2019 (8) TMI 1026 - AT - Service Tax

Quantification of service tax liability - Transportation of passengers by Air Services - appellants submitted final figures vide letter dated 15.04.2013 to the department and have discharged the entire service tax liability; The Ld. Commissioner noted the contents but confirmed the demand in entirety without considering the correct figures - Supply of Tangible Goods for Use Services - Extended period of limitation - Transportation of passengers by Air - Taxable event - date of agreement - period 2009-10, 2010-11 and 2011-12 - Banking and Financial Services - Revenue neutrality - Reimbursement of Fuel - Demand of service tax - appellant argued that there is non-consideration of various facts. HELD THAT - There is force in the arguments of the appellants - the learned commissioner has not considered the submissions, accounting practices of the appellant and the agreements in totality. It is also seen that the learned Commissioner has not considered the case law submitted by the appellants in so far as the demands raised on certain issues like reimbursement of fuel etc. - also appellants submissions on limitation were not considered. The Commissioner should have gone through the submissions of the appellant and give his findings on the same before coming to a conclusion. The matter needs to go back to the commissioner for a fresh reconsideration of the issues in the light of the submissions made by the appellant and the interpretation given Tribunal and Courts as submitted by the appellants wherever applicable - Appeal allowed by way of remand.

Issues Involved:

1. Service Tax on Transportation of Passengers by Air Services
2. Service Tax under Supply of Tangible Goods for Use Services
3. Service Tax under Banking and Financial Services
4. Service Tax on Reimbursement of Fuel
5. Reversal of Cenvat Credit under Rule 6(3) of Cenvat Credit Rules, 2004
6. Invocation of Extended Period for Demand

Detailed Analysis:

1. Service Tax on Transportation of Passengers by Air Services:

The appellants are engaged in the transportation of passengers by air services and hold a Non-Scheduled Operators Permit (NSOP) issued by the DGCA. They have been discharging service tax on the consideration received under this category since 01.07.2010. The department issued a show cause notice demanding service tax of ?3,76,23,339/- based on the details submitted by the appellants for the financial year 2011-12. The appellants contended that they had already discharged the entire service tax liability on the gross receipts through Cenvat Credit and Cash, and the Ld. Commissioner confirmed the demand without considering the correct figures and the fact of payment of full service tax.

2. Service Tax under Supply of Tangible Goods for Use Services:

The appellants argued that the show cause notice invoked the extended period without proper justification. They contended that the taxable event for "Supply of Tangible Goods for Use" is the transfer of custody of goods, which in this case occurred before the taxable category came into existence. The appellants also highlighted discrepancies in the financials prepared on an accrual basis versus the tax liability on a cash basis. The Ld. Commissioner confirmed the demand without addressing these points.

3. Service Tax under Banking and Financial Services:

The appellants had entered into a lease agreement with CESNA(UK), which was later amended to remove clauses related to the option to purchase the asset. Despite providing the amended agreement, the Ld. Commissioner relied on the old agreement to confirm the demand. The appellants cited the judgment of Bajaj Auto Finance Ltd. v. CCE, which was affirmed by the Apex Court, to argue that the demand was not sustainable. They also contended that the situation was revenue neutral, as any tax paid under the reverse charge mechanism would be eligible for Cenvat Credit.

4. Service Tax on Reimbursement of Fuel:

The department alleged that the appellants were not discharging service tax on the reimbursement of fuel costs recovered from customers. The appellants relied on the judgment of Intercontinental Consultants & Technocrats Pvt. Ltd. v. UOI, where the Delhi High Court held that expenses incurred in the course of providing taxable services are not taxable. This judgment was upheld by the Supreme Court. The Ld. Commissioner did not consider this judgment while confirming the demand.

5. Reversal of Cenvat Credit under Rule 6(3) of Cenvat Credit Rules, 2004:

The appellants argued that the demand for reversal of Cenvat Credit was incorrect as they had rightly reversed the credit in terms of Rule 6(3A) of the Cenvat Credit Rules, 2004. The Ld. Commissioner did not address this argument adequately.

6. Invocation of Extended Period for Demand:

The appellants contended that the extended period for demand was invoked without proper justification. They had submitted detailed replies to the show cause notice, but the Ld. Commissioner did not provide any findings on the extended period and mechanically confirmed the entire demand.

Conclusion:

The Tribunal found merit in the appellants' arguments and noted that the Ld. Commissioner had not considered the submissions, accounting practices, and agreements in totality. The Commissioner also failed to consider relevant case law and the appellants' submissions on limitation. As a result, the Tribunal set aside the impugned orders and remanded the matter back to the Commissioner for fresh reconsideration of the issues in light of the appellants' submissions and relevant judicial interpretations. All issues were kept open for reconsideration.

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