2019 (6) TMI 865 - AT - Service Tax

Classification of services - Transport of Passengers by Air or not - it appeared to the Department that such charges collected should be included in the gross amount collected by service provider for rendering the Transport of Passengers by Air Services - HELD THAT - The identical issue has been dealt by this Tribunal in case of KINGFISHER AIRLINES LTD, JET AIRWAYS LTD. VERSUS COMMISSIONER OF SERVICE TAX 2015 (11) TMI 54 - CESTAT MUMBAI (LB) , wherein it was held that since the main service is of carrying passenger which also been includes charges for carrying of Excess Baggage from passenger, and thus is integral part of main service and also incidental to main service. Further, there is no element of transport of accompanied goods under this service in absence of separate contract carrying Excess Baggage, not covered under transport of goods by air service but by the Transport of Passenger by Air Service only - appeal allowed - decided in favor of appellant.

Summary

Issues:
Interpretation of service tax provisions regarding Excess Baggage Charges collected by airlines.

Analysis:
The appellant, engaged in operating airlines, provided services under categories like 'Cargo Handling Services', 'Business Auxiliary Services', and 'Transport of Passengers by Air Services'. The Department observed that the appellant collected 'Excess Baggage Charges' (EBC) for baggage exceeding the threshold limit. The Department contended that these charges were related to passengers' accompanied baggage during air travel, falling under taxable 'Transport of Passengers by Air' category. Consequently, a Show Cause Notice was issued demanding a substantial amount from the appellant, which was confirmed in the impugned order.

The appellant argued that a similar issue was decided in their favor in a previous Tribunal's order and upheld by the Supreme Court. The Tribunal referred to the previous case involving Kingfisher Airlines, where it was held that excess baggage charges were integral to the main service of transporting passengers by air. The Tribunal emphasized that excess baggage charges were not for a separate service but were part of the main service provided by the airlines. The Tribunal found that there was no separate contract for transporting excess baggage, and the charges were incidental to the service of transporting passengers by air.

Based on the precedent set by the previous Tribunal's decision, the current Tribunal set aside the impugned order, allowing the appeal with consequential benefits as per the law. The judgment highlighted that excess baggage charges collected by the airlines were an integral part of the service provided for transporting passengers by air. The decision was pronounced in court on 17th June 2019 by the members of the Tribunal.