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2017 (11) TMI 1407 - AT - Service TaxLevy of service tax - Passenger Service Fees - other taxes (international taxes) collected by the airlines as part of consideration when the tickets are issued to the passengers - Held that - the Tribunal had occasion to examine the same issue in respect of various international airlines. As rightly pointed out by the appellants 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 - service tax cannot be levied. Includibility - other taxes (international taxes) collected by the airlines as part of consideration when the tickets are issued to the passengers - Held that - while upholding the issue on merit regarding tax liability of fuel surcharge and insurance surcharge we hold that the demands are to be restricted to the normal period of limitation only - penalties set aside. Appeal allowed in part.
Issues Involved:
1. Liability to pay service tax on Passenger Service Fees (PSF) and other international taxes. 2. Service tax liability on fuel surcharge and insurance surcharge. 3. Entitlement of Cenvat credit for M/s Royal Jordanian Airlines. Detailed Analysis: 1. Liability to pay service tax on Passenger Service Fees (PSF) and other international taxes: The appellants, international airlines, contested the inclusion of PSF and other taxes in the taxable value for air travel services under Section 65 (105) (zzo). The Tribunal had previously settled similar disputes in favor of other airlines. The appellants provided detailed evidence showing that PSF is a statutory levy under Section 22 of the Airport Authority Act, 1994, fixed by the Ministry of Civil Aviation, and collected by airlines as instructed by M/s DIAL, without any markup or reduction. The Tribunal confirmed that PSF and other airport taxes are not part of the assessable value for air travel services, based on precedents such as Continental Airlines, Lufthansa Airlines, and Austrian Airlines. The Tribunal noted that service tax on PSF collected by the airlines and remitted to the Airport Authority would otherwise result in double taxation, as PSF falls under airport services per Section 65(105)(zzm). The Tribunal set aside the impugned orders, confirming no service tax liability on PSF and other taxes. 2. Service tax liability on fuel surcharge and insurance surcharge: For M/s China Eastern Airlines, M/s China Airlines, and M/s Royal Jordanian Airlines, the Tribunal addressed the inclusion of fuel surcharge and insurance surcharge in the taxable value. The appellants did not contest the tax liability on merits but argued against the invocation of the extended period and penalties. The Tribunal referenced the British Airways case, which included fuel surcharge in the taxable value. However, the Tribunal agreed with the appellants that due to ongoing consultations and correspondence with the Ministry, there was no basis for invoking fraud or suppression. Consequently, the Tribunal limited the demand to the normal period of limitation and set aside the penalties. 3. Entitlement of Cenvat credit for M/s Royal Jordanian Airlines: M/s Royal Jordanian Airlines faced an additional dispute regarding Cenvat credit eligibility of ?6,99,148/-. The show cause notice alleged improper service tax payment, but the original and appellate orders lacked findings on this issue. The Tribunal noted that the allegation was based on discrepancies in the ST-3 returns and required re-verification with documentary evidence. No penalty was deemed applicable in this situation. Conclusion: The Tribunal ruled that no service tax liability arises for the appellants concerning PSF and other taxes. For fuel surcharge and insurance surcharge, the appellants were liable for service tax, but the demand was restricted to the normal period of limitation, and penalties were set aside. The Cenvat credit issue for M/s Royal Jordanian Airlines required further verification. All appeals were disposed of accordingly.
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