2018 (4) TMI 837 - AT - Service Tax

Valuation - includibility - Passenger Service Fee (PSF) and Excess Baggage Ticket (EBT) - Transport of Passengers for international Journey by Air service - Held that - Since the appellant is the intermediary between the passenger and the airport authority and is not providing any taxable service with regard to the collection and deposit of the PSF amount, such fee cannot be included in taxable value for payment of service tax - The law is well settled that no service tax liability would arise in respect of passenger service fee, being collected by the assessee on behalf of the Airport Authority of India and being paid by it to the said authority - demand set aside. Excess Baggage Charges - Held that - the said amount was collected from the passengers for carrying extra luggage above the normal level prescribed by the airlines. Such charges does not fall under any of the category of defined taxable service for the purpose of levy of service tax - demand set aside. The tickets sold by the appellant prior to the tax liability i.e. 1.5.2006 and used thereafter by the passengers - time limitation - Held that - This Tribunal in the case of National Aviation Co. of India Ltd. 2015 (8) TMI 596 - CESTAT MUMBAI has held that in absence of any specific exemption provided for the tickets used after 1.5.2006, the assessee is under statutory obligation to pay service tax on sale of such tickets - since the demand was confirmed beyond the normal period, the same is barred by limitation of time and demand cannot be sustained on the ground of limitation - demand set aside. Appeal allowed - decided in favor of appellant.

Summary

Issues:

1. Liability of service tax on Passenger Service Fee (PSF) and Excess Baggage Ticket (EBT) collected by the airlines.
2. Applicability of service tax on tickets sold before 1.5.2006 but used by passengers after that date.

Analysis:

Issue 1: Liability of service tax on PSF and EBT:
The case involved the appellant, an airlines operator, who collected total fare from passengers but deposited service tax only on the base fare and fuel surcharge. The service tax department initiated proceedings seeking confirmation of service tax demand for non-included PSF and EBT. The appellant argued that PSF collected on behalf of the airport authority and EBT charges were not taxable services. The Tribunal held that PSF collected for the airport authority did not attract service tax as the appellant acted as an intermediary. The Tribunal also ruled that EBT charges, collected for excess baggage, were integral to the main service of transporting passengers by air and should not be separately taxed under any other category.

Issue 2: Applicability of service tax on tickets sold before 1.5.2006:
Regarding tickets sold before 1.5.2006 but used by passengers after that date, the appellant contended that the show cause proceedings were time-barred. The Tribunal referred to previous decisions and held that the appellant was liable to pay tax on the tickets used after 1.5.2006. However, the demand confirmed beyond the normal period was barred by limitation, and the extended period of limitation could not be invoked. Therefore, the demand for service tax on tickets used after 1.5.2006 was not sustainable due to the limitation of time.

In conclusion, the Tribunal set aside the impugned order, ruling in favor of the appellant, based on the non-taxability of PSF, EBT charges integral to the main service, and the time-barred nature of the demand for service tax on tickets sold before 1.5.2006 but used thereafter.