabad had contravened the following provisions:-

(a) Section 68 of the Finance Act,1994, read with Rule 6 of the Service Tax Rules, 1994, in as much as they have failed to make the payment of Service Tax as detailed in Annexure-A to the Notice to the credit of the Central Government; and

(b) Section 70 of the Finance Act, 1994, read with Rule 7 of the Service Tax Rules, 1994, in as much as they have not assessed the tax payable by them and not filed periodical ST-3 Returns.

23. As per the provisions of Section 75 of the Finance Act, 1994, if any person was required to pay the service tax, did not pay the service tax in time has to pay the interest. In the subject case, the service provider has not paid the service tax as provided under Section 68 of the Finance Act, 1994, and thereby they are required to pay the interest as provided under Section 75 of the Finance Act, 1994. Therefore, in addition to the Service Tax, the said service provider was also required to pay the interest at the appropriate rate under Section 75 of the Finance Act, 1994.

24. Moreover, in addition to the contravention, omission and commissions on the part of the said service provider as stated in the foregoing paras, it appeared, that, they had willfully suppressed the facts, nature and value of service and they had failed to file prescribed half yearly S.T.-3 returns for the period of 2009-10 to 2010-11 and also failed to deposit the Service Tax collected by them from the clients to the credit of Central Government. Thus, the contravention, omission and commissions on the part of the service provider rendered themselves liable for penalty under Section 78 of the Finance Act, 1994.

25. The details of various service income for the year 2009-10 was called for from the assessee by the jurisdictional Range Superintendent vide letter dated 13-07-2010 and the assessee vide letter dated 13-10-2010 submitted the details. The assessee being big and well known Air Travel Agent having branches in all over India, well aware that service tax was chargeable on the gross amount received towards taxable service provided and not on the net amount after passing on certain income to the customers or airlines. The assessee had failed to submit correct gross service income as per their Books of Accounts/ Ledger which resulted in short demanding of service tax in the show cause notice dated 15-10-2010 issued to the assessee. By furnishing wrong details of various service incomes for the year 2009-10, the assessee had suppressed the facts from the department with intent to evade payment of service tax or to avoid issue of show cause notice for correct amount of service tax payable. Thus for demanding service tax on gross income as per income ledgers, extended period of five years under proviso to Section 73(1) of Finance Act, 1994 was invokable. All these acts of contravention of the provisions of Section 68 and Section 70 of the Finance Act, 1994 read with Rules 6 and Rule 7 of the Service Tax Rules, 1994 are punishable under the provisions of Section 76, Section 77 and Section 78 of the Finance Act, 1994.

26. In light of the facts discussed in foregoing paras, it appeared that the said service provider had not paid the service tax amounting to Rs.29,69,683/- (as detailed in Annexure-A & B) on the service covered under the category of "Business Auxiliary Service” for the period from 2009-10 to 2010-11, till date. Therefore, the Service Tax not paid at the material time was required to be recovered under proviso to Section 73 of the Finance Act, 1994. Further, interest on the said amount of Service Tax as per section 75 of the Finance Act, 1994 also appeared chargeable and recoverable from them. All these acts of contravention of the provisions of Section 68 & 70 of the Finance Act, 1994 as amended read with rule 6 and 7 of the Service Tax Rules, 1994 appears to be punishable under the provisions of section 76, 77 & 78 of the Finance Act, 1994.

27. Now, therefore, M/s Riya Travels & Tours (I) Pvt. Ltd., Empire Tower, Unit No. 6 & 7, Nr. Associated Petrol Pump, C.G. Road, Ahmedabad-380 006, was issued a show cause notice no.


STC/4-53/O&A/ADC/D-II/11-12 dated 19.10.2011 by the Additional Commissioner, Service Tax, Ahmedabad , as to why;

(i) the show cause notice No. SD-02/Riya/SCN/61/AR-X/2010-11 dated 15-10-2010 issued by the Assistant Commissioner, Service Tax, Division-II, Ahmedabad demanding service tax of Rs.3,21,319/- on various service income of Rs.31,19,599/- (as per details provided by the assessee vide their letter dated 13-10-2010) should not be treated as null and;

(ii) the gross amount of Rs.3,13,52,581/- (Gross income Rs.3,16,91,682/- less Rs.3,39,101/- on which service tax paid and declared in ST-3 for the period 2009-10 and 2010-11) should not be considered as taxable value for providing Business Auxiliary Service defined under Section 65 (19) of the Finance Act, 1994 should not be considered as taxable value under the same category;

(iii) Service tax of Rs.32,29,316/- should be not demanded and recovered from them on taxable value of Rs.3,13,52,581/- for the year 2009-10 to 2010-11, under proviso to Section 73(1) of the Finance Act, 1994, invoking extended period of five years; however, the amount of service tax of Rs.1,25,373/- already paid by the assessee should not be appropriated against the above service tax demand;

(iv) Interest at the appropriate rate should not be charged and recovered from them under Section 75 of the Finance Act, 1994 from the due date on which the Service Tax was liable to be paid till the date on which the said Service Tax is paid;

(v) Penalty should not be imposed upon them under Sections 76 of the Finance Act, 1994 for the failure to make the payment of the Service Tax payable by them within prescribed period of time;

(vi) Penalty under Section 77 of finance Act,1994 should not be imposed upon them for their failure to self assess the service tax liability and their failure to declare correct value of taxable services provided by them during the year 2009-10 in the ST-3 Returns filed within the stipulated time; and

(vii) Penalty should not be imposed upon them under Section 78 of the Finance Act, 1994, for suppressing the value of taxable services provided by them before the department with intent to evade payment of Service Tax.

DEFENCE REPLY

28. The said assessee file their replies dated 2.03.2012 and 29.01.2013 wherein they submitted as under :

That the company received letter dated 13-07-2010 from Range Superintendent requesting to provide the income figures for the period 1-4-2009 to 31-3-2010 in respect of voiding charges, cancellation charges, processing charges, hotel sales, service charges, overseas insurance, visa service charges, incentive ACM-BSP, car rental charges, no show charges and domestic tour income etc. The company submitted the figures vide letter dated 13-10-2010. Again the company has received letter dated 28-09-2011 from Range Superintendent requesting to provide the income figures for the period 1-4-2010 to 31-3-2011 in respect of voiding charges, cancellation charges, processing charges, hotel sales, service charges, overseas insurance, visa service charges, incentive ACM-BSP, car rental charges, no show charges and domestic tour income etc. The company submitted the figures vide letter dated 07-10-2011. Further, audit was conducted for the year 2009-10 in the month of January-2011. During the course of audit it was observed by audit party that company has not paid service tax on following income

Sr.No. Description of income

1 Voiding Charges/Cancellation Charges

2 Processing Charges

3 Service Charges


4 Overseas insurance

5 Visa Service charges

6 incentive-ACM BSP

28.1 Accordingly based on information and audit party observation for FY 2009-10 and information given by company for FY 2010-11, it is alleged in the show cause notice that the company has not paid the service tax on the total amount of Rs.3,13,52,581/- for the Periods FY 2009-10 and FY 2010-11 which is the income received on account of voiding charges, processing charges, overseas insurance, visa service charges and incentive-ACM BSP.

