Service Provided to Foreign Airline Amounts to Export of Service under Finance Act: CESTAT Quashes Service Tax Demand [Read Order]
Demand of Consequential Interest as well as Imposition of Penalty under Section 76 held Untenable by Chennai Bench
Service Tax Demand, CESTAT Chennai, Export of Service
Service Tax Demand, CESTAT Chennai, Export of Service
The Chennai Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has held that the overriding commission received by a General Sales Agent (GSA) from a foreign airline in convertible foreign exchange amounts to export of service and is not liable to service tax.
The appellant, Translanka Air Travels (P) Ltd., acted as the GSA for Srilankan Airlines and received overriding commission and contract fees under the agreement. A show cause notice issued by the department demanded service tax of ₹32.13 lakhs, treating the services as taxable under the category of Business Auxiliary Services. The adjudicating authority confirmed the demand, which was upheld by the Commissioner (Appeals).
Appearing for the appellant, Ms. Radhika Chandra Sekhar, Advocate, argued that the services were rendered to a recipient located outside India, with consideration received in foreign currency, and hence qualify as export of services under Rule 3(1)(iii) of the Export of Services Rules, 2005. She also pointed out that similar issues had been decided in favour of the appellant in earlier CESTAT rulings. Shri. N. Satyanarayana, appearing for the department, reiterated the findings of the appellate authority.
The Tribunal, comprising of Ajayan T.V. (Judicial Member) and M. Ajit Kumar (Technical Member), agreed with the appellant’s submissions and noted that in the appellant’s own earlier cases, the same issue had been settled in its favour. It was further noted that the show cause notice reveals in para 14 that in the GSA agreement there is no specific clause about payment of any amount as Contract Fees for any specific purposes.
Further, the Bench found that no specific demand for contract fees had been raised in the show cause notice, and the inclusion of reimbursable expenses was contrary to the Supreme Court’s decision in Intercontinental Consultants & Technocrats Pvt. Ltd.
Holding the demand of service tax and penalty as unsustainable, the CESTAT set aside the order-in-appeal and allowed the appeal with consequential relief.
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