In a major relief to M/s. BCD Travels India Private Limited, the Chennai Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) quashed service tax demand on commission received on fuel surcharge.
Entertaining a doubt that the appellant did not include the amount of fuel surcharge received by it in the ‘basic fare’, a Show Cause Notice dated 19.06.2009 came to be issued thereby proposing to demand Service Tax on the commission received on the fuel surcharge for the period from December 2008 to February 2009, along with applicable interest and penalty.
The appellant justified its stand as to the non-includability of commission received on fuel surcharge in the basic fare, but however, not accepting the plea of the appellant in adjudication, the Adjudicating Authority, confirmed the proposals carried in the show cause notice.
Rule 6 (7) of the Service Tax Rules, 1994 clearly gives an option to the taxpayer, specifically an Air Travel Agent, to pay an amount calculated at the rate of 0.6% of the basic fare in the case of domestic bookings and at the rate of 1.2% of the basic fare in the case of international bookings instead of paying service tax at the rate specified in Section 66 of the Finance Act, 1994, and as per Section 66, the rate of Service Tax was a flat 12% of the value of taxable services.
The Coram comprising P Dinesha, Judicial Member and Vasa Seshagiri Rao, Technical Member observed that “An airline may pay commission inter alia on various items, apart from the basic fare, which are indicated clearly in the ticket issued to a traveller. The basic fare is clearly indicated, followed by various other charges in such ticket. Hence, when the basic fare is so specifically indicated, the authorities cannot add or delete anything to the same to say that the basic fare should also include those other things.”
“Rule 6 (7) of the Service Tax Rules, 1994 has to be read, in the context of the break-ups given in the ticket wherein the basic fare stands clearly indicated and viewed thus, the interpretation drawn by the lower authorities to include the commission on fuel surcharge in the basic fare cannot hold any water, for which reason the impugned order cannot sustain” the Tribunal opined.
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