2010 (8) TMI 584 - AT - Service Tax

Waiver of pre-deposit - Air Transport of Passengers Embarking for International Travel service - The demand arises that the assessees were liable to pay Service tax on Passengers Service Fee (PSF) which is an amount collected by the Airport Authority of India (AAI) for the security and maintenance services provided by AAI to passengers using respective airports in India and it is the AAI which has created a charging mechanism requiring the airlines to collect the PSF from passengers and remit the same to the AAI. Held that the strong prima facie case for total waiver as they do not provide or render any service to passengers, while it is only a service provider (or in some cases, service recipient) who is liable to pay Service tax - Hence, pre-deposit waive.

Summary

Issues: Liability of Service tax on Passengers Service Fee (PSF) collected by airlines for security and maintenance services provided by Airport Authority of India.

The judgment by the Appellate Tribunal CESTAT, Chennai, involved a case where the issue revolved around the liability of Service tax on Passengers Service Fee (PSF) collected by airlines for security and maintenance services provided by the Airport Authority of India (AAI). The assessees, engaged in operating international airlines from India to various international destinations, were registered with the Service Tax Commissionerate, Chennai for the service of "Air Transport of Passengers Embarking for International Travel." The demand for Service tax arose due to the holding that the assessees were liable to pay Service tax on the PSF collected by the AAI from passengers for the services provided at airports in India. It was noted that the AAI created a mechanism where airlines collected the PSF from passengers and remitted it to the AAI. The assessees argued that they did not provide any service to passengers, and it was the AAI or the service provider who should be liable to pay the Service tax, not them as the airlines. The tribunal found that the assessees had a strong prima facie case for total waiver of the pre-deposit of the demanded amounts, as they were not the direct service providers to passengers. Therefore, the tribunal dispensed with the pre-deposit and stayed the recovery of the amounts pending the appeals.

The judgment highlighted the importance of understanding the nature of services provided and the entities responsible for the payment of Service tax. It emphasized that liability for Service tax should align with the actual service providers or recipients, clarifying that mere collection of fees by airlines for services provided by another entity does not automatically make the airlines liable for the tax. The decision provided relief to the assessees by granting a waiver of the pre-deposit and staying the recovery of the demanded amounts, considering the absence of direct service provision to passengers by the airlines. This case serves as a precedent for cases involving the interpretation of liability for Service tax in situations where multiple entities are involved in the provision of services and collection of fees.