Pranav B Prem

In a significant ruling, the Delhi Bench of the Customs, Excise & Service Tax Appellate Tribunal (CESTAT) has held that services received by Air India Ltd. from foreign-based Computer Reservation System (CRS) companies are not taxable under the category of Online Information and Database Access or Retrieval (OIDAR) services. The three-member bench comprising Justice Dilip Gupta (President), Ms. Binu Tamta (Judicial Member), and Mr. P. V. Subba Rao (Technical Member) made it clear that ownership of the data involved is the determining factor in deciding the applicability of service tax under OIDAR.

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The judgment came in response to a massive tax demand exceeding ₹100 crore raised by the Directorate General of Central Excise Intelligence (DGCEI) on Air India (formerly Indian Airlines Ltd.) for the period October 2003 to December 2008, under the reverse charge mechanism. The department alleged that Air India had received taxable OIDAR services from foreign CRS companies such as Amadeus, Galileo, and Abacus, and had failed to pay the service tax applicable on those payments.

The department's case hinged on the argument that CRS companies maintained databases accessible through computer networks, and hence, Air India had received OIDAR services. It also relied on earlier Tribunal rulings such as British Airways [2013 (36) STR 598 (Tri.-Del.)] and Jet Airways [2016 (44) STR 465 (Tri.-Mumbai)], where similar services had been held taxable under OIDAR.

However, the Tribunal in the present case observed that the data accessed by travel agents through the CRS platforms originated from Air India itself, and the CRS companies merely facilitated access to that data. The contractual arrangements revealed that CRS companies did not create or own the information, and were simply offering a technological interface to aid global booking by travel agents.

Rejecting the department’s position, the Tribunal held that "the expression 'providing data/information' in the context of OIDAR service would mean to supply such data/information which was previously not available to the service recipient." It added that if the data already belongs to the service recipient, then the activity of routing that data through a system does not amount to 'providing' data within the meaning of OIDAR.

The Tribunal analyzed in detail the agreement between Air India and Abacus Distribution Systems, a Singapore-based CRS company. It found that Air India was categorized as a “Participating Airline” and “Service Provider” that supplied its own fare and flight information to Abacus. The agreement’s terms indicated that Air India retained full control and responsibility for supplying updates to its flight schedules, seat availability, and pricing data. CRS companies would then convert this into a compatible format and make it available to travel agents for bookings.

The fee structure also played a decisive role in the Tribunal’s reasoning. It noted that payments to CRS companies were only triggered upon successful bookings, indicating that the consideration was not for access to data but for successful facilitation of sales.

In support of its conclusions, the Tribunal relied on several precedents including United Telecom Ltd [2008 (8) TMI 191- CESTAT-Bangalore ], State Bank of India [2015 (37) STR 340 (Tri.-Mumbai)], and PVR Ltd [2021 (55) GSTL 435 (Tri.-Del.)], which laid down that OIDAR taxability hinges on the actual provision of new data and not merely routing or formatting existing data belonging to the recipient. The Tribunal explicitly overruled British Airways and Jet Airways, stating that these decisions failed to consider the ownership aspect, and therefore, did not lay down the correct law.

The bench concluded: “What is of paramount is the ownership of such data/information intended to be provided. It cannot, therefore, be urged that foreign CRS Companies provided any data/information to the appellant.”

Further, it held that even if some data was being provided, it was only incidental to the primary purpose of increasing booking outreach and not sufficient to classify the service as OIDAR. The Tribunal emphasized that substance over form must prevail in such assessments.

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In its conclusive observation, the Tribunal answered the reference placed before the Larger Bench in unambiguous terms: “The services provided by CRS Companies to the appellant would not be taxable under the category of OIDAR services and the decision of the Tribunal in United Telecom lays down the correct position of law.” Accordingly, the entire service tax demand along with interest and penalties was quashed, bringing substantial relief to Air India.

Appearance

Shri B.L. Narasimhan, Ms. Shagun Arora and Shri Kunal Aggarwal, Advocates for the Appellant

Shri Ajay Jain, Special Counsel of the Department

Cause Title: Air India Ltd (Earlier Known as Indian Airlines Ltd.) V. Commissioner (Adjudication) Service Tax, New Delhi

Case No: Service Tax Appeal No. 52780 OF 2014

Coram: Hon’ble Mr. Justice Dilip Gupta [President], Hon’ble Ms. Binu Tamta [Member (Judicial)], Hon’ble Mr. P. V. Subba Rao [Member] (Technical)