2016 (11) TMI 1351 - AT - Service Tax

Levy of tax - transport of goods by air - the chargeability of service tax on the amount collected from passengers as charges for transportation of their excess baggage by the appellant Airline during the period of 10.9.2004 to 13.09.2006, when the service of Transportation of Passengers by Air was not under taxable category - Held that - carrying excess baggage on payment of certain fee/tariffs for the passengers who have opted to use air services of the appellant is an integral part of the main service provided by the appellant. The incidental service of transportation of excess baggage by air cannot be charged service tax under the category of service of transportation of goods by air as defined under Section 65 (105) (zzn) of the Finance Act, 1994, CESTAT Mumbai in the case Kingfisher Airlines Ltd. Vs. Commissioner of Service Tax, Mumbai 2015 (11) TMI 54 - CESTAT MUMBAI (LB) , where it was held that The excess baggage charges collected by the appellants are an integral part of the main service namely transportation of passengers by air. Therefore, the demand of service tax is set aside. Appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Chargeability of service tax on excess baggage charges collected by an airline.
2. Interpretation of the category of service of 'transportation of goods by air' under Section 65(105)(zzn) of the Finance Act, 1994.
3. Determination of whether excess baggage charges are an integral part of the main service of transporting passengers by air.

Issue 1: Chargeability of service tax on excess baggage charges collected by an airline
The appellant, an airline, appealed against the order confirming the liability of service tax on excess baggage charges collected from passengers. The appellant argued that carrying excess baggage is an integral part of the main service of transporting passengers by air and should not be separately taxed. The appellant cited a previous decision by CESTAT in the case of Kingfisher Airlines Ltd. vs. Commissioner of Service Tax, Mumbai, which supported their stance. The Revenue, represented by the ld. A.R., maintained the findings of the impugned order.

Issue 2: Interpretation of the category of service of 'transportation of goods by air'
The Tribunal considered the definition of 'transportation of goods by air' under Section 65(105)(zzn) of the Finance Act, 1994. After evaluating the arguments from both sides and the precedent set by CESTAT Mumbai in the case of Kingfisher Airlines Ltd., the Tribunal concluded that carrying excess baggage, as an incidental service, cannot be taxed under the category of 'transportation of goods by air.' The Tribunal emphasized that excess baggage charges are an integral part of the main service of transporting passengers by air.

Issue 3: Determination of whether excess baggage charges are an integral part of the main service
The Tribunal, following the decisions of CESTAT in the case of Kingfisher Airlines Ltd. vs. Commissioner of Service Tax, Mumbai, held that excess baggage charges collected by airlines are indeed an integral part of the main service of transporting passengers by air. Therefore, the demand for service tax on excess baggage charges was set aside, and the appeal by the appellant was allowed based on the established legal principles and precedents.

In conclusion, the judgment by the Appellate Tribunal CESTAT New Delhi addressed the chargeability of service tax on excess baggage charges collected by an airline, interpreting the relevant provisions of the Finance Act, 1994, and determining that such charges are an integral part of the main service of transporting passengers by air, thereby exempting them from service tax under the category of 'transportation of goods by air.'