The Chandigarh Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has ruled that the commission retained by an air travel agent on tickets procured from other GSA/IATA agents cannot be subjected to service tax under the category of Business Auxiliary Service (BAS). 

Holding that the activities are intrinsically part of Air Travel Agency Services, the bench of  Justice S.S. Garg (Member Judicial) and P. Anjani Kumar (Member Technical) set aside the service tax demand of ₹7.39 lakh, along with the associated penalties.

The appellant/assessee is an IATA-recognised air travel agent based in Jalandhar, is engaged in providing Air Travel Agent Services and pays service tax in accordance with the Finance Act, 1994. Apart from issuing tickets directly on behalf of domestic and international airlines, the company also purchased tickets from other General Sales Agents (GSA) and IATA agents to meet customer requirements. These intermediary agents passed on a portion of the airline commission or discount to the appellant after retaining their share, and the appellant, in turn, retained a portion while passing the remaining benefit to customers. 

Buy Now: 70+ Judgements Indirect Tax – July 2026 | E-Magazine

The Service Tax Department viewed the commission retained by the appellant as consideration for services rendered to the co-GSA/IATA agents. According to the Department, the activity amounted to Business Auxiliary Service, making the commission liable to service tax.

Based on this reasoning, a show cause notice dated April 12, 2013, covering the financial year 2011-12, proposed recovery of service tax. The adjudicating authority confirmed a demand of ₹7,39,392, along with penalties under Sections 76 and 77 of the Finance Act, 1994. The Commissioner (Appeals) subsequently upheld the order, prompting the assessee to approach the Tribunal. 

The appellant argued that the issue had already been conclusively decided in the company’s own case for the earlier period from 2006-07 to 2010-11 through Final Order No. 60118/2024 dated March 19, 2024. Since the facts and legal issue remained identical, the appellant contended that the present demand could not survive. 

The department however, defended the impugned order and reiterated the findings adopted by the lower authorities. 

After examining the records, the Tribunal found that the controversy stood squarely covered by its earlier decision involving the same assessee.

The Bench reiterated that, under the statutory framework governing service tax, any activity relating to booking air passage by an air travel agent falls within the ambit of “Air Travel Agency Services.” Whether the travel agent procures tickets directly from the airline or through another GSA/IATA agent does not alter the character of the service being rendered. 

The Tribunal observed that merely because a travel agent receives part of the commission from another GSA/IATA operator, it cannot be inferred that the agent is providing an independent Business Auxiliary Service to that intermediary. The commission retained is only part of the commercial arrangement connected with booking airline tickets and not consideration for any separate taxable service rendered to another travel agent. 

Referring to its earlier ruling, the Bench reaffirmed that the appellant was not rendering any Business Auxiliary Service to co-GSA/IATA operators, and consequently, the commission earned by the appellant was not liable to service tax under that taxable category. 

Following its earlier precedent, the Tribunal held that the impugned appellate order was legally unsustainable. It accordingly allowed the appeal and granted the appellant consequential relief in accordance with law, thereby setting aside the service tax demand of ₹7.39 lakh together with the penalties imposed. 

Membership Required to Access Case Details & Order Copy

To view the complete Case Details and Download Order Copy, you must have an active membership. Please subscribe to continue.

Read More: CENVAT Credit Can’t Be Denied on Duty-Paid Inputs from Area-Based Exempt Units: CESTAT