2018 (4) TMI 1045 - AT - Service Tax

Supply to Tangible Goods Service - classification of services - the appellant were providing helicopter to the State Government for transportation of their personnel as and when required and for this purpose they were required to keep helicopter in readiness at particular places maintain the same and also provide qualified and experience crew for their operation and maintenance - whether the service provided by the appellant is Transportation of Passengers by Air within India or Supply to Tangible Goods Service ? Held that - The expenses on fuel maintenance parking etc. are to be borne by the appellant in terms of the agreement - The appellant were to receive certain minimum fixed monthly charges on account of certain minimum flying hours per calendar month in addition to this they will also receive remuneration on per hour basis during the period when the helicopter had been operated for transportation. An identical issue regarding charter hire of helicopter to ONGC came up before the Tribunal in the case of Global Vectra Helicorp Ltd. vs. CC (Import) Mumbai 2015 (2) TMI 974 - CESTAT MUMBAI (LB) in that case the appellant therein claimed the classification of their service as Transportation of Passengers by Air Service. But the Tribunal after very detailed discussion of the facts and various case law on the subject as well as CBEC Circular No. 20/2009 dt. 09.02.2009 came to the conclusion that the services will be rightly classifiable under the category of Supply to Tangible Goods Service . Classification of the service rendered under the category of Supply to Tangible Goods Service upheld. Technical Inspection Certificate Service - reverse charge mechanism - Since the service received was from service providers situated abroad the department has confirmed service tax demand against the appellant under Section 66A of the Finance Act - Held that - the above payments were made by the appellant towards receipt of services from abroad - The service tax on such services is required to be paid by the recipient under the reverse charge basis in terms of Section 66A of the Act read with Rule 2(1)(d) of the Service Tax Rules 1994 - demand upheld. Appeal dismissed - decided against appellant.

Summary

Issues Involved:

1. Classification of services provided by the appellant.
2. Liability of the appellant to pay service tax under reverse charge for services received from abroad.

Issue-wise Detailed Analysis:

1. Classification of Services Provided by the Appellant:

The appellant operates non-scheduled air transport services (Passenger/Cargo/Charter) under a permit issued by the Director General of Civil Aviation (DGCA). During the period from 2006-07 to 2008-09, the appellant provided helicopters to various State Governments for transporting personnel. The appellant maintained the helicopters and provided trained manpower for their operation and maintenance. The appellant received fixed monthly charges based on minimum flying hours and additional hourly charges for actual usage. The department contended that these activities fell under "Supply of Tangible Goods Service" taxable under Section 65(105)(zzzzj) of the Finance Act, 1994.

The appellant argued that their services were for the transportation of passengers by air, which became taxable only from 01.07.2010 under Section 65(105)(zzzo) of the Finance Act. They claimed that the nature of their service was clear from their agreements with clients and their DGCA permit. They relied on several case laws to support their position, including *King Rotors & Air Charter P. Ltd. vs. CC (ACC & Import), Mumbai* and *Global Vectra Helicorp. Ltd. vs. CC (Import) Mumbai*.

The Revenue argued that the appellant provided helicopters on charter hire, receiving fixed monthly charges irrespective of usage, indicating a leasing arrangement rather than transportation service.

The Tribunal, after examining the agreements and relevant case laws, including the decision in *Global Vectra Helicorp Ltd. vs. CC (Import) Mumbai*, concluded that the appellant's services fell under "Supply of Tangible Goods Service." The Tribunal noted that the appellant provided helicopters without transferring possession and effective control, aligning with the definition under Section 65(105)(zzzzj). The Tribunal also referred to the CBEC Circular No. 20/2009, which clarified that chartering of aircrafts without transferring possession and effective control falls under "Supply of Tangible Goods Service."

2. Liability to Pay Service Tax under Reverse Charge for Services Received from Abroad:

The appellant received Technical Inspection and Certification services from service providers abroad, for which they paid ?89,71,685/-. The department asserted that the appellant was liable to pay service tax on these services under the reverse charge mechanism, as per Section 66A of the Finance Act, 1994, read with Rule 2(1)(d) of the Service Tax Rules, 1994.

The Tribunal upheld the department's position, noting that the payments were made for services received from abroad, and the nature of the services was confirmed by the appellant's Chartered Accountant. The Tribunal confirmed that these services were classifiable under Technical Inspection and Certification Service, and the appellant was liable to pay service tax under the reverse charge mechanism.

Conclusion:

The Tribunal upheld the classification of the appellant's services under "Supply of Tangible Goods Service" and confirmed the service tax demand with interest and penalties. The Tribunal also upheld the service tax demand under the reverse charge mechanism for services received from abroad. Consequently, the appeal filed by the appellant was dismissed.