Incentives paid for achieving targets cannot be deemed to be consideration and are not liable to Tax. Tribunal Kolktata

The primary issue in this case was whether the incentive or commission received by an Air Travel Agent is subject to service tax?

Background: The appellant, an Air Travel Agent, used CRS provided by Galileo for booking airline tickets. Galileo, in return, offered incentives to the travel agent for using their system. These incentives were a form of loyalty reward.

The Commissioner of Central Excise, Kolkata, had ruled that these incentives were classifiable under ‘Business Auxiliary Service’, and were therefore liable to service tax. The appellant was consequently issued notices demanding service tax, along with interest and penalties.

Challenge: The appellant challenged this decision, citing a precedent set by the Larger Bench in the case of Kafila Hospitality & Travels Pvt. Ltd. vs. Commr. of S.T., Delhi, where it was held that such incentives were not subject to service tax.

HELD: 1. The CESTAT, after considering the submissions and the Larger Bench's decision in Kafila Hospitality, concurred that the incentive/commission received by the appellant from Galileo was not liable to service tax.

It was established that the travel agent was promoting its own business, not the business of the airlines or Computer Reservation System (CRS) companies.
The Tribunal set aside the impugned orders and allowed the appeals, granting the appellant relief.