Kafila Hospitality And Travels Private Limited Vs Commissioner of Service Tax (CESTAT Delhi)
The appeal challenged the order of the Commissioner of Service Tax, New Delhi, confirming a demand of service tax by invoking the extended period of limitation under the proviso to Section 73(1) of the Finance Act, 1994. The dispute related to the levy of service tax on target-based incentives received by an IATA-accredited air travel agent from airlines and on Central Reservation System (CRS) commissions received from CRS companies. A Division Bench of the Tribunal, expressing doubts about an earlier decision in D. Pauls Consumer Benefit Ltd., referred six issues to a Larger Bench concerning the taxability of such incentives under the category of Business Auxiliary Service (BAS).
The Tribunal noted that airlines provide air transport services, IATA-accredited travel agents sell airline tickets and receive commission from airlines, while CRS companies provide online reservation platforms to airlines and travel agents. CRS companies also paid incentives or commissions to travel agents based on the volume of bookings made through their reservation systems. Airlines similarly paid target-based incentives upon achievement of specified booking targets. The Department alleged that these incentives represented consideration for promoting the business of airlines and CRS companies and therefore attracted service tax under Section 65(19)(ii) read with Section 65(105)(zzb) of the Finance Act. The Commissioner accepted this view and confirmed the demand.
