2016 (3) TMI 905 - AT - Service Tax

Waiver of pre-deposit - Classification of service - Transport of passengers on domestic routes through its helicopters - Whether comes within the ambit of Section 65(105)(zzzo) or within supply of tangible goods for use (STGU), Section 65(105) (zzzzj) of the Act - Held that - since there is no privity of contract between the appellant and the passengers who travel on appellant s helicopters and the contracts were invariably between the appellant and the charter parties who hired appellant s helicopters for the purpose of transporting passengers. Therefore, the services clearly fall within the ambit of STGU. Invokation of Extended Period of Limitation - Proviso to Section 73 of the Act - Held that - As on 16.5.2008, the date with effect from which STGU was introduced as a taxable service, transportation of passengers by air on domestic routes was not a taxable service. So the petitioner cannot therefore gainfully contend that it entertained a bona fide doubt whether services provided by it fall within STGU. Therefore, invokation of extended period of limitation sustains - stay denied

Summary

Issues:
1. Restoration of stay application dismissed for default
2. Confirmation of service tax demand
3. Rejection of appeal by Commissioner, Central Excise (Appeals)
4. Interpretation of services provided by the appellant as falling within STGU or transportation of passengers by air
5. Privity of contract between appellant and passengers
6. Invocation of extended period of limitation

Analysis:

1. The judgment addresses the restoration of a stay application dismissed for default, with the Appellate Tribunal restoring the stay application as a satisfactory cause was shown. The application was heard and disposed of on the same day as per the order.

2. The adjudication order confirmed a service tax demand of Rs. 56,06,254 along with interest and penalty on the basis that the appellant provided supply of tangible goods for use, a taxable service during a specific period. This decision was made by the Additional Commissioner of Service Tax, New Delhi.

3. The appellant's appeal against the adjudication order was rejected by the Commissioner, Central Excise (Appeals), Delhi-IV. The rejection of the appeal led to the continuation of the service tax demand and related penalties.

4. The main issue in the case revolved around the interpretation of the services provided by the appellant. The appellant argued that the services were related to the transport of passengers on domestic routes through its helicopters, falling under Section 65(105)(zzzo) of the Finance Act, 1994. The contention was that the services did not fall within the ambit of supply of tangible goods for use (STGU) as defined in the Act.

5. The appellant emphasized the lack of privity of contract between the appellant and the passengers traveling on the helicopters. Instead, the contracts were between the appellant and charter parties who hired the helicopters for passenger transport. This lack of direct contractual relationship with passengers was a key point in the argument.

6. Regarding the invocation of the extended period of limitation, the appellant claimed bona fide doubts about whether the services provided fell within STGU or transportation of passengers by air. However, the Tribunal found no merit in this argument, stating that the transportation of passengers by air on domestic routes was not a taxable service at the relevant time, thus rejecting the contention about doubts regarding the tax liability.

In conclusion, the judgment upheld the service tax demand, rejected the appellant's arguments regarding the nature of services provided, and directed the appellant to pre-deposit the assessed liability within a specified timeframe, failing which the appeal would stand dismissed.