2016 (7) TMI 995 - AT - Service Tax

Demand of service tax on passenger service fee and airport taxes - extended period of limitation - Held that - mere non-payment of duties is not equivalent to collusion or wilful mis-statement or suppression of facts, otherwise there would be no situation for which ordinary limitation period would apply. Inadvertent non-payment is to be met within the normal limitation period and the burden is on Revenue to prove allegation of wilful mis-statement. - the ingredients required for imposing penalty under Section 78 ibid are conspicuously absent in this case. Demand pertaining to passenger service fee and airport taxes is set aside and the penalty under Section 78 ibid is also set aside. - Decided in favor of assessee.

Summary

Issues:
Appeal against service tax demand on transportation of passengers by air service - Non-payment of service tax on fuel, insurance surcharge, passenger service fee, and airport tax - Contention regarding inclusion of charges in assessable value - Penalty under Section 78.

Analysis:
1. The appeal was filed challenging the Order-in-Original confirming a service tax demand on transportation of passengers by air service. The demand was for not paying service tax on fuel, insurance surcharge, passenger service fee, and airport tax. The appellant did not contest the demand on fuel and insurance surcharge but argued against the demand on passenger service fee and airport taxes.

2. The appellant argued that passenger service fee was collected from passengers and remitted to the airport authority, while airport taxes were remitted to foreign airports. CESTAT judgments in similar cases were cited to support the argument that no service tax is payable on these charges as they are not part of the assessable value. The appellant claimed there was no wilful mis-statement or suppression of facts as the issue was clarified by CBEC later, and the service tax was paid accordingly.

3. The Departmental Representative contended that the charges in question form part of the assessable value, citing a CESTAT judgment in a different case. However, the appellant had already paid the service tax on fuel and insurance surcharge, indicating their compliance with the clarified position.

4. The Tribunal considered both sides' contentions. It noted that the appellant had paid the service tax on fuel and insurance surcharge and cited previous CESTAT judgments that supported the appellant's argument regarding passenger service fee and airport taxes. The Tribunal distinguished a CESTAT judgment cited by the Revenue, which relied on a rule declared ultra vires by the Delhi High Court.

5. Regarding the penalty under Section 78, a letter from CEBC clarified the issue of including certain charges in the taxable value of services provided by aircraft operators. The Tribunal found that the appellant had acted in good faith, as the issue had been raised with the CBEC, and the service tax was paid once the matter was clarified. Precedents were cited to emphasize that mere non-payment of duties does not imply wilful mis-statement or suppression of facts.

6. Consequently, the Tribunal partly allowed the appeal by setting aside the demand related to passenger service fee and airport taxes and also waived the penalty under Section 78, as the conditions for imposing the penalty were not met in this case.