Determination of Basic Fare of Service Tax under ‘Air travel Agent service’ not include Gross Fare including Fuel Surcharge u/s 6(7) of Service Tax Rules: CESTAT [Read Order]

The New Delhi bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) held that the term ‘basic fare’ in terms of the definition of rule 6(7) of the Service Tax Rules,1994 was not the gross fare including fuel surcharge for the determination of service tax under the category of air travel agent service. 

Kafila Hospitality & Travels Pvt. Ltd., the appellant assessee was an approved International Air Ticketing Association agent registered with the Service Tax Commissionerate, Delhi under the category of ‘Air travel agent service’. 

The assessee appealed against the order passed by the Commissioner of Service Tax for confirming the demand for service tax under rule 6(7) of the Service Tax Rules. 

Madhumita Singh and Sameer Sood, the counsels for the assessee contended that the term “basic fare”, in terms of its definition in Rule 6 (7) of the Service Tax Rules was not the gross fare including fuel surcharge, but was that part of the gross airfare on which the concerned Airlines normally pay the commission to the Air Travel Agent. 

Radhe Tallo, the counsel for the department contended that since some of the airlines were paying commission on airfare and fuel surcharge with effect from 2008-09, the basic fare should include the fuel surcharge and audit for the period 2005-06 to 2009-10 was conducted and the assessee was asked to provide details of fuel surcharge against tickets. 

The Bench observed that the Billing and Settlement Plan (BSP) produced by the assessee conclusively shows that the commission was received only on the airfare and not on airfare plus fuel surcharge and found recorded by the Commissioner that the commission was paid on the airfare plus fuel surcharge cannot be sustained. 

The two-member bench comprising Dilip Gupta (President) and Hemambika Priya (Technical) held that the fuel surcharge was not added to the airfare to determine the commission amount. 

Support our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates