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TMI Blog2023 (7) TMI 949X X X X Extracts X X X X X X X X Extracts X X X X ..... 15 (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 ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... show cause notice dated 18.09.2012 mentions that the appellant had collected excess baggage charges during the period 2007-08 to 2011-12 on which service tax amounting to Rs. 1,64,25,588/- was leviable but it was not paid. The service that was alleged to have been rendered by the appellant was mentioned as transport of passengers embarking in India for International journey by air service, made taxable under section 65(105)(zzzo) of the Finance Act. The show cause notice dated 06.05.2014 mentions that for the period 2012-13, the appellant would be required to pay service tax amounting to Rs. 23,12,067/- for the reasons stated in the earlier show cause notice dated 18.09.2012. 5. The appellant filed a reply to both the show cause notices. In response to the show cause notice dated 18.09.2012 the appellant pointed out that since the amount towards excess baggage charges is not paid by the passenger at the time of booking of the ticket and such amount is paid when the baggage is found to be in excess of the permissible weight, this service would have to be classified as transport of goods by air and not as transport of passengers by air. The appellant also pointed out that till 30. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2011-12 4,625 16,807 21,432 21.58% 4,07,99,156 2.16% 8,80,441 7,83,589 10.30% 80,710 Total 19,605 91,446 1,11,051 15,31,26,883 27,37,201 24,36,099 2,61,420 6. The month wise figures for excess baggage charges collected for the period April 2012 to March 2013 was also mentioned by the appellant and is as follows: Period EBT ST applicable @ 4.944% Total ST paid Short deposited April 2012 25,38,665 1,25,215 - (1,25,512) May 2012 22,71,437 1,12,300 - (1,12,300) Jun 2012 18,70,595 92,482 - (92,482) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ative regime, the claim of the noticee that prior to 01-07-2012, the same must be classified as Transport of goods by air. xxxxxxxx. The excess baggage charges were always collected by the noticee in relation to transport of passenger by air prior to 01.07.2012 also and there was no change in the nature of service provided by the noticee, thereafter, as well. The said fact having been admitted by the noticee, I hold that the excess baggage charges are appropriately classifiable under the category of transport of passenger by air service before and after 01-07-2012, as discussed supra. (emphasis supplied) 8. The benefit of the Notification No. 26/2010-ST dated 22.06.2010 which exempted the services referred to in section 65(105)(zzzo) of the Finance Act in excess of 10% of the gross value of the ticket or Rs. 500/- per journey, whichever is less, for passengers embarking in India for an International journey in economy class was rejected for the following reasons:- 6.14 ***** As can be seen from the notification itself, the exemption is applicable only to the gross value of ticket for passengers embarking in India for an international journey in economy class. Ther ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... facts attracting the extended period of limitation. There must be a deliberate attempt on their part to suppress the facts from the Department with an intention to evade payment of service tax. 8.4 I also find that with effect from 16.07.2001, due to the changes brought in the Finance Act, 2001, self-assessment of the service tax payable under the provision of Section 70 of the Act was introduced, wherein the Superintendent of Central Excise is empowered only to verify the correctness of the Returns under the provisions of the Section 71 of the Act. Under self-assessment procedure, the party is required to assess on its own the tax due on the services provided by him and furnish the details in the form of a return under the provisions of the Section 70 of the Act. Thus, the onus is on the party that a correct Return be filed within the stipulated time which onus the party has filed to discharge. Accordingly I am of the view that the party has willfully and deliberately suppressed the facts regarding taxable value from the Department so as to avoid their liability towards payment of due amount of service tax and accordingly the extended period is liable to be invoked in this c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or the show cause notice dated 06.05.2014 confirmed the demand to the extent of Rs. 7,34,900/-. The Principal Commissioner, therefore, ordered for recovery of the said amount with interest and penalty. 15. It is this order dated 27.07.2016 passed by the Principal Commissioner that has been assailed in this appeal. 16. What, therefore, transpires from the two show cause notices, the reply submitted by the appellant and the order of the Principal Commissioner is that the show cause notices proposed levy of service tax by treating the service provided by the appellant as transport of passengers by air; the appellant in reply contended that the services provided would fall under transport of cargo by air; and the Principal Commissioner confirmed the demand under transport of passengers by air. 17. Shri Anil Makhia, learned counsel appearing for the appellant assisted by Shri Sunil Anand, learned chartered accountant did not seriously dispute that the services provided by the appellant would fall under transport of passengers by air but what was contended was that the extended period of limitation for the period from April 2007 to June 2011 could not have been invoked in the fa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 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. 21. 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 relevant portion of the decision is reproduced below: 13. From the above provision, it is clear that when taxable service comprises of more than one services then such services shall be classifiable under the taxable head which gives its essential characteristic. In this case, we have seen that the question of excess baggage charges arises when passenger is transported by air, otherwise not. In that situation, the essential characteristic of the service of transportation of passenger by air. In these circumstances, we do agree with the contention of the learned counsel for the appellants that the excess baggage charges are nothing but an integral part of the service of transport of passenger by air. 14. We have also seen that the appellant is paying service tax under the category of transpor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le. There are many instances when the passengers bring commercial quantities of goods along with them. In such cases, the passenger will be asked to file a Bill of Entry as in the case of Commercial Cargo. Thus the baggage becomes Commercial Cargo and its transportation will be leviable to Service Tax. A hotel may provide two services and charge for them separately. For example, it may provide room rent service and restaurant service. In such cases, service tax is leviable on the two services. But when free breakfast is part of room rent, only then it may be said that the breakfast service is incidental to room rent service. Therefore the service of excess baggage transportation cannot be considered as an integral part of the service of transportation of passenger when both the services are distinctly leviable to tax under Service Tax law. ***** 20. Being well aware of the requirement of law, the appellants collected excess baggage charges over a long period of time without declaring the same to the department. This shows suppression of facts and intention of the appellant to evade duty. Hence, the extended period under Section 73(1) of the Finance Act has been rightly in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tal to the service being transport of passengers by Air and the same is classifiable under Section 65(105)(zzn). There is no separate contract in the facts of the case for transport of goods (excess baggage). More particularly, in the case of agreement of transport of passengers by Air, there is no element of transport of unaccompanied goods. Thus, agreeing with the learned Member (Judicial), I hold that the excess baggage charges collected by the appellant Airlines is integral part of the service provided for transport of passengers by Air . 3.1 So far the question of invocation of extended period is concerned, I find that there is no case of any suppression on the part of the appellant Airlines. The appellant Airlines have duly disclosed the receipts from passengers towards excess baggage in their books of account, maintained in the ordinary course of business. I find that 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. 3.2 So far the imposition of penalties are concerned, in the facts and circumstances, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er the extended period of limitation could have been invoked in the facts and circumstances of the case. 29. The show cause notice dated 18.09.2012, in connection with the invocation of the extended period of limitation, states as follows: 6. Whereas, it appears that the assessee was collecting excess baggage charges from the passengers, however, the assessee has never depicted this fact correctly in their ST-3 returns. The fact has come to the notice of the department only after an inquiry was conducted by the department. Thus, by not disclosing the entire facts correctly to the department the said value escaped from the assessment for the purpose of service tax. Thus, it appears the assessee willfully suppressed the fact and has contