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2023 (7) TMI 949 - AT - Service TaxInvocation of extended period of limitation contemplated under the proviso to section 73(1) of the Finance Act - intent to evade or not - Levy of service tax - service of transport of passengers by air or not - excess baggage charges collected by the appellant from the passengers. HELD THAT - Case of Jet Airways - The two learned Members constituting the Division Bench in Jet Airways had not agreed on the invocation of the extended period of limitation nor did they agree on the issue of the classification of the services rendered by the appellant - The learned Member (Judicial) held that the services rendered by the appellant would fall under transport of passengers by air and the extended period of limitation could not have been invoked - The learned Member (Technical), however, held that the services rendered by the appellant would fall under transport of goods by air and the extended period of limitation was correctly invoked. Difference of opinion was referred to Third Member in KINGFISHER AIRLINES LTD, JET AIRWAYS LTD. VERSUS COMMISSIONER OF SERVICE TAX 2015 (11) TMI 54 - CESTAT MUMBAI (LB) , to whom the matter was referred, agreed with views expressed by the learned Member (Judicial) on all the three issues - it was held by Third Member and thus majority view was that i). the excess baggage charges collected by the appellant Airlines is integral part of the service provided for transport of passengers by Air ii). the issue is one of interpretation of the taxing statute and as such being debatable, there is no element of any fraud or suppression. Accordingly, the extended period of limitation is held not invocable and iii) So far the imposition of penalties are concerned, in the facts and circumstances, there being no deliberate defiance of the provisions of law or non-compliance with the provisions of Service Tax, none of the penalties are held to be attracted. The Division Bench of the Tribunal in M/S THAI AIRWAYS INTERNATIONAL PUBLIC COMPANY LTD. VERSUS CST, NEW DELHI 2018 (4) TMI 837 - CESTAT NEW DELHI followed the decision rendered by the Tribunal in Jet Airways and observed Upon analysis of the scope of the taxable service vis- -vis. the excess baggage charges collected by the assessee, the Tribunal in the case of Jet Airways Ltd. has held that collection of such charges is an integral part of the main service and cannot be separately taxed under any other heads of service. Thus, in view of the aforesaid decisions, it has to be held that the collection of amount by the appellant towards excess baggage charges would be leviable to service tax under the category of transport of passengers by air and not under transportation of cargo by air. Extended period of limitation - HELD THAT - There is substance in the contention advanced by the learned counsel for the appellant that mere suppression of fact is not enough as it has also to be conclusively established that suppression was wilful with an intent to evade payment of service tax - It is correct that section 73 (1) of the Finance Act does not mention that suppression of facts has to be wilful since wilful precedes only misstatement. It has, therefore, to be seen whether even in the absence of the expression wilful before suppression of facts under section 73(1) of the Finance Act, suppression of facts has still to be willful and with an intent to evade payment of service tax. The Supreme Court and the Delhi High Court have held that suppression of facts has to be wilful and there should also be an intent to evade payment of service tax. In PUSHPAM PHARMACEUTICALS COMPANY VERSUS COLLECTOR OF C. EX., BOMBAY 1995 (3) TMI 100 - SUPREME COURT , the Supreme Court examined whether the Department was justified in initiating proceedings for short levy after the expiry of the normal period of six months by invoking the proviso to section 11A of the Excise Act. The proviso to section 11A of the Excise Act carved out an exception to the provisions that permitted the Department to reopen proceedings if the levy was short within six months of the relevant date and permitted the Authority to exercise this power within five years from the relevant date under the circumstances mentioned in the proviso, one of which was suppression of facts. It is in this context that the Supreme Court observed that since suppression of facts has been used in the company of strong words such as fraud, collusion, or wilful default, suppression of facts must be deliberate and with an intent to escape payment of duty. The Principal Commissioner, therefore, fell in error in observing that the extended period of limitation could be invoked even if there was no intent to evade payment of service tax - The Principal Commissioner also fell in error in holding that the extended period of limitation could be invoked in the present case because under the self-assessment procedure parties are required to process on their own tax dues on the services provided but since the appellant had failed to discharge this burden, the appellant had willfully and deliberately suppressed facts so as to avoid payment of service tax. This issue was examined by a Division Bench of the Tribunal in M/S HLS ASIA LTD. VERSUS COMMISSIONER, SERVICE TAX COMMISSIONERATE, NEW DELHI 2023 (3) TMI 379 - CESTAT NEW DELHI and it was held that the extended period of limitation cannot be invoked merely because the parties have to self assess. This apart, the learned Member (Judicial) in Jet Airways had observed that since the issue of classification of the service on the basis of various judicial pronouncement was debatable, the extended period of limitation could not have been invoked. Though the learned Member (Technical) did not agree with this view, but the learned Third Member (Judicial) to whom the matter was referred agreed with the views expressed by the learned Member (Judicial) on this issue. Thus, it has to be held that the Principal Commissioner was not justified in holding that the extended period of limitation had been correctly invoked in the present case. It can be thus concluded that - 1. the services provided by the appellant in connection with the collection of excess baggage charges would fall under the category of transport of passengers by air. 2. the extended period of limitation could not have been invoked; and the benefit of Notification No. 26/2010 dated 22.06.2010 as also the benefit of the Notification No. 4/2011 that amended the notification dated 22.06.2010 would be available to the appellant. 3. The matter has, therefore, to be remitted to the Principal Commissioner to determine the service tax that would be payable by the appellant.
Issues Involved:
1. Classification of excess baggage charges under service tax. 2. Applicability of extended period of limitation. 3. Eligibility for benefit under Notification No. 26/2010 and Notification No. 4/2011. Summary: 1. Classification of Excess Baggage Charges: The main issue was whether excess baggage charges collected by the appellant should be classified under 'transport of passengers by air' or 'transport of goods by air.' The adjudicating authority and the Principal Commissioner concluded that these charges should fall under 'transport of passengers by air' as per section 65(105)(zzzo) of the Finance Act, 1994. The appellant argued that these charges should be classified under 'transport of goods by air.' However, the Tribunal, referencing decisions in Jet Airways and Thai Airways, held that excess baggage charges are an integral part of the service provided for 'transport of passengers by air.' 2. Applicability of Extended Period of Limitation: The Principal Commissioner invoked the extended period of limitation under the proviso to section 73(1) of the Finance Act, asserting that the appellant had willfully suppressed facts to evade service tax. The appellant contended that there was no intent to evade tax, and audits had been conducted without finding such issues. The Tribunal found that mere suppression is not enough; it must be willful with an intent to evade tax. Citing Supreme Court and High Court precedents, the Tribunal concluded that the extended period of limitation could not be invoked in this case. 3. Eligibility for Notification Benefits: The Principal Commissioner denied the benefit of Notification No. 26/2010-ST, which provides exemptions for services under section 65(105)(zzzo) for economy class passengers. The Tribunal held that this benefit, along with the benefit of Notification No. 4/2011, should be applicable to the charges collected for excess baggage from economy class passengers since these services fall under 'transport of passengers by air.' Conclusion: The Tribunal directed the Principal Commissioner to reassess the service tax liability by excluding the extended period and applying the benefits of the relevant notifications. The order dated 26.07.2016 was set aside to this extent, and the appeal was allowed in part.
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