2018 (9) TMI 921 - AT - Service Tax

Classification of Services - appellant own two Aircrafts/Helicopters, which are being provided by them on chartered hire basis - whether in the given facts and circumstances of the case, the services provided by the appellant are the Aircraft Operator Service as assumed by the appellant or, are the services for supply of tangible goods for use as alleged by the Department? Held that - For an Aircraft operator service , the activity is regulated under strict observation of Aviation Industry subject to stringent regulatory controls, Director General of Civil Aviation grants permits to the scheduled aircraft transport service. Even a non-scheduled permit can be granted by DGCA and the fact remains is that any person in Aviation has at least to be a non-scheduled operator. As far as supply of tangible goods is concerned, it is apparent from the above definition that it is the transfer of the goods to be used without the transfer of its legal possession and effective control by one person to another - The invoice makes it clear that the Aircraft was given on hire for use of charterer on the terms and conditions of the permit in favour of the appellant. It is evident that the Aircraft was supplied alongwith the licensed / trained Pilot and necessary Engineering Crew to operate the Aircraft. Thus, the effective control and possession of the Aircraft was still with the appellant, who was charging the charterer on the basis of actual time consumed during the said flight. An identical issue regarding charter hire of helicopter came up before the Tribunal in the case of Global Vectra Helicorp Ltd. vs. CC (Import) Mumbai 2015 (2) TMI 974 - CESTAT MUMBAI (LB) , in that case the appellant therein claimed the classification of their service as Transportation of Passengers by Air Service. But, the Tribunal after very detailed discussion of the facts and various case laws on the subject as well as CBEC Circular No. 20/2009 dt. 09.02.2009 came to the conclusion that the services will be rightly classifiable under the category of Supply to Tangible Goods Service - the classification of the service under the category of STGS upheld. Time Limitation - Held that - It is apparent from the show cause notice dated 21.12.2010 that a demand for the period w.e.f. May, 2008 to May, 2010 has been raised - It becomes apparently clear that while issuing the said show cause notice, Department has invoked the longer time limit as mentioned in proviso to Section 73 of the Act. The law for invoking extended period of limitation is stated that the onus heavily rest upon the Department to prove the alleged suppression of facts. Perusal of entire record shows no such discharge on part of the Department, except merely raising the oral allegation of suppression - the Department was not entitled to invoke the extended period of limitation - the demand falling beyond one year period preceding show cause notice dated 21.12.2010 is not sustainable and accordingly is set aside. Demand beyond normal period do not sustain - Appeal allowed in part.

Summary

Issues Involved:
1. Classification of services provided by the appellant.
2. Applicability of extended period of limitation for demand.

Issue-wise Detailed Analysis:

1. Classification of Services Provided by the Appellant:

The primary issue was whether the services provided by the appellant were classified as "Aircraft Operator Service" or "Supply of Tangible Goods for Use." The appellant argued that they provided Aircraft Operator Services, which became taxable from June 1, 2010, and not during the disputed period. They claimed that their services fell under "transport of passengers by air service," which was not taxable during the relevant period. The Department, however, contended that the appellant was providing services under "supply of tangible goods for use," as they did not transfer the right of possession and effective control of the aircraft to the service receivers.

The Tribunal examined the definitions under Section 65(105)(zzzo) for Aircraft Operator Services and Section 65(105)(zzzj) for Supply of Tangible Goods for Use. It also referred to the Department's clarification in D.O.F. No.334/I/2008-TRU dated February 29, 2008, which stated that transactions allowing another person to use goods without transferring legal possession and effective control are treated as services.

The Tribunal analyzed an invoice dated December 28, 2009, which showed the aircraft was chartered with the appellant retaining effective control and possession, providing licensed pilots and engineering crew. This indicated that the service was not merely transporting passengers but chartering the aircraft, fitting the definition of "Supply of Tangible Goods for Use."

The Tribunal also referred to the case of Global Vectra Helicorp Ltd. vs. CC (Import) Mumbai, where similar services were classified under "Supply of Tangible Goods for Use." The Tribunal concluded that the appellant's services were rightly classifiable under this category, as the appellant retained control and possession of the aircraft.

2. Applicability of Extended Period of Limitation for Demand:

The second issue was whether the extended period of limitation could be invoked for the demand. The show cause notice dated December 21, 2010, demanded service tax for the period from May 2008 to May 2010, invoking the extended period under the proviso to Section 73 of the Act. The appellant argued that the extended period was not applicable as there was no intentional evasion of tax.

The Tribunal noted that for invoking the extended period, the Department must prove suppression of facts with intent to evade tax. The Supreme Court in Gopal Zarda Udyog vs. CCE, Delhi, and Cosmic Dye Chemical vs. CCE, Bombay, clarified that mere inaction or failure is insufficient; there must be conscious and deliberate withholding of information.

The Tribunal found no evidence of wilful suppression by the appellant. The appellant had a reasonable belief that their services were not taxable and had registered and discharged their liability once the services became taxable. Therefore, the extended period of limitation was not applicable.

Conclusion:

The Tribunal upheld the classification of the appellant's services under "Supply of Tangible Goods for Use" and confirmed the demand on merit. However, it set aside the demand for the period beyond one year preceding the show cause notice, as the extended period of limitation was not justified. The appeal was allowed, and the demand was confined to the normal period of one year.