Services Of Planning Travel Itinerary Of Clients Classified As “Air Travel Agent” And Not Under Business Support Service: CESTAT

The Delhi Bench of Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) has held that services for planning travel itineraries for clients are classified as “air travel agents” and not under business support services.

The bench of Binu Tamta (Judicial Member) and Hemambika R. Priya (Technical Member) has observed that the definition of “air travel agent” includes all services connected with or in relation to the booking of passage for travel by air. The miscellaneous services rendered by the appellant are also in furtherance of the travel agent's service to its customers and hence cannot be classified under “Business Support Service.”.

The appellant is a member of the International Air Transport Association (IATA) and is registered with the Service Tax Delhi-II for rendering the services of an air travel agent, a rail travel agent, and a tour operator under Section 65 of the Finance Act, 1994. Prior to 01.04.2014, the appellant had separate registration for each of its branches throughout India, and w.e.f. 01.04.2014, it was centrally registered in New Delhi.

The appellant, during the course of providing the services of 'Air Travel Agent', also renders certain services to its clients in the nature of planning the travel itinerary of the clients, suggesting better flights and flight time options, preparing department-wise travel-related reports (MIS Reports), i.e., the number of tickets booked, the number of tickets cancelled, etc. for the clients, escorting the client's representative up to the point of immigration at the airport, etc. The appellant charges'management fees' for rendering these services, which are separately reflected on the air travel bill raised for the client.

The appellant had discharged the service tax liability under Rule 6(7) of the Rules, i.e., the value of services on the basic/commissionable fare.

The appellant, while seeking Centralized Registration in compliance with Trade Notice No. 07/ST/2012 dated April 25, 2012, issued by the Delhi Commissionerate mandating disclosure of all the SCN's, pending adjudications, and appeals before various appellate forums, had disclosed all issues and SCN pending adjudications before various adjudicating authorities and pending appeals before various appellate forums pertaining to all its branches pan-India.

A show cause notice was issued by the Department for the periods 2010-2014 and 2014-2015, respectively, classifying the services rendered by the appellant under the category of “Business Support Services” and charging a service tax amounting to Rs. 2,97,58,677/- for the period 2010-2011 to 2013-2014, invoking the extended period of 5 years under Section 73(1), as the service provider had intentionally avoided the disclosure of the requisite details and documents while filing the returns, though they were under the statutory obligation of self-assessment to correctly assess their liability and pay the same within the time specified.

The actions of the service providers amount to suppression of material facts from the Department, resulting in contravention of the various provisions of the Act with intent to evade payment of service tax.

The show cause notice was adjudicated, and on the issue of the invocation of an extended period of limitation, the adjudicating authority dropped the demand raised for the period 2010–2011 as the same being beyond the period of 5 years and confirmed the service tax liability for the period 2011–2012 to 2015–2016. Being aggrieved against the demand being dropped for the years 2010–2011, the Department has filed a separate appeal, and the appellant has challenged the imposition of service tax by invoking the extended period of limitation as well as on merit.

The assessee contended that the appellant's claim is that service tax cannot be charged on the “management fee” under the category of “business support services” as it presupposes the existence of a business and activities related to the said business that are outsourced for operational efficiencies and financial liabilities. The learned counsel distinguished that the customers of the appellant are not in the business of booking tickets, planning an itinerary, escorting passengers up to immigration, or making payments for management fees; rather, they are the actual travellers. Here, the appellant, in the course of providing the services of “Air Travel Agent,” also renders certain services in the nature of planning the travel itinerary of the clients, suggesting better flights and flight times, options, and preparing department-wise travel-related reports.

The tribunal held that the services rendered by the appellant have already been taxed under the “Air Travel Agency” service, so any consideration arising from the same transaction cannot be taxed under different categories, and therefore the demand was set aside.

Counsel For Appellant: Madhumita Singh

Counsel For Respondent: Rajeev Kapoor

Case Title: M/s. International Travel House Pvt. Ltd. Versus Commissioner of Service Tax

Case No.: Service Tax Appeal No.50311 of 2017 (DB)

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