“Convenience Fee” & “Cancellation Fee” Not Connected To Business Promotion; CESTAT Quashes Service Tax Demand Against Yatra Online
The Chandigarh Bench of Customs, Excise, and Service Tax Appellate Tribunal (CESTAT), while quashing the service tax demand against Yatra Online, held that “convenience fee” and “cancellation fee” are recovered in the course of the provision of the service related to the booking of tickets for passage through air and not in connection with any business promotion.The bench of S. S....
The Chandigarh Bench of Customs, Excise, and Service Tax Appellate Tribunal (CESTAT), while quashing the service tax demand against Yatra Online, held that “convenience fee” and “cancellation fee” are recovered in the course of the provision of the service related to the booking of tickets for passage through air and not in connection with any business promotion.
The bench of S. S. Garg (Judicial Member) and P. Anjani Kumar (Technical Member) has observed that the “convenience fee" and “cancellation fee” are not relatable to any other service provided by the appellant or assessee and the service tax is being discharged in terms of Rule 6(7) of the Service Tax Rules, 2006. No additional liability of the service tax can be fastened to the appellant on account of the “convenience fee and “cancellation fee” either before or after July 1, 2012.
The appellant/assessee, Yatra Online, is in the business of booking air tickets for various domestic and international airlines and is registered with the service tax department under the category of "air travel agent.".
The appellant books air tickets for passengers to travel on airlines. In terms of the agreement with the airlines, the appellant receives commission or incentive from the airlines for facilitating the sale of air tickets for the airlines. The appellant also receives a convenience fee from the customer for booking the air ticket. In the event of a customer canceling a booked ticket, the appellant withholds a cancellation fee and refunds the remaining portion of the ticket price to the consumer.
The two show cause notices were issued to the appellants, holding that the convenience fee and cancellation fee received or retained by the appellant were towards the consideration of “business auxiliary service” rendered by the appellant.
The proposals in the SCNs were confirmed by the orders by confirming service tax on convenience fees and cancellation fees.
The assessee contended that the notice and impugned order are based on an erroneous understanding of taxing services offered in relation to the booking of air travel tickets, displaying a failure to understand the design of the law and its complete compliance by the appellant. A combined reading of entry 65 (41) (l) and Section 67 (k) of the Act leads to the conclusion that air travel agent services are provided by the air travel agent to the customer, and consideration for the provision of such services can be paid by the airline in the form of commission. An entity “A can provide ATA service to a customer “B, for which consideration can be paid by the airline “C, i.e., it is not necessary for the service recipient to pay for the service received.
The assessee contended that the service for which a convenience fee is charged, though considered separate, would qualify to be bundled with the service of booking air tickets as per Section 66F.
The department contended that “convenience fee or “service fee, in addition to commission from the airlines for providing air travel agent service, is recovered not for providing any booking-related service but for providing various additional services after booking the ticket, such as issuing boarding passes, providing information relating to the time of the flight, rescheduling or cancellation, and such other details that involve the use of the internet, staff, and various administrative expenses. Since services are provided post-booking of tickets, these are not covered in the definition of air travel agent service and are different from the services provided in relation to booking of passage for travel by air.
The tribunal while allowing the appeal held that the convenience fee is collected towards the access given to the customers to their website in the course of booking tickets. Therefore, by charging the convenience fee, the appellants are not rendering any separate service to the airlines and receiving the consideration thereof from the customers who book airline tickets. The cancellation fee is also collected when the tickets are cancelled by the customers. The charges are in the nature of recovering administrative expenses involved in booking and cancelling tickets for passage by air.
Counsel For Appellant: Arjun Raghavendera
Counsel For Respondent: Rajpal Sharma
Case Title: M/s Yatra Online Pvt Ltd Versus Commissioner, CGST, Gurugram
Case No.: Service Tax Appeal No. 60306 of 2019