That the service tax has been demanded in the show cause notice on the value of taxable service of Rs.3,13,52,581/- for the period FY 2009-10 and FY 2010-11. It will be evident from the show cause notice that service tax is demanded for following items.

Sr.No

Description of income

1 Voiding Charges/Cancellation Charges

2 Processing Charges

3 Service Charges

4 Overseas insurance

5 Visa Service charges

6 incentive-ACM BSP

29. Their submissions in respect of non-taxability on above charges are as follows:

A. Principle of Classification of category of service: Section 65A of Chapter V of Finance Act lays down the principle of classification of service. As per sub-clause 2(a) of Section 65A the sub-clause which provides most specific description shall be preferred to sub-clauses providing a more general description. Thus the first principle is that the service shall be categorized under the more specific description than the general description. The Hon. Supreme Court has in the case of Moorco (India) Ltd, 1994 (74) ELT 5 (SC) and Plasmac Machine Mfg Co. (P) Ltd, 1991 (51) ELT 161 (SC) has observed as follows:

1994 (74) ELT 5

The specific heading of classification has to be preferred over general heading. The clause contemplates goods which may be satisfying more than one description. Or it may be satisfying specific and general description. In either situation the classification which is the most specific has to be preferred over the one which is not specific or is general in nature. In other words, between the two competing entries the one most nearer to the description should be preferred. Where the class of goods manufactured by an assessee falls say in more than one heading one of which may be specific, other more specific, third most specific and fourth general. The rule requires the authorities to classify the goods in the heading which satisfies most specific description. For instance, taking the case of the appellant the item manufactured by the appellant is described and used as flow meter. It is an instrument for measuring volume as well. Flow meter is specifically classified in Heading No. 90.24. Whereas the Heading 90.26 is general in nature. It applies to every production meter or calibrating meter for gas, liquid and electricity supply. Therefore, on the finding recorded by the Assistant Collector, the goods produced by the appellant specifically fall in Heading No. 90.24. They may also fall in Heading No.90.26 but that being more general entry preference should have been given to the entry 90.24 as the goods satisfy most specific description of being flow meter. The Tribunal or the appellate authority without adverting to it applied clause (c) and levied duty under 90.26 as it was a latter heading. But


clause (c) would apply only if clauses (a) and (b) do not apply. Since the goods manufactured by the appellant satisfied the specific description of Tariff Heading 90.24 being a flow meter, the Tribunal committed an error of law in classifying it under Tariff Heading 90.26 as it was a latter item under the classification list.

1991 (51) ELT 161

As was held in Dunlop India Ltd. v. Union of India (supra) if an article is classifiable under a specific item, it would be against the very principle of classification to deny it the proper parentage and consign it to the residuary item.

In this particular case, the definition of Business Auxiliary service as given under section 65(19) w.e.f 01-07-2010 is as follows:

“business auxiliary service” means any service in relation to,-

(i) Promotion or marketing or sale of goods produced or provided by or belonging to the client; or

(ii) Promotion or marketing of service provided by the client; or

(iii) Any customer care service provided on behalf of the client; or

(iv) Procurement of goods or services, which are inputs for the client; or

Explanation: For the removal of doubts, it is hereby declared that for the purposes of this sub-clause, “inputs” means all goods or services intended for use by the client.

(v) Production or processing of goods of goods for, or on behalf of, the client

(vi) Provision of service on behalf of the client; or

(vii)

A service incidental or auxiliary to any activity specified in sub-clauses (i) to (vi), such as billing, issue or collection or recovery of cheques, payments, maintenance of accounts and remittance, inventory management, evaluation or development of prospective customer or vendor, public relations services, management or supervision,

and includes services as a commission agent, but does not include any activity that amounts to manufacture of excisable goods.Explanation.—For the removal of doubts, it is hereby declared that for the purposes of this clause,—(a) "commission agent" means any person who acts on behalf of another person and causes sale or purchase of goods, or provision or receipt of services, for a consideration, and includes any person who, while acting on behalf of another person—(i) deals with goods or services or documents of title to such goods or services; or(ii) collects payment of sale price of such goods or services; or(iii) guarantees for collection or payment for such goods orservices; or(iv) undertakes any activities relating to such sale or purchase ofsuch goods or services;(b) “Excisable goods” has the meaning assigned to it in clause (d) of section 2 of the Central Excise Act, 1944 (1 of 1944)(c) “manufacture’ has the meaning assigned to it in clause (f) of section 2 of the Central Excise Act, 1944 (1 of 1944)

It includes the services of commission agent. The explanation (a) defines the word commission agent as ‘any person who acts on behalf of another person and causes sale


or purchase of goods, or provision or receipt of services’. There is no specific mention about the nature of goods or services in the definition. The definition is very general and causing sale or purchase of any goods or provision of service would be covered by the word ‘commission agent’.

30. Further, the definition of Air Travel Agent is given in section 65(4) means any person engaged in providing any service connected with the booking of passage for travel by air. It is the admitted position that the company is engaged in booking of tickets for various airlines. The commission and productivity linked bonus is also received by the company for booking of passage for travel by air. Therefore it is submitted that the services of Air Travel Agent is more specific than the definition of Business Auxiliary Service. All types of commission agents except specifically covered under different category would be covered under Business Auxiliary Service. The agents providing specific services which are taxable under different category are covered under specific category of service. In view of the judgment of Hon. Supreme Court (supra) and section 65A(2)(a) the appropriate category would be Air Travel Agent and not Business Auxiliary Service.

31. That even as per Board’s circular No. 59/8/2003 dated 20-6-2003, the services are taxable under Air Travel Agents only.

The Central Board of Excise & Customs issued circular No. 59/8/2003 dated 20-6-2003 (copy of relevant portion of circular is attached as Annexure-1 when the Business Auxiliary Service was introduced. Prior to 1-7-2003 the services provided by Insurance Agents and C&F Agents were already taxable under different category. The issue had come up whether Insurance Agents and C&F Agents are otherwise taxable under different category would be taxable under Business Auxiliary Service or under respective category. Para 2.1.3 of the circular clarifies the same. The same is reproduced below:

2.1.3 Certain doubts have been raised in case of business auxiliary services. In this regard the following is clarified,— While it is not possible to give an exhaustive list of business auxiliary services, the following are illustrations of services that are covered under this category viz. evaluation of prospective customers, processing of purchase orders, customer management, information and tracking of delivery schedules, accounting and processing of transactions, operational assistance for marketing, formulation of customer service and pricing policies, managing distribution & logistics. The services provided in relation to getting a customer, verification of prospective customer, processing of purchase order etc would also be covered under service tax, as the law specifically provides for inclusion of such services as business auxiliary support services.

