Dilip Gupta, President:— M/s. Air India Ltd. (earlier known as Indian Airlines Ltd.) has filed this appeal to assail that part of the order dated 03.02.2014 passed by the Commissioner (Adjudication), Service Tax, Commissionerate, New Delhi by which the demand of service tax of Rs. 37,58,23,581/- has been confirmed against the total amount of service tax that was proposed in the show cause notice. An amount of Rs. 13,90,47,132/- proposed in the show cause notice was dropped for the reason that there was no liability pay service tax prior to 18.04.2006. The Commissioner has also ordered for recovery of interest under section 75 of the Finance Act, 1994 and penalty under sections 76, 77 and 78 of the Finance Act.

2. The issue that arises for consideration in this appeal is regarding demand of service tax under the reverse charge basis on the services received from “Computer Reservation System” companies under the category of “online information and database access or retrieval” services defined under section 65(75) of the Finance Act and made taxable under section 65(105)(zh) of the Finance Act.

3. The appellant claims to be a 100% government owned company engaged in the business of transportation of passengers, cargo, etc. in national and international traffic by air. Apart from booking tickets over the counter, the appellant also provided the facility of booking its tickets online through an internet-based reservation system. The appellant also authorized various air travel agents for booking of its tickets. The air travel agents booked the tickets through the CRS, a proprietary global reservation platform, provided by the CRS companies. For this purpose, the appellant entered into agreements with various CRS companies located abroad and provided them access to its data/information, namely, seat availability, flight routes, fares, etc.

4. The appellant has explained the working of the CRS companies in the following manner:

(i) CRS companies are provided access by the appellant to the public domain information/data of the appellant available on its online reservation system, namely, flight schedule, seat availability and fare schedule;

(ii) Conversion of this data in CRS format by CRS companies;

(iii) CRS companies provide hardware connectivity infrastructure and software access to air travel agents;

(iv) CRS companies provide access to information to the air travel agents;

(v) Booking of tickets by air travel agents through CRS;

(vi) Updating of CRS by air travel agents as soon as booking/cancellation is done;

(vii) CRS companies provide a report detailing tickets booked/cancelled through their CRS;

(viii) Appellant pays fee to CRS companies as per the agreed terms, usually on each booking; and

(ix) CRS companies share fee with air travel agents for tickets booked using their CRS.

5. The Directorate General of Central Excise Intelligence initiated an investigation against the appellant by alleging non-payment of service tax on reverse charge basis for payment made to CRS companies. The investigation culminated in the issuance of a show cause notice dated 22.04.2009, proposing service tax of Rs. 51.48 crores for the period 01.10.2003 to 31.12.2008 under the category of OIDAR services by invoking the extended period of limitation. Penalties under section 76, 77 and 78 were also proposed against the appellant in the show cause notice.

6. This show cause notice was adjudicated upon by the Commissioner by order dated 03.02.2014 and the relevant portion of the order is reproduced below:

“67. ******* I find from the above discussion that the only requirement in this transaction is that the assessee's own network (computer system) should respond on real time basis with confirmation to the request made by the Travel Agents accessing the data relating to the assessee as available in the data processing centre of CRS companies. To enable this, the travel agents, in turn, are provided with a computer system by the CRS companies with a suitable software and on-line connectivity with their own data processing centre which in turn, is connected with the computer system of the assessee. The data processing centre of the CRS companies make available to the travel agents the database of the respective airlines, for ascertaining seat availability including other related process and thereafter enables booking of a seat on a particular flight of the airline. The assessee's computer network, in turn access and retrieve the data relating to booking of an air ticket by any travel agent from the data base of the CRS server on real time basis.

68. For the above activities, the assessee has been paying consideration to the said CRS Companies for each booking made by the travel agents or by itself through its computer system since Oct 03 onwards in the instant case. It is clarified that service tax is liable to be paid on consideration paid for using CRS service by the assessee. It is seen that the airline specific CRS software and the data processing centre maintained by CRS companies, is accessed and used by the assessee and the travel agents. Under this process, the assessee appears the ultimate beneficiary. Therefore any payment made and services received in the hands of the assessee, in this regard, are taxable amount under the above said taxable service. I also observe in view of the provisions of section 65(75) (zh) of the Act that it is not necessary that the data or information should be provided to a customer personally or that the computer network should be owned by the service provider/assessee/TAs as claimed by them. It is also not important as who is under the possession of related data or information. The important thing involved in the instant case is the arrangements, the systems available for delivery of message, data and information. In the instant case, I find that the element of intangible service is visible in the form of access or retrieval of the data or information whether owned or not by the service provider and receiver and where the computer network is the main vehicle for delivery of the subject service in question. I find that amendment till 18.04.06 and clarifications under circular are immaterial at present in the instant.

69. I find that the provision of service to travel agents, as contended, is delivered only at the instance of the assessee by CRS companies through computer network which would amount to providing the service to the assessee as per stipulated terms of the agreement. This is not a denying fact. The assessee below para A.15 (3) stated that service provided by the CRS companies is nothing but the additional facility or mechanism which facilitates the booking of its tickets. I find it on record that the access towards the computer system and the data by the travel agents is on the instruction, on behalf of and for the benefit of the assessee only. It is also clarified that the CRS companies are not getting the value of air tickets sold by travels agents/assessee but the sale-proceeds goes to assessee. The CRS companies get their consideration for providing on line data in the form of the consideration based on air ticket sale. The linkage of consideration with air ticket sale is only a method of calculating remuneration for the service of online data provision. Therefore, the assessee has to pay service tax on the said value paid to the said CRS companies.

70. ******* As such the offices of CRS companies are actually located outside India. Therefore, I find that the issue of leviability of service tax on such services received in India appears to be correctly covered under the provisions of Rule 2(1)(d)(iv) of the Service Tax Rules, 1994 read with Section 66A w.e.f. 18.04.06 only in the instant case.”

(emphasis supplied)

7. Shri B.L. Narasimhan assisted by Ms. Purvi Asati learned counsel for the appellant made the following submissions:

i. The service rendered by CRS companies are not covered under OIDAR services;

ii. In order to be covered under the ambit of the above said taxable service, the following conditions have to be cumulatively complied with:

(a) service must be of providing data or information;

(b) such data or information must be provided to any person;

(c) such data or information should be accessible or retrievable or both; and

(d) such data or information has to be provided in electronic form through computer network in any manner.

iii. The CRS companies did not provide any data or information to the appellant. The show cause notice as well as the impugned order have admitted at multiple occasions that it is the appellant who provides its data to the CRS companies, which is processed by the CRS companies. Thus, the information stored and accessed belongs to the appellant only;

iv. In support of this contention learned counsel placed reliance upon the decision of the Tribunal in United Telecom Limited v. Commissioner of Service Tax, Bangalore 2008 (8) TMI 191 - CESTAT-Bangalore, wherein it was held that the ownership of the data is very much relevant for deciding the taxability of OIDAR;

v. Learned counsel also placed reliance on the decision of the Tribunal in State Bank of India v. Commissioner of Service Tax-Mumbai-II 2015 (37) STR 340 (Tri.-Mumbai) as also the decisions of the Tribunal in Commissioner of Service Tax-Mumbai-II v. BASF India Ltd. 2018 (5) TMI 916 (CESTAT-Mumbai) and Nestle India Ltd. v. CCE & ST, LTU, Delhi 2018 (11) TMI 461 - CESTAT Chandigarh;

vi. Though, in British Airways v. Commissioner of Central Excise (Adjudication), Delhi 2013 (36) STR 598 (Tri.-Del.) and Jet Airways (I) Ltd. v. Commissioner of Service Tax, Mumbai 2016 (44) STR 465 (Tri.-Mumbai), the taxability of services provided by CRS companies under the category of OIDAR services was upheld but these decisions did not consider the ratio of the decision of the Tribunal in United Telecom and State Bank of India. In British Airways, the decision of United Telecom has been referred to but it was summarily distinguished without even considering the ratio of the law laid down in United Telecom. Jet Airways did not even consider United Telecom and State Bank of India on the ground that British Airways has decided this issue;

vii. Even if the appellant is liable to pay service tax as confirmed by the impugned order, service tax so payable by the appellant is admissible as credit to the appellant, which could have used for payment of service tax on taxable services. Thus, no tax can be demanded in case of a revenue neutral situation; and

viii. The extended period could not have been invoked nor could be imposed.

8. Shri Harshvardhan, learned authorized representative appearing for the Department, however, made the following submissions:

i. The issue of taxability of services provided by CRS has been decided as taxable under OIDAR services in Jet Airways;

ii. The decision of the Tribunal in United Telecom is not applicable in the present case as was clearly held by the Tribunal in British Airways and Jet Airways;

iii. The terms and conditions of the contract that appellant has signed with the overseas service providers clearly establish the fact that the impugned arrangement in the contract is OIDAR;

iv. The appellant is liable to pay applicable service tax under reverse charge mechanism as per section 66A of the Finance Act and the Rules made thereunder; and

v. Plea of revenue neutrality taken by the appellant is not admissible to the facts of the case.

9. The submissions advanced by learned counsel for the appellant and the learned authorized representative appearing for the Department have been considered.

10. The issue that arises for consideration is whether demand of service tax under reverse charge basis on services received from CRS companies under the category of OIDAR service is justified or not.

11. In this connection we find that there are two sets of decisions. In United Telecom, the appellant entered into a contract with the Government of Andhra Pradesh to build, own and operate a Wide Area Network to provide data communication services to Andhra Pradesh Technology Services Limited. The issue that arose was whether the appellant was liable to pay service tax under OIDAR. The Division Bench held that the ownership of data was relevant and since the data was generated only by Andhra Pradesh Government and the same was used by different wings of the Government, the appellant had not provided any data. Thus, the demand of service tax was not justified.

12. However, in British Airways where the issue was whether OIDAR service was received by British Airways from foreign based CRS companies and British Airways was liable to pay service tax under reverse charge mechanism, the Division Bench after referring to the earlier decision held that the services were covered by the definition of OIDAR. The same view was expressed by another Division Bench of the Tribunal in Jet Airways, wherein again the issue was relating to OIDAR service provided by CRS companies situated abroad.

13. Thus, there are two conflicting views of Division Benches of the Tribunal. It would, therefore, be appropriate to refer the matter to the President for constitution of a Larger Bench of the Tribunal to decide whether the services provided by CRS companies to the appellant can be subjected to levy of service tax under the OIDAR services and as to which of the two set of decisions of the Tribunal, namely, United Telecom, on the one hand, and British Airways and Jet Airways, on the other hand, lay down the correct law on this issue.