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M/s. Air Canada Appellant v/s C.S.T.-Service Tax, Delhi


    Appeal No. ST/53919 of 2014 in-Original No. 13-14-AKJ of 2014 & Final Order No. 52556 of 2018

    Decided On, 20 July 2018

    At, Customs Excise Service Tax Appellate Tribunal Principal Bench New Delhi

    By, THE HONOURABLE MR. V. PADMANABHAN
    By, TECHNICAL MEMBER & THE HONOURABLE MR. AJAY SHARMA
    By, JUDICIAL MEMBER

    For the Appellant: Anil Makhija, Advocate. For the Respondent: Sanjay Jain, DR.



Judgment Text

V. Padmanabhan, Technical Member.

1. The present appeal is directed against the Order-in-Original No. 13- 14/2014 dated 30/05/2014. The appellant is operating an International Airline engaged in Transport of Passengers and Goods. They have their Head Office in Canada. They have office establishments in India which is registered with Service Tax Department. The Head Office of the appellant entered into a contractual, agreement with M/s Amadeus, Abacus, Galileo, for provision of Centralized Reservation System (CRS) for Airline Travel. The dispute in the present case is with reference to tax liability of the appellant’s office in India for such services received by them under the category of ‘Online Information and Data Base Access Retrieval Service’. The Revenue contended that the appellant herein received such service from foreign based CRS Companies, under the category of ‘Computer Network Services’ in terms of Section 65 (105) (zh) of the Finance Act 1994. The period of dispute is from October, 2006 to June, 2012. The demand was raised under Reverse Charge Mechanism by issue of two different show cause notices which were adjudicated in the common impugned order.

2. With the above background we heard Shri Anil Makhija, Ld. Counsel for the appellant as well as Shri Sanjay Jain, Ld. DR for the Revenue.

3. Ld. Advocates submitted that the present dispute is no longer resIntegra. He submitted that in a series of decisions, the Tribunal has decided that for the period up to 30/06/2012, no Service Tax can be fastened on the foreign Air Lines such as the appellant. In this connection he relied on the following decisions.

i. British Airways dated 23/05/2014 reported as TIOL979- CESTAT- DEL.

ii. Final Order in the case of KLM Royal Dutch Airlines dated 01/07/2014

iii. Final Order in the case of Qatar Airways and Emirates 2016-TIOL- 1263-CESTAT-MUM

iv. Korean Air 2017-TIOL-3332-CESTAT Mumbai

v. Air France Final order 50596/2018.

4. The Ld. Advocate further submitted that since the dispute in the present case is only up to June 2012, the entire Service Tax demand may be set aside.

5. Ld. DR justified the impugned order. He explained that the decisions relied by the appellant, have decided the issue in those cases where consideration for the use of CRS service have been paid by the Head Offices of the Foreign Airlines of the respective service providers. The Tribunal has taken the view that the Head Office as well as the Indian office are different establishments, and hence the liability for Service Tax does not arise on the Indian office.

6. The Ld. DR brought to our notice the findings of the Adjudicating Authority in para 26 of the impugned order. He highlighted the fact that the Head Office of the appellant has been debiting the Indian Office of the appellant for the consideration equivalent to the amount paid by the Head Office to the CRS Service Provider. On this ground, he submitted that the user of the service is the appellant in India and the consideration for such service has been paid by the Indian office and hence he justified the levy of Service Tax on the appellant.

7. Opposing the arguments of Ld. DR, Ld. Advocate submitted that the Service provider and Service receiver relationship exists only between the Head Office of the appellant and CRS Companies. For such an agreement between these two parties the consideration was paid by the Head Office to CRS Companies. Since the Head Office as well as the Indian office of the appellant are to be considered as two distinct legal persons, even if a debit has been raised against the Indian Office, the same cannot be considered as a consideration liable to payment of Service Tax.

8. The Ld. Advocate further submitted that the findings of the Adjudicating Authority in para 26 appear to be at variance with the facts. He asserted that no debits have been raised by their Head Office for this CRS Service on the Indian office.

9. Heard both sides and perused the record.

10. The demand for Service Tax has been raised on Reverse Charge Basis under Section 66A of Finance Act, 1994 on the service received by the appellants under the category of ‘Online Information and Data Base Access or Retrieval Service’. Such service has been received by the appellant in India from foreign based CRS Service provider. Such services were received on the basis of agreements executed by the Head Office of the appellant with the respective CRS Companies. The appellant has strongly contented that the issue has been settled by the Tribunal in their favour in several cases including that of Air France (supra). We have perused the cited decisions. The demand for Service Tax for such services on reverse charge basis has been set aside in all the cited decisions. The view taken by the Tribunal was that the agreement with the CRS Companies was made by the Head Office of the Foreign Airlines. The consideration as per such agreement was also paid by the Head Office to the CRS Companies. Since the Head Office and Branch Office in India of the Foreign Airlines have to be considered as distinct persons in terms of Section 66A, Tribunal has held that the Service Tax liability on Reverse Charge Basis does not accrue to the Indian Arm of the Foreign Airlines.

11. The decisions of the Tribunal on the above lines have been sought to be distinguished by the Ld. DR. He has brought to the notice the findings of the Adjudicating Authority in para 26 of the impugned order wherein the Adjudicating Authority has recorded the finding that the consideration paid by the Head Office of the appellant to CRS Companies, is being recovered from the Indian branch of the appellant by way of debit notes to this effect. Accordingly, the Adjudicating Authority has held that the services received by the appellant in India and the consideration for the same has been paid to the foreign Head Office, who, in turn, has paid the CRS Companies.

12. The above finding of the Adjudicating Authority has been refuted by the Ld. Advocate as erroneous. He has asserted in the court that no mounts have been paid by the appellant to their Head Office as recorded by the Adjudicating Authority.

13. After perusal of the various decisions cited by the appellant, we note that the liability for payment of Service Tax on similar arrangements of various Foreign Airlines have been held to be not liable to payment of Service Tax on Reverse Charge Basis. Such decisions have settled the matter for the period upto 30/06/2006. Fro

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m the observations of the Adjudicating Authority in para 26, it appears that the facts of the present case are different from those in the other cases. But the Ld. Advocate has asserted the Adjudicating Authority has recorded facts incorrectly. 14. In the facts and circumstances of the present case, we set aside the impugned order and remand the matter to the Adjudicating Authority for de novo decision of the matter in the light of the various decisions on the matter. But before deciding the issue he will extended an opportunity to the appellant to produce documents in support of his assertion that the observations in para 26 are erroneous. 15. In view of above, the appeal is allowed by way of remand.
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