2017 (11) TMI 354 - AT - Service Tax

Valuation - includibility - Fuel Surcharge (YQ Tax) - Passenger Service Fee (PSF) - GDS cost collected (YR) - Held that - The controversy concerning taxability of Passenger Service Fee collected by the airlines from the passengers in their air ticket has indeed been set to rest in the case laws adduced by the Ld. Advocate. Hence there can be no service tax liability on the quantum of passenger service fees collected by the appellant under this head. For the limited purpose of ascertaining whether the tax liability that was alleged in respect of other taxes has also been paid up by the appellant along with interest as averred, the matter is being remanded back to the adjudicating authority. In such de novo proceedings, in case it is ascertained that all the tax liabilities except that relating to Passenger Service Fee has been paid by the appellant along with interest thereon, there shall be no further tax liability in respect of these proceedings. Penalty - Held that - there was sufficient cause for the appellant s failure to discharge their tax liabilities. Another mitigating factor is that the appellants have paid up the entire tax liability as admitted by them along with interest, before the issue of the show cause notices. Keeping all these aspects in mind, we are of the considered opinion that imposition of penalty would be an overkill, for which reason, they are set aside. Appeal allowed in part and part matter on remand.

Summary

Issues:
- Taxability of various charges collected by an airline in addition to the basic fare for air tickets.
- Imposition of penalties under various provisions of law.
- Confusion regarding tax liability on different heads leading to lack of clarity.

Analysis:
1. Taxability of various charges collected by the airline: The case involved the airline collecting additional charges such as Fuel Surcharge, Passenger Service Fee, GDS cost, Service Tax, and Other Taxes from passengers. The Department initiated proceedings claiming service tax liability on these additional charges. The adjudicating authority confirmed a service tax demand and imposed penalties under the Finance Act, 1994. The appellant contested the taxability of Passenger Service Fee citing various Tribunal decisions in their favor. The Tribunal held that there was no service tax liability on the Passenger Service Fee but remanded the matter back to ascertain if tax liabilities on other charges were paid by the appellant.

2. Imposition of penalties: The appellant argued that due to confusion and lack of clarity regarding taxability during the relevant period, there should be no penalty imposed for failure to pay tax liabilities. The Tribunal agreed, considering the confusion surrounding the taxability under different heads and the appellant's payment of the entire tax liability along with interest before the show cause notices were issued. The Tribunal held that imposition of penalties would be excessive and set them aside, partially allowing the appeal and remanding for further proceedings to determine the tax liabilities on other charges.

3. Confusion regarding tax liability: The Tribunal acknowledged the confusion surrounding the tax liability on various charges collected by the airline. It noted that the tax liability was not calculated item-wise in the SCNs or the impugned order, leading to uncertainty about the exact quantum of tax liability. The Tribunal remanded the matter back to the adjudicating authority to determine if all tax liabilities, except for the Passenger Service Fee, were paid by the appellant. If confirmed, there would be no further tax liability in the proceedings, providing consequential benefits as per law. The Tribunal emphasized the need for clarity and specific calculation of tax liabilities for each charge to avoid confusion and ensure accurate determination of tax liability.