2019 (1) TMI 1172 - AT - Service Tax

Valuation - transport of passenger by air service - Department was of the view that the appellants were not paying service tax on the gross amount received by them from their customers under the category of transport of passenger by air service - Held that - The matter is no longer res integra as the issue has already been decided by this Tribunal in the case of M/s. Royal Jordanian Airlines and others vs. CST, Delhi 2017 (11) TMI 1407 - CESTAT NEW DELHI , where it was held that in the case of M/s Continental Airlines Inc. Versus Commissioner of Service Tax, New Delhi 2015 (7) TMI 1079 - CESTAT NEW DELHI , where the Tribunal held against the inclusion of these charges in the taxable value for air travel service by the appellants - demand set aside - appeal allowed - decided in favor of appellant.

Summary

Issues:
Interpretation of tax liability on charges collected by airlines as Passenger Service Fee (PSF) and airport taxes for air travel services.

Analysis:
The appellants, engaged in operating airline services, were registered under different service tax categories. The department alleged non-payment of service tax on the total amount received from passengers, specifically PSF and airport taxes. The appellants contended that PSF and airport taxes should not be included in the taxable value for service tax payment. The Tribunal referred to previous judgments involving international airlines and held that PSF and airport taxes are not part of the assessable value for air travel services. The Tribunal emphasized that charges like PSF are for services provided by the Airport Authority to passengers, not the airlines, and should not be subject to double taxation. The Tribunal also noted that the Revenue's argument regarding service tax collection with PSF was not raised in the show cause notice, and the impugned order was set aside based on previous decisions and factual analysis.

In conclusion, the Tribunal ruled in favor of the appellants, setting aside the order-in-Appeal that required payment of service tax on PSF and airport taxes. The decision was based on established principles from previous cases and the understanding that charges like PSF are not part of the taxable value for air travel services. The Tribunal emphasized the need for verification of details related to service tax remittance by the Airport Authority and rejected the Revenue's argument not raised in the show cause notice. The judgment provided clarity on the tax liability of charges collected by airlines, ensuring fair treatment and avoiding double taxation for services provided to passengers.