ORDER
P.G. Chacko, Member (J)
1. After examining the records and hearing both sides, we are of the view that the appeal itself requires to be finally disposed of at this stage. Accordingly, after dispensing with predeposit, we take up the appeal.
2. Learned Commissioner, in the impugned order, demanded Service Tax of over Rs. 86 lakhs from the appellants and imposed on them equal amount of penalty. The demand of tax is for the period July, 2003 to August, 2004 and from June, 2005 to March, 2006 covered by show-cause notice dated 17.08.2006. It is on ‘Overriding Commission’ (ORC, for short) received by the appellants in Indian currency from M/s. Sri Lankan Airlines during the above period under an agreement entered into between them. M/s. Sri Lankan Airlines had appointed the appellants as ‘General Sales Agent’ (GSA, for short) for India. The duties of GSA were laid down under the above agreement. The services rendered, in discharge of these duties, by the appellants to the airlines fell in the category of “Business Auxiliary Service” which had become exigible to Service Tax with effect from 01.07.2003. The appellants had not paid such tax on ORC received from the airlines in terms of the agreement during the period of dispute. From the documents recovered by officers of DGCEI from the appellants, it appeared that Sri Lankan Airlines had been making ORC payments to the appellants in India by issuing credit notes in their favour separately for domestic and international passenger traffic sales to promote and market the airlines passenger traffic in India. The ORC was worked out on a monthly basis and credit notes issued accordingly. The credit notes mentioned the amounts in terms of Indian rupees and such amounts were credited to the appellant’s bank account. The correspondence between the appellants and the airlines and between the airlines offices in India and Sri Lanka, recovered by the investigating agency, indicated that both the parties were aware of leviability of Service Tax on ORC in the category of “Business of Auxiliary Service” with effect from 01.07.2003. They were found to be even aware of the legal position that, where ORC payment was in convertible foreign exchange, exemption from payment of Service Tax on such amount was available under Notification No. 21/2003-ST dated 20.11.2003. The appellants were also found to have had the apprehension that the question whether the funds received by them into their current account in India from Sri Lankan Airlines would represent convertible foreign exchange would have to be tested in courts. Functionaries of the appellant-company, in their statement admitted the above facts. The appellants also furnished particulars of payments of ORC received by them from the airlines during the period of dispute. It was on the basis of the results of these investigations that the subject show-cause notice was issued to the appellants treating the GSA’s services to the airlines as “Business Auxiliary Services” under Section 65(19) of the Finance Act, 1994 and demanding Service Tax on the ORC received by them in Indian currency from the airlines during the period of dispute. The show-cause notice was contested on numerous grounds, but none was accepted by the adjudicating authority. Hence the impugned order.
3. In the present appeal, the appellants have raised a jurisdictional question. It is submitted that DGCEI had no jurisdiction to issue the show-cause notice during the period of dispute. The demand of tax and imposition of penalty have been contested on numerous other grounds also. Learned Counsel for the appellants has reiterated these grounds. Learned SDR has argued in defence of the impugned order. It is further pointed out by learned SDR that this Bench dismissed a similar appeal of M/s. ETA Travel Agency Pvt. Ltd. after overruling the jurisdictional objection and sustaining the demand of Service Tax on ORC for a comparable period. Contextually, it is pointed out by learned advocate that the penalty in that case was reduced from Rs. 1.68 crores to Rs. 10 lakhs.
4. After considering the submissions, we find that our Final Order No. 452/07 dated 20.04.2007 in Appeal No. S/209/2006 filed by M/s. ETA Travel Agency Pvt. Ltd, cited today by learned SDR, covers all the issues in the present case against the appellants. In the cited case, the demand of tax was to the extent of over Rs. 1.68 crores, which was a demand on ORC received by the said company as GSA from Malaysian Airlines in the same manner as the present appellants received ORC from Sri Lankan Airlines. In that case, we sustained the Commissioner’s decision against the party, with reduction of the penalty from Rs. 1.68 crores to Rs. 10 lakhs. Fortunately, there is a consensus between the two sides that the facts of the two cases are strikingly similar. In the circumstances, following our decision rendered in the case of M/s. ETA Travel Agency Pvt. Ltd. (supra), we sustain the Commissioner’s order impugned in the present appeal, with the modification that the quantum of penalty on the appellants shall be Rs. 5 lakhs (Rupees Five Lakhs only/-). The appeal is dismissed with this modification.
(Dictated and pronounced in open court)