32. As regards the question whether insurance agents, C&F agents working on commission basis fall under the definition of business auxiliary service, it is clarified that they do not, as they are specifically covered within the definition of other specified taxable services, namely the Insurance service and C&F Service respectively. Under Section 65A of Finance Act 1994, it has also been provided that in case of overlap, a service would be classified under the head, (a) which provides most specific description, (b) in case of a composite service having combination of different taxable services, the service which give them their essential character and (c) in case the test of (a) and (b) does not resolve, the service which comes earlier in the clauses of Section 65, i.e. the service that was subjected to service tax earlier. Since Insurance services and C&F Services are more specific description and were also subjected to service tax prior to imposition of tax on business auxiliary service, the insurance agents, C&F agents working on commission basis would fall under those respective categories. From this, it follows that a particular service can be taxed only under one head of service.


It is evident from the above that the specific services which are covered under different category would not be covered under the category of Business Auxiliary Service and hence it is submitted that no service tax is payable under Business Auxiliary Service.

33. That the services are not taxable under Business Auxiliary Service.

The definition of Business Auxiliary Service is reproduced above. That it is alleged in show cause notice that the activity of selling ticket is promoting the business and acting on behalf of Airlines during the course of provision of service for consideration as commission agent under Business Auxiliary Service w.e.f. 16-6-2005. The definition of word commission agent is reproduced above. It is evident that commission agent shall cause –

(a) sale or purchase of goods(a) provision or receipt of service

for consideration.

In this case, the company is booking of passage for travel by air. It does not cause sale or purchase of goods. Therefore it is not covered under first clause of definition. It is also submitted that the company does not cause provision of any service. The service of transportation of passenger from one place to another place is provided by the airlines and not the company. Thus, there is no provision of service. The company does not receive any service.

34. That the word ‘provision of service on behalf of client’ also does not cover the service provided by the company. This clause applies only when the client of the company is required to provide the service to any person and as against the client providing the service, the services are provided by the company. In this case, the show cause notice does not specify the nature of service which the client is required to provide any service to the person who has booked the ticket. The client of the company i.e. the airlines are engaged in the business of transporting passenger by air. As per clause (vi) of section 65(19) if the services of transporting passenger by air is provided by the company as against the airlines, such service will become taxable under this category. However, in this case, the company is not providing the service of transporting passenger by air and therefore the service cannot be categorized under Business Auxiliary Service as the services are not provided on behalf of the client. Hence it is submitted that no service tax is payable under Business Auxiliary Service and the service is not taxable under this category.

35. That the Commissioner (Appeals), Ahmedabad has passed order number 457/2010 (STC)/KCG/Commr.(A)/ Ahd dated 30/11/2010 to hold that voiding charge, cancellation charge, processing charges will not be taxable under the category of Business Auxiliary Service. The copy of order is attached as annexure-2. In view of above it was submitted by the assessee that the demand under the category of Business Auxiliary Service is not sustainable.

36. That the amount received towards cancellation, void, processing, deportation, rescheduling etc. are exempt under notification 22/1997 ST dated 26-6-1997. It is admitted position in the show cause notice that these amounts are received in connection with booking of passage for travel by air. This service gets rendered only after the tickets have been booked. Therefore these amounts are received towards the taxable service rendered under Air Travel Agent’s service. Notification No. 22/97 ST exempts from levy of service tax that portion of value of taxable service which is in excess of commission received by the Air Travel Agent from airlines for booking of passage for travel by air. Thus the entire amount received by the Air Travel Agent, in addition to the commission received by the Air Travel Agent from the airlines is exempt under this notification. Thus the taxability of service provided by the Air Travel Agents is restricted to the amount of commission only. In this case, it is admitted in the show cause notice that the company is paying service tax on the basic fare of airlines ticket. Thus, the amount for cancellation, void, processing, deportation, rescheduling etc. are


not towards the commission received by the company and therefore it is submitted that the same would be exempt from notification 22/97. The copy of circular is attached as annexure-3.

37. That No tax is payable on Incentive ACM BSP when option under rule 6(7) is exercised.

It is submitted that the company receives the normal IATA commission from the airlines. In addition to IATA commission the Airlines offer during certain season or on certain sectors seasonal commission in addition to IATA commission. These additional seasonal commission is given through Incentive ACM and the amount is deducted from the total amount payable to Airlines through BSP (Billing Settlement Plan). It is evident from the same that the services provided by the company to the airlines are booking of passage for travel by air. It is thus only commission received from airlines and hence it is submitted that the services are taxable under air travel agents services however the company has opted for payment of service tax on basic fare as provided under rule 6(7) of Service Tax Rules. Rule 6(7) is reproduced below:

(7) The person liable for paying the service tax in relation to the services provided by an air travel agent, shall have the option, to pay an amount calculated at the rate of 0.6% of the basic fare in the case of domestic bookings, and at the rate of 1.2% of the basic fare in the case of international bookings, of passage for travel by air, during any calendar month or quarter, as the case may be, towards the discharge of his service tax liability instead of paying service tax at the rate specified in section 66 of Chapter V of the Act and the option, once exercised, shall apply uniformly in respect of all the bookings of passage for travel by air made by him and shall not be changed during a financial year under any circumstances.

Explanation.—For the purposes of this sub-rule, the expression "basic fare" that part of the air fare on which commission is normally paid to the air travel agent by the airline.

37.1 The words ‘instead of paying service tax at the rate specified in section 66’ appearing in rule 6(7) makes it evident that once service tax has been paid under rule 6(7) of Service Tax Rules, no further service tax is payable by applying the rate specified in section 66 and computing the value under section 67. The payment of service tax under rule 6(7) is sufficient to discharge the service tax liability for the services rendered by the company.It is not disputed that the company has exercised this option and have been paying service tax on basic fare. In fact it is admitted in the show cause notice that service tax is paid on basic fare of airlines ticket. Therefore, it is submitted that the service tax under section 66 is not payable.

38. That Service tax is not payable on void/cancellation charges and processing charges :The department had issued earlier show cause notice demanding service tax on afore said charges collected by the company under the category of Business Auxiliary Service. The Commissioner (Appeals) Ahmedabad, vide his order-in-appeal No. 305/2010(STC)/MM/ Commr(A)/Ahd dated 16-9-2010 has held that the said charges are not includible in the taxable value. The company has not received any appeal filed against the said order-in-appeal by the department. It is submitted that in view of the order-in-appeal, the service tax is not payable by the company on the amount of Rs. 2,20,07,697/- The copy of order-in-appeal is attached as Annexure-4.

39. Service tax Overseas Insurance Shri Saumil Hasmukhbhai Patel, in his statement recorded on 22-7-2011 submitted that charges for overseas insurance was received at their Head Office for consolidated business done for all the branch and service tax on such services are collected from the insurance companies and the same was paid from Head Office at Mumbai under the category of Insurance Auxiliary Service. The amount appearing in Ahmadabad Branch was only in respect of the amount received from Head Office. In this connection, they also had


submitted certificate dated 17-2-2011, copy attached as Annexure-5, issued by M/s P.S. Sanghvi & Co. Chartered Accountant. It was submitted that the show cause notice does not dispute that the company was registered with service tax authorities at Head Office for Insurance Auxiliary Service and have been paying service tax on the said services from Head Office for all the branches. For the period FY 2009-10 & 2010-11, the company paid following amount of service tax towards commission received from insurance company

Period AmountApril-September 2009 12,57,916/-

October-March 2010 12,04,924/-

April-September 2010 21,10,167/-

October-March 2011 15,19,491/-

Copy of ST-3 return is attached as Annexure-6 to substantiate the same. It is submitted that service tax had been paid on the commission received at Head Office and hence no further service tax is payable.

40. Earlier department had issued show cause notice demanding service tax on overseas insurance for the year 2007-08 and 2008-09. The company has made submission that the tax has been paid at Head Office and submitted documentary evidence. The Assistant Commissioner vide his order-in-original No. SD-02/OIO No. 78/2010-11 dated 18-4-2011 accepted the company’s submission and observed in para 13.13 as follows:

“To verify the veracity of the above mentioned transaction I have further gone through the documents as submitted by the said service provider on 8-3-2011. I verified the ST-3 return of the Mumbai Office where they showed the insurance income as taxable services and paid service tax on it. Further on a sample basis, I verified an invoice no. IS/118 dated 1-4-2008 issued by the head office of the said service provider situated at Mumbai, wherein they had mentioned the component of service tax paid by them and that invoice is addressed to the said service provider and in turn the said service provider had mentioned that in their party ledger. From this I reach to a conclusion that the party’s contention that the income appearing in the books of M/s Riya Travels & Tours (I) Pvt. Ltd., Ahmedabad is received from Mumbai Head office who distributes service charges to branches on which service tax is already paid by Mumbai office is tenable and as such I accept this as correct. As service tax is already paid on the said overseas insurance charges, I find that there is no service tax liability on the said income to be paid by Ahmedabad branch. I have gone through the certificate of Chartered Accountant in this regard. In view of the above, I held that service tax, is not leviable on overseas insurance charges under BAS on the said service provider accordingly penalty and interest also not applicable on them . ”

Accordingly, he set aside the demand of service tax under overseas insurance. In view of the said findings, it was submitted that the demand for overseas insurance should be set aside for this year also. Copy of show cause notice dated 17-3-2010 and order-in-original No SD-02/OIO No.78/2010-11 dated 18-4-2011 was attached as Annexure-7.

41. Visa charges :That the company was engaged in providing visa processing and immigration services. The nature of service is as follows: The consulate is required to endorse the passport with the details of period for which the visa is granted, the purpose for which visa is granted etc. Foreign consulate office has prescribed visa fee which is required to be paid for different types of visa and duration of the visa. Every applicant is required to pay the said fees. The amount of fees paid is mentioned in foreign currency in the passport. The visa fee is paid by the firm through pay orders or cash to the Foreign consulate office in India.The clients are charged for providing these services and reimbursement towards


visa fees paid on behalf of client to Consulate office. These services are provided to individual persons to stay abroad for various purposes.

The Central Board of Excise & Customs has recently vide circular No. 137/6/2011-ST dated 20-4-2011 clarified that the service tax is not payable on visa processing charges. Based on the said circular, it is submitted that no service tax is payable by the company. Copy of circular 137/6/2011-ST dated 20-4-2011 is attached as Annexure-8.

42. Inclusive of Tax: The amount shown in annexure to the show cause notice indicates the amount received by the appellant during the relevant period. The appellant has not charged the service tax on the said amount receiver as the appellant was under a bonafide belief that no service tax is payable by the appellant. The explanation 2 to section 67 during the relevant time read as follows :-

“Where the gross amount charged by a service provider is inclusive of service tax payable, the value of taxable service shall be such amount as with the addition of tax payable, is equal to the gross amount charged.”

In the case of ADVANTAGE MEDIA CONSULTANT 2008 (10) S.T.R. 449 (Tri. - Kolkata), tribunal has held that When the amount is collected for the provision of services, the total compensation received should be treated as inclusive of service tax due to be paid by the ultimate customer of the services unless service tax is also paid by the customer separately. The said case was affirmed by the Supreme Court in Commissioner v. Advantage Media Consultant - 2009 (14) S.T.R. J49 (S.C.). In the present case there is no dispute that service tax amount has not been collected by the appellant and therefore by applying the ration of the Supreme Court same cum-duty benefit has to be granted.

It is submitted that the amount collected from various persons for should be taken as inclusive of service tax and the demand should be reworked as follows:

Total income alleged to be taxable = Rs. 32,29,316/-

Income excl. service tax (considering above income as inclusive of service tax) = Rs. 2,84,24,824/-

Service Tax (10.3%) = Rs. 29,27,757/-

Thus, it is submitted that even if the demand for service tax arises, the same shall be Rs. 29,27,757/-

43. Penalty: (i) Section 80 of the Service Tax empowers the Commissioner of Central Excise to waive

the penalty if the assessee proves that there was a reasonable cause for nonpayment of service tax. The words ‘reasonable cause’ has been defined as follows :-

Reasonable cause can be reasonably said to be a cause which prevents a man of average intelligence and ordinary prudence, acting under normal circumstances, without negligence or inaction or want of bonafides – Azadi Bachao Andolan v. Union of India 2001 (116) Taxman249 /252 ITR 471.

In this case there was a reasonable belief on account of the fact that the Commissioner (Appeals) Ahmedabad has already set aside the demand of service tax on account of voiding charges/cancellation/no show charges,. The company has already paid service tax on overseas insurance at Head Office. As regards visa charges the CBEC has issued circular clarifying that no service tax is payable. In view of the submissions made above, it was submitted that no penalty was leviable under section 76. Without prejudice to this, it was submitted that as per section 76, penalty shall not be less than Rs.100/- per day or @ 1% of such tax per month whichever is higher subject to maximum of 50% of the tax payable. Thus in any event, the penalty amount shall not exceed 50% of the service tax payable.


The issue involved in the instant case related to interpretation of the definition of the provisions contained in the statute. The Hon. Tribunal has consistently held that the penalty should not be imposed where the question of interpretation of any statutory provision are involved. The appellants rely upon the following judgments for the above proposition.

