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TMI Blog2017 (3) TMI 1024X X X X Extracts X X X X X X X X Extracts X X X X ..... venue earned. This factum can be settled through a certificate from an independent Chartered Accountant, who may be asked to look into the books of AASL and AIL for the relevant period and may be asked to certify whether such consideration has been received AIL by book transfer or otherwise, as per the terms of the agreement entered into between two companies. If the consideration has been received by AIL, then we are of the view that service tax is liable to be paid by AIL on such receipts - matter remanded for this purpose. Time limitation - Held that: - the argument taken by appellants that service tax was not paid on the basis of bonafide belief that service tax was not payable, is not convincing - Consequently, Revenue is entitled to invoke the extended period of limitation in this case. Aircraft lease charges - demand - Held that: - These clauses clearly show that lease charges were to include maintenance charges and AIL was under obligation to maintain and repair the aircrafts as part of the lease agreement. Thus this maintenance agreement cannot be considered as an independent and separate agreement. Accordingly, in the impugned order, it has been rightly concluded ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mand for service tax amounting to ₹ 18.7 Crores. The Revenue has filed appeal against dropping of service tax demand amounting to ₹ 103.57 Crores. 3. With the above background, we have heard Shri P.K. Sahu, ld. Advocate appearing for AIL as well as Shri Amresh Jain, ld. DR appearing for the Revenue. 4. The service tax demand confirmed is only in respect of activities carried out by 3rd agreement mentioned above, namely Ground Traffic, other support service and Handling agreement. The demand is confirmed under the head of BAS defined under Section 65(19) of Finance Act, 1994 in respect of activities like sales and marketing net work support, Revenue collection and Credit Administration Support, Billing and Accounting support etc. The tax demanded is relatable to commissions received under clause 4 and clause 14 of the above agreement totalling to about 4%. The appellant has advanced the following main grounds to challenge the impugned order:- (a) The show cause notice which has been issued by Additional DG, DGCEI is bad in law. The Addl. DG did not have the jurisdiction to issue the said notice, particularly in view of the decision of the Hon'ble Delhi High ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing AASL by absorbing its losses. Consequently, it cannot be said that the consideration for the services has been received as per agreement and consequently, there can be no demand for service tax in view of Rule 6 of Service Tax Rules as it stood at the relevant time. He also argued the ground of limitation by submitting that service tax was not paid as per the bonafide belief on the part of AIL and that Revenue has not produced any evidence to show that AIL has intention to evade payment. 7. Shri Amresh Jain, ld. DR for the Revenue supported part of the impugned order, wherein tax demand has been confirmed. He argued that AIL had collected the payments for the activities rendered on behalf of the AASL. Out of the amounts realized by AIL by ticket sales, they had retained the commission amount due to them from AASL and transferred only the balance by book adjustment. Accordingly, he submits that consideration for the services rendered has been realized by the AIL and will be liable to be paid by AIL. Since AIL and AASL are separate legal entities, service tax is liable in spite of the fact that, one is a 100% subsidiary of the other. Ld. DR further submitted that the ext ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... x is that they have not received this consideration in terms of 4% of the revenue earned. Show cause notice as well as grounds of appeal allege that the practice of accounting between AIL and AASL was such that AIL collected the ticketing charges from passengers and credited the same to the account of AASL after deducting 4% charges payable to them by AASL. If this was a fact then AIL s claim the consideration has not been received would have to be disregarded. However, the fact will need to be independently confirmed. 10. The additional argument advanced is that AASL was not having any separate business but the entire operation of AASL done was by AIL only. The time-table and ticketing of passengers were in the name of AIL and the aircrafts were also owned operated and maintained by AIL. Accordingly, it has been argued that there is no Service Tax liability. 11. We note that even though AASL is a 100% subsidiary of AIL, the two companies are having distinct and separate identities and even registered separately under the Companies Act. Consequently, the two companies have maintained separate books of accounts and their profit and loss account were to be determined separat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AASL). AIL has not discharged the service tax liability. In the light of the observations of the statutory auditors, We are not convinced with the argument taken by appellants that service tax was not paid on the basis of bonafide belief that service tax was not payable. Consequently, we are concluding that Revenue is entitled to invoke the extended period of limitation in this case. 13. Now we turn to the ground advanced by Revenue in their appeal, pertaining to dropping of service tax demand amounting to nearly ₹ 103 Crores in the impugned order. This demand of service tax was raised in the show cause notice on the basis of Aircraft Lease Agreement and the Aircraft Maintenance Agreement. In terms of these agreements, AASL was liable to pay to AIL the Aircraft lease charges. It was also the responsibility of AIL to carry out the aircraft repair under the Aircraft Maintenance Agreement. The ld. Commissioner in the impugned order has come to the conclusion that the consideration received aircraft lease charges includes the charges for aircraft repair and maintenance under the Aircraft Maintenance Agreement. We have gone through the relevant clauses of the agreement. The ..... X X X X Extracts X X X X X X X X Extracts X X X X
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