2017 (1) TMI 663 - AT - Service Tax

Transfer of Goods by Air Service - excess baggage charges recovered from passengers - whether, the amount collected by the appellant from passengers on account of the excess baggage carried by it are subject to service tax under section 65 (105) (zzn) ibid? - Held that - the issue in this case is no more res-integra in view of the decision of the Tribunal in the case of Kingfisher Airlines Ltd. 2015 (11) TMI 54 - CESTAT MUMBAI (LB) , wherein it has been held that the excess baggage charges collected by the Airlines are integral part of the main service namely, transportation of passengers by air and, therefore demand of service tax on such charges cannot be sustained under the taxable service defined in Section 65 (105) (zzn) - appeal allowed - decided in favor of appellant.

Summary

Issues:
Whether excess baggage charges collected by the appellant are subject to service tax under Section 65 (105) (zzn) of the Finance Act, 1994.

Analysis:

Issue 1: Taxability of excess baggage charges

The appeal was filed against an order confirming a service tax demand on excess baggage charges collected by the appellant. The appellant argued that the excess baggage charges are integral to the taxable service of "Transport of Passengers by Air" under Section 65 (105) (zzzo) and had discharged appropriate service tax liability. The appellant contended that since the excess baggage charges are part of the main service provided, they should not be separately taxed under the category of "Transport of Goods by Air Service." Reference was made to a previous Tribunal decision in the case of Kingfisher Airlines Ltd., where it was held that excess baggage charges are part of the main service of passenger transportation by air and not subject to separate service tax under Section 65 (105) (zzn).

Issue 2: Tribunal's Decision

The Tribunal noted that the issue of taxability of excess baggage charges had already been settled in the case of Kingfisher Airlines Ltd., where it was established that such charges are an integral part of the main service of passenger transportation by air. Therefore, the demand for service tax on excess baggage charges under Section 65 (105) (zzn) was not sustainable. The Tribunal found no merit in the impugned order and ruled in favor of the appellant, allowing the appeal.

In conclusion, the Tribunal held that excess baggage charges collected by the appellant, being an integral part of the main service of passenger transportation by air, were not subject to separate service tax under Section 65 (105) (zzn) of the Finance Act, 1994. The decision was based on the precedent set by the case of Kingfisher Airlines Ltd., where a similar issue had been resolved in favor of the airline.