(a) Uniflex Cables Ltd 2011 (271) ELT 161 (SC)(b) Sonar Wires Pvt. Ltd. Vs. CCEx. 1996 (87) ELT 439 (T)(c) Synthetics & Chemicals Ltd. 1997 (89) ELT 793 (T)(d) Man Industries Corporation 1996 (88) ELT 178 (T)(e) Sports & Leisure Apparel Ltd. CCE., Noida 2005 (180) ELT 490(f) Aquamall Water Solutions Ltd. 2003 (153) ELT 428(g) Blue Cross Laboratories Ltd. vide order no. A/1529/C-IV/SMB/2007

44. Penalty under section 77 :The company has submitted the ST-3 return for the period April 2011 to March 2012. The copy of the return is attached as annexure-6. The present show cause notice does not specify the clause of section 77 under which penalty is proposed to be levied. Section 77 of Finance Act two sub-sections and five clauses however the present show cause notice does not mention the clause which has been violated by the company.

The Supreme Court in the case of Amrit Foods 2005 (190) ELT 433 (SC) has observed that it is necessary for the assessee to be put on notice as to the exact nature of contravention for which the assessee was liable under any provision. The observation made by the Supreme Court is as follows:“5. The Revenue has preferred an appeal from the order of the Tribunal setting aside the imposition of penalty under Rule 173Q of the Central Excise Rules, 1944. The Tribunal has set aside the order of the Commissioner on the ground that neither the show cause notice nor the order of the Commissioner specified which particular clause of Rule 173Q had been allegedly contravened by the appellant. We are of the view that the finding of the Tribunal is correct. Rule 173Q contains six clauses the contents of which are not same. It was, therefore, necessary for the assessee to be put on notice as to the exact nature of contravention for which the assessee was liable under the provisions of the 173Q. This not having been done the Tribunal’s finding cannot be faulted. The appeal is, accordingly, dismissed with no order as to costs.

In M/s United Telecom Ltd. 2011 (21) STR 234 (T), the Tribunal has with respect to Business Auxiliary Services observed that show cause notice must specify the clause under which the demand is proposed to be raised. The observation made in the case is as follows:“8.1In the impugned order, the Commissioner suggests that the activity of the appellant could be classified variously under clause (iii) of Section 65(19) as service rendered on behalf of a client, as of a commission agent or, under clause (vii), as maintenance of accounts. The Commissioner does not give a finding as to the sub-clause (i) to (vi) of 65(19) to which maintenance of accounts related if the services fell under clause (vii). Moreover, there were no such proposals in the show cause notice. We find that no tax liability can be confirmed against any person unless the same is specifically alleged in the show cause notice. We hold that the impugned demand therefore is not legally sustainable. Consequently, the demand of interest and penalty is also not sustainable”

Thus, they submitted that there shall be no levy of penalty even if the demand is upheld.

45. The said assessee was granted PH on 13.12.2012 and again on 17.01.2013. The assessee requested for adjournment of one week. Accordingly, they were granted PH on 29.01.2013, wherein they were represented by Shri Shakir V Chauhan (CA), Shri Sarath Menon , Area Manager and Shri Saumil Patel (Manager), and they argued the case. They reiterated their submissions and also filed a written submissions dated 29.01.2013.


DISCUSSIONS AND FINDINGS

46. I have carefully gone through the contents of the Show Cause Notices and defence replies, relevant documents of the case, and written submissions of the said assessee along with all the relevant documents submitted during or before personal hearing.

47. In the instant case , I find that the said assessee had collected certain amounts from their customers/passengers in the name of Voiding Charges/ Cancellation charges / No show charges, Processing Charges, Service Charges , Visa charges and Overseas Insurance Charges and the service tax has been demanded on them under the category of “Business Auxiliary Service” as defined under Section 65(19) of the Finance Act, 1994.

The details are as under ;

YEAR 2009-10

Sr.No Particulars of Income Gross Income as per Ledger

Service Tax payable (Rs.)

Edu.Cess payable (Rs.)

SHEC payable (Rs.)

Total Service Tax payable (Rs.)

1 Voiding/Cancellation charges

1331813 133181 2664 1332 137177

2 Processing charges 1309553 130955 2619 1310 1348843 Service charges 17450 1745 35 17 17974 Overseas Insurance 5708399 570840 11417 5708 5879655 Visa charges 335930 33593 672 336 34601

TOTAL 8703145 870315 17406 8703 896424LESS : Service Tax paid 339101 33910 678 339 34927TAX RECOVERABLE 8364044 836404 16728 8364 861497

YEAR 2010-11

Sr.No

Particulars of Income

Gross Income as per Ledger

Service Tax payable (Rs.)

Edu.Cess payable (Rs.)

SHEC payable (Rs.)

Total Service Tax payable (Rs.)

Total Service Tax paid

Diff. S.Tax to be recovered

1 Voiding/Cancellation charges

2762754 276275 5526 2763 284564 0 284564

2 Overseas Insurance 16377770 1637777 32756 16378 1686910 0 16869103 Incentive- ASM BSP 2613803 261380 5228 2614 269222 0 2692224 Visa service charges 1234210 123421 2468 1234 127124 125373 1751

TOTAL 22988537 2298854 45977 22989 2367819 125373 2242446

48. I find that with regard to payment of service tax on Voiding charges, Cancellation charges & Processing charges, the same has issued finality in the case of M/s Akbar Travels of India P Limited in OIA No. 457/2010(STC)/KCG/Commr(A)/Ahd dated 30.11.2010. The said order of M/s Akbar Travels of India P Ltd, concerning the above 3 services {except those of Visa Service Charges , Commission on Travel Insurance & Commission on Credit Cards}, has been accepted by the Department, as informed by the Deputy Commissioner (RRA), Service Tax, Ahmedabad vide his letter F.No. IV/4-352/STC/OIA-457/10-11 dated 27.02.2013. The amount involved in these 3 charges, therefore is not sustainable, are as under :

Sr.No. YEAR Head of Income Amount of Service Tax demanded in the

SCN (Rs.)1 2009-10 Voiding/Cancellation charges 137177


Processing charges 1348842 2010-11 Voiding/Cancellation charges 284564

TOTAL 556625

49. Now I proceed to discuss the other charges as under :

VISA SERVICE CHARGES : With regard to Service tax demand on the Visa Service charges, I find that in their defence replies , they have cited the Board’s Circular No. 137/6/2011-ST dated 20.04.2011 wherein it has been clarified that the service tax is not payable on visa processing charges. For easy reference, I reproduce the contents of the said circular as under :

“An issue has been brought before the Board, seeking a clarification as to whether service tax liability would arise on the assistance provided by visa facilitators, to individuals directly, for processing of visa applications.

2. The same has been examined. Assistance provided by a visa facilitator, for obtaining visa, to a visa applicant or for foreign employer does not fall within the scope of supply of manpower service. Visa facilitators, while providing visa assistance directly to individuals does not act on behalf of the embassies, as agents of the principal and hence service tax is not leviable within the meaning of business auxiliary service. Also where the assistance is rendered to an individual directly, by a visa facilitator, and the visa applicant pays the service charge on his own (meaning such service charge is not borne by any business entity), the same cannot be considered as support service for business or commerce.

3. Visa facilitators, merely facilitate the procurement of visa and directly assist individuals who intend to travel abroad, to complete the immigration formalities. Visa facilitators collect certain statutory charges like visa fee, certification fee, attestation fee, emigration fee, etc. from the visa applicant, which are remitted to the respective authorities, and in addition collect service charges for themselves as remuneration for the assistance provided by them to obtain the visa. Such a service provided by a visa facilitator, in the form of assistance to individuals directly, to obtain a visa, does not fall under any of the taxable services under section 65(105) of the Finance Act, 1994. Hence service tax is not attracted.

4. However, service tax is leviable on any service provided other than assistance directly to individuals for obtaining visa, falling under the description of any taxable service, as classifiable under the appropriate heading. To cite a few instances, where in addition to rendering assistance directly to individuals for obtaining visa, visa facilitators may also act as agents of recruitment or of foreign employer, in which case, service tax is leviable to the extent under the service of ‘supply of manpower’. In certain other cases, for example, a visa facilitator, may be rendering visa assistance to individuals who are employed in a business entity, but the service charge may be paid by the business entity on behalf of those individuals, to the visa facilitator, in which case, service tax is leviable under ‘business support service’”


49.1 I find that the said assessee is engaged in providing visa processing and immigration services. The nature of service carried out by the said assessee is as follows:

Foreign consulate office has prescribed visa fee which is required to be paid for different types of visa and duration of the visa.

Every applicant is required to pay the said fees. The amount of fees paid is mentioned in foreign currency in the passport.

The visa fee is paid by the firm through pay orders or cash to the Foreign consulate office in India.

The clients are charged for providing these services and reimbursement towards visa fees paid on behalf of client to Consulate office. These services are provided to individual persons to stay abroad for various purposes.

49.2 I find from the above, that the services carried out by the assessee falls within the purview of Para 2 & 3 the said Board’s Circular. Further, I find that the review of the OIA no. 457/2010(STC)/KCG/Commr(A)/Ahd dated 30.11.2010 in case of Akbar Travels of India P Ltd. concerning Visa Service Charges was done before the clarification issued by the Board vide the said circular dated 20.04.2011. In view of the above, I find that there is no doubt that the visa services carried out by the assessee are not chargeable to service tax. Thus, Rs. 34,601/- demanded for the year 2009-10 and Rs. 1,751/- demanded for the year 2010-11 , on account of visa charges are not sustainable.

50. OVERSEAS INSURANCE CHARGES : I find that the overseas insurance charges income has been received by the said assessee from Insurance Companies for issuing Insurance Policies. I further find that they are not authorized agent of Insurance Companies but actually these incomes have been received towards providing outsource services for permitting the use of infrastructure like computer systems, office premises and the staff of the service provider to the Insurance Companies. In short Overseas Insurance charges income is towards referral and facilities provided by the service provider to the various Insurance Companies and is covered under the category of “Business Auxiliary Services”. However, I find that the said assessee has claimed that they have already paid service tax on the said services from their Head Office at Mumbai. They have also produced the copies of the ST-3 returns. However, I find that they have not provided any Invoices/Documents to substantiate this claim and providing copies of the ST-3 returns filed at Service Tax-I, Mumbai, do not suffice. In view of the above, I cannot allow them the benefit and come to the conclusion that they have to pay service tax on the Overseas Insurance charges under the category of “Business Auxiliary Services” and I confirm the same.

51. Incentive - ASM BSP : I find that the assessee has submitted that these are commissions received from the Airlines, and that they have opted for payment of service tax on Basic Fare as provided under Rule 6(7) of Service Tax Rules.

Rule 6(7) is reproduced as under :

Rule 6(7): The person liable for paying the service tax in relation [of booking of tickets for travel by air] provided by an air travel agent, shall have the option, to pay an amount calculated at the rate of [0.6%]of the basic fare in the case of domestic bookings, and at the rate of [1.2%]of the basic fare in the case of international bookings, of passage for travel by air, during any calendar month or quarter, as the case may be, towards the discharge of his service tax liability instead of paying service tax [at the rate of specified in [Section 66B] of Chapter V of the Act] and the option, once exercised, shall apply uniformly in respect of all the bookings of passage for travel by air made by him and shall not be changed during a financial year under any circumstances.


Explanation - For the purposes of this sub-rule, the expression "basic fare" means that part of the airfare on which commission is normally paid to the air travel agent by the airline

51.1 I find that there is no dispute to the fact that in respect to the Air Travel Agent Service, the assessee has opted to pay service tax on basic fare (as also mentioned in the show cause notice). However, I find that assessee in their reply has stated that

“ … It is submitted that the company receives the normal IATA commission from the airlines. In addition to IATA commission the Airlines offer during certain season or on certain sectors seasonal commission in addition to IATA commission. These additional seasonal commission is given through Incentive ACM and the amount is deducted from the total amount payable to Airlines through BSP (Billing Settlement Plan). It is evident from the same that the services provided by the company to the airlines are booking of passage for travel by air. It is thus only commission received from airlines and hence it is submitted that the services are taxable under air travel agents services...”

51.2 It is thus evident that the ‘additional seasonal commission’ is received at a later date , than the date of journey of the passengers. Accordingly, as stated by the assessee, the said amounts are deducted from the total amount payable to Airlines through BSP. Thus, I conclude that these ‘additional seasonal discount’ are not known and thus not passed on to the passengers on the date of the journey . Therefore, the ‘commission’ and the ‘basic fare’ are mutually exclusive, and thus has been received as an Income by the assessee at a later date. Further, I also find that the assessee has not provided any evidence to show what was the base fare on which commission was paid to them. In view of the above, the commission received by the assessee is only for promoting the services of the Airlines and would fall under the category of “Business Auxiliary Service” , and I confirm the same.

52. SERVICE CHARGES : I find that service charges amounting to Rs. 17450/- has been collected by the said assessee for ticket revalidation, date change or any other alteration in air ticket terms during the year 2009-10. Therefore, tha mount collected is concerning charges received either from the passengers or the Airlines, and therefore as held by the appellate authority in M/s Akbar Travels of India P Ltd (supra) in case of Voiding/Cancellation/Processing charges, I also hold the Service Charge to be more appropriately classifiable under “Air Travel Agent” service. The service tax demanded in these charges are to the tune of Rs. 1797/- [in the year 2009-10] and I drop the charges raised on this front.

53. INCLUSIVE OF TAX :

The assessee has pleaded that they should be given the benefit of ‘cum-duty price’ and has cited the case of M/s Advantage Media Consultants (supra) . While acknowledging the decision of the hon’ble Apex Court in the matter, I also place reliance on the judgement of M/s Amrit Agro Industries Limited reported at 2007 (210) E.L.T. 183 (S.C.), wherein the hon’ble Apex Court, on the issue and applicability of the principle of cum-duty price has held that “…..the assessee will have to show as to how he has determined the value. What the appellant has really done in the instant case has to be examined. Whether the price charged by him to his customers contains profit element or duty element will have to be examined…” I find that in this case, the said assessee has not shown as to how he has determined the amount so collected and has simply asked for the benefit, and therefore I am not inclined to give so.

54. In view of the above, I confirm the demand on Overseas Insurance Charges and Incentive-ASM BSP charges amounting to Rs. 25,44,097/-, under the category of “Business Auxiliary Services” and the same is to be recovered along with Interest from the said assessee under Section 73 of the Finance Act, 1994 read with Section 75 of the Act ibid.


55. With regard to imposition of penalty, I find that the said assessee had supplied wrong figures regarding the Incomes received under different charges/head in their letter dated 13.10.2010 to the Department. However, during the audit it was revealed that they had received supplied wrong figures and that they had suppressed a sizable portion of their income, on those same charges/heads as well. In his statement Shri Saumil Hasmukhbhai Patel, Manager (Accounts) recorded on 22-07-2011, Shri Patel stated that the various service charges income figures provided by them vide letter dated 13-10-2010 were net income figure after deducting amount passed on to the customers or paid to airlines whereas Audit Party has taken gross income figure from credit side of income ledgers. Thus, there was a difference between gross income as per ledgers and data provided by them to the Service Tax Department. In this connection, I find that the sizable difference was in the income reported is that of OVERSEAS INSURANCE CHARGES { in the year 2009-10 } i.e of Rs. 50,11,149/- . As discussed above, the overseas insurance charges are basically income/commission received towards referral and facilities provided by the said assessee to the various Insurance Companies and thus promoting the business of the Insurance companies. So it is not understandable as to why the said assessee would pass on their commission back to the Insurance companies. Thus I find that the argument of the assessee is misleading and false. Thus I hold that the assessee has deliberately misdeclared the facts to evade payment of service tax.

56. As discussed above, the demand has also been held to be sustainable on merits. Thus I find that it was the duty of the said service provider/assessee to declare such activities, and receipt towards the same in their ST-3 returns filed by them from time to time. With regard to the issue that extended period of limitation & suppression of facts, I note that the assessee has quoted some cases but shelter in those cases is not available to them as they are an assessee under service tax since long and are well aware of the Rules & Regulations as laid down under Service Tax Rules, 1994. The assessee had not mentioned the details of incomes received, as discussed in the foregoing paras, in their ST-3 returns and was noticed only when the details were sought by the audit. I find that they were well aware of the facts regarding such transactions and the commissions garnered thereof had not been disclosed before the department and therefore the contention of the assessee that they have not suppressed the facts is not acceptable in this case. Thus, the suppression with an intent to evade payment, on part of the assessee, is proved beyond doubt and proviso to Section 73(1) of the Finance Act, 1994 has rightly been applied in the instant case and therefore, by their such act of omission and commission, the assessee have rendered themselves liable for penalty.

56.1 Hon’ble High Court of Gujarat in the case of CCE, Surat – I Vs Neminath Fabrics Pvt. Ltd., reported at 2010 (256) ELT 369 (Guj), while deciding the similar issue in Central Excise, has held that proviso can not be read to mean that because there is knowledge, suppression which stands established disappears – concept of knowledge, by no stretch of imagination, can be read into provisions – suppression not obliterated, merely because department acquired knowledge of irregularities. The relevant para is reproduced below ;

“20. Thus, what has been prescribed under the statute is that upon the reasons stipulated under the proviso being satisfied, the period of limitation for service of show cause notice under sub-section (1) of Section 11A, stands extended to five years from the relevant date. The period cannot by reason of any decision of a Court or even by subordinate legislation be either curtailed or enhanced. In the present case as well as in the decisions on which reliance has been placed by the learned advocate for the respondent, the Tribunal has introduced a novel concept of date of knowledge and has imported into the proviso a new period of limitation of six months from the date of knowledge. The reasoning appears to be that once knowledge has been acquired by the department there is no suppression and as such the ordinary statutory period of limitation prescribed under sub-section (1) of Section 11A would be applicable. However such reasoning appears to be fallacious inasmuch as once the suppression is admitted,


merely because the department acquires knowledge of the irregularities the suppression would not be obliterated.”

56.2 In view of the above, I find that extended period for recovery of service tax on Incomes received on account of Overseas Insurance Charges and Incentive-ASM BSP charges on rendering of taxable services as “Business Auxiliary Services”, under the proviso to section 73(1) of the Finance Act, 1994 was rightly invoked and the SCN is sustainable on limitation. Therefore, the service tax amount of Rs. 25,44,097/- is recoverable from the said assessee along with Interest as provided in proviso to Section 73(1) of the Finance Act, 1994 read with Section 75 of the Act ibid.

57. Since the said assessee had not discharged service tax liability on the amount of taxable value on the services mentioned in the foregoing paras and as demanded under the show cause notice and therefore, they have contravened the provisions of Section 67 and 68 of the Finance Act, 1994 and thereby rendered themselves liable to penal action under Sections 76 & 78 of Finance Act 1994. Further, I find that they have failed to file the prescribed service tax returns and therefore have contravened the provisions of Section 69 & 70 of the Finance Act, 1994 . They have thereby rendered themselves liable to penal action under Section 77 of Finance Act 1994.

58. As regards the issue of imposition of penalty under Section 76 of the Finance Act, 1994, I observe that penalty under Section 76 and 78 of the Finance Act, 1994 are mutually exclusive w.e.f. 10.05.2008 and once penalty under Section 78 is imposed, no penalty under Section 76 can be imposed in terms of the proviso inserted in Section 78 w.e.f 10.5.2008 in this regard. Therefore, no penalty under Section 76 is imposable for the period from 10.5.2008 onwards. In the case before me, the demand of service tax is for the period from 2009-10 to 2010-11 i.e after the effective date of 10.05.2008, therefore, I hold that penalty under Section 76 of the said Act is not imposable on the said service provider.

59. As regards imposition of penalty under Section 78, I find that as the said assessee had suppressed the facts with intention to evade payment of service tax, penalty under Section 78 of the Finance Act, 1994 is mandatorily imposable as has been held by the Apex court in the case of Dharmendra Textile Mills Ltd-2008 (231) ELT 3 (SC) and Rajasthan Spinning & Weaving Mills Ltd-2009 (238) ELT 3 (SC). Therefore, I hold that penalty is imposable on the said assessee under Section 78 of the Finance Act, 1994. I, therefore, hold that they have rendered themselves liable to penalty under Section 78 of the Finance Act, 1994. My above view gets support from below mentioned case laws;

Shiv Network Vs CCE, Daman reported in 2009 (14) STR 680 (Tri.Ahmd.) CCE, Vapi Vs Ajay Sales Agencies reported in 2009 (13) STR 40 (Tri. Ahmd.) Order No. A/754/WZB/AHD/2010 dt. 09.06.2010 / 23.06.2010 in the case of M/s Bajrang

Security Services Vs CST, Ahmedabad. Order No. A/1937/WZB/AHD/2010 dated 08.10.2010 / 20.12.2010 in the case of M/s

Dhaval Corporation Vs CST, Ahmedabad.

59.1 I further observe that recently hon’ble High Court of Punjab & Haryana, in the case of CCE Vs Haryana Industrial Security Services reported at 2011 (21) STR 210 (P&H), has also upheld the penalty equal to service tax imposed under Section 78 of the Finance Act, 1994. Hon’ble Karnataka High Court has also taken similar view in the case of CCE, Mangalore Vs K Vijaya C Rai reported at 2011 (21) STR 224 (Kar.)

60. I further find that the assessee have failed to declare the correct taxable value in their ST-3 returns for the period covered under the impugned show cause notice. Further, they have also failed to obtain the Service Tax registration in time. Hence they are liable


for penalty under Section 77, for not filing ST-3 returns correctly for the period in dispute. Hence imposition of mandatory penalty under Section 77 is also justified.

61. As regards invoking Section 80 of the Finance Act, 1994 for waiver of penalty, I find that the said assessee has not produced any reasonable cause for the failure to pay service tax except that it was their bonafide belief and a reasonable cause that service tax was not payable by them. I have already discussed the issue of taxability of services in the foregoing paras. In any case, I have taken into account the order of the Appellate authority on account of incomes received by the assessee on account of Voiding charges, Cancellation charges and Processing charges. I observe that if the said assessee had any doubt with regard to taxability of other services, then being a registered service tax assessee they should have approached the service tax authorities for clarification of doubt to ascertain the taxability of the service provided by them. Therefore, I consider it appropriate to hold the said assessee liable to penalty under Section 78 of the Finance Act, 1994.

62. I find that a SCN No. SD-02/Riya/SCN/61/AR-X/2010-11 dated 15.10.2010 was issued by the Assistant Commissioner, Service Tax, Division-II, Ahmedabad, to the said assessee, amounting to Rs. 3,21,319/- for the period 2009-10, on the same issue. I find that as the assessee had suppressed the facts and thereafter submitted revised figures during the audit, the service tax amount of the abovesaid SCN i.e Rs. 3,21,319/- has been incorporated in the instant SCN. Also as informed by the JDC vide his letter F.No. SD-02/Misc/O&A/12-13 dated 08.03.2013, the SCN dated 15.10.2010 has not been adjudicated and therefore I find that there is no duplication of demands,

63. In light of the aforesaid discussions and findings, I hold that the differential service tax amount of Rs. 25,44,097/- alongwith interest is liable to be confirmed under Section 73(1) of the Finance Act,1994 read with Section 75 of the Act ibid and they are also liable to penalty under the provisions of Sections 77 and 78 of the Finance Act, 1994.

64. Accordingly, I pass the following order:-

ORDER

(i) I consider the amount of Rs.2,46,99,972/- as taxable value for providing “Business Auxiliary Service” as defined under Section 65(19) of the Finance Act, 1994 ) on Overseas Insurance Charges and Incentive ASM BSP charges by M/s Riya Tours & Travels (I) Pvt. Limited located at Empire Tower, Unit No. 6 & 7, Near Associated Petrol Pump, C.G.Road, Ahmedabad- 380006.

(ii) I confirm the demand of service tax of Rs. 25,44,097/- ( Rupees Twenty Five Lacs Forty Four Thousand and Ninety Seven only ) on Overseas Insurance Charges and Incentive –ASM BSP charges, not paid on during 2009-10 to 2010-11 and order to recover the same under Section 73(1) of the Finance Act, 1994 from M/s Riya Tours & Travels (I) Pvt. Limited located at Empire Tower, Unit No. 6 & 7, Near Associated Petrol Pump, C.G.Road, Ahmedabad- 380006.

(iii) I drop the demand of Rs. 6,85,219/- (Rupees Six Lacs Eighty Five Thousand Two Hundred and Nineteen Only) raised on M/s Riya Tours & Travels (I) Pvt. Limited on Visa charges, Processing charges, Voiding charges, Cancellation charges & Service charges.

(iv) I direct from M/s Riya Tours & Travels (I) Pvt. Limited located at Empire Tower, Unit No. 6 & 7, Near Associated Petrol Pump, C.G.Road, Ahmedabad- 380006 to pay the interest as applicable on the amount of their service tax liability of Rs. 25,44,097/- under Section 75 of the Finance Act, 1994.

(v) I refrain from imposing penalty on the said assessee under Section 76 of the Finance Act, 1994.


(vi) I impose a penalty of Rs. 10,000/- (Rupees Ten Thousand Only) under Section 77 of the Finance Act, 1994.

(vii) I also impose a penalty of Rs. 25,44,097/- (Rupees Twenty Five Lacs Forty Four Thousand and Ninety Seven only ) upon them under Section 78 of the Finance Act, 1994 for suppressing the value of taxable services provided by them before the Department with intent to evade payment of service tax. If the service tax amount is paid along with appropriate interest as applicable, within 30 days from the date of receipt of this order, then the amount of penalty under Section 78 shall be reduced to 25% of the service tax amount, provided if such penalty is also paid within such period of 30 days.

(J. S. NEGI) Additional Commissioner

Service Tax: Ahmedabad

By Regd. Post A. D./Hand DeliveryF. NO. STC/4-53/O&A/11-12 Date :- 14/03/2013

ToM/s Riya Tours & Travels (I) Pvt. Limited ,Empire Tower, Unit No. 6 & 7, Near Associated Petrol Pump, C.G.Road, Ahmedabad- 380006.

Copy to:1. The Commissioner of Service Tax, Ahmedabad (Attn. Review Cell).2. The Deputy Commissioner, Service Tax, Division-II, Ahmedabad. 3. The Superintendent Range-X, Division-II, Service Tax, Ahmedabad with an extra copy of

OIO to be served to the assessee and submit the acknowledgement to this office.4. Guard file.