Relief for Air India: CESTAT Rules CRS Services Not Taxable Under OIDAR Due to Data Ownership [Read Order]

Air India, the appellant, had entered into agreements with foreign-based CRSproviders like Abacus, Amadeus, and Galileo, allowing them to disseminate Air India's flight information to global travel agents. These CRS platforms charged Air India a fee per booking and shared a portion of it with travel agents. The department issued a show cause notice alleging that Air India had failed to pay service tax on a reverse charge basis for the services provided by the foreign entities under the category of OIDAR services, covering the period from October 2003 to December 2008.

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The appellant’s counsel argued that the services received from the CRS companies were not in the nature of OIDAR, as they did not involve the supply of any independent data or database. They submitted that the data accessed by travel agents through CRS systems belonged to Air India, and the CRS merely facilitated its dissemination. They emphasized that the fee paid to CRS providers was not for data access, but for facilitating bookings based on data that Air India itself supplied and owned.

The department's counsel countered that the CRS platforms provided real-time electronic access to flight information and therefore qualified as OIDAR services under the Finance Act, 1994. They argued that since the service was provided by foreign-based companies and used in India, Air India was liable to pay service tax under the reverse charge mechanism. The department also referred to earlier rulings such as in the cases of British Airways and Jet Airways, where similar CRS services were held to be taxable under OIDAR.

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The Larger Bench comprising Dilip Gupta (President), P. V. Subba Rao (Technical Member), and Anil Choudhary (Judicial Member) agreed with Air India’s submissions. The tribunal observed that the essence of OIDAR lies in the provision of data or access to a database that the service provider owns or controls. In this case, it was clear that the data originated from Air India and was not owned or supplied by the CRS companies. The tribunal found that the real intent of the agreements was to increase Air India’s ticket sales through broader access to its own flight information, not to procure information from a third-party database.

The tribunal distinguished the earlier decisions relied on by the department, stating that those cases did not adequately consider the ownership of the data or the true nature of the service. The tribunal agreed with the ruling in United Telecom Ltd., where it was held that the ownership of data is a key factor in determining whether a service falls under OIDAR.

The tribunal ruled that since Air India owned the data and the CRS providers did not supply any new or external information, the services could not be classified as OIDAR. Accordingly, the reference was answered in favour of Air India, and the matter was sent back to the Division Bench for further proceedings on other aspects of the case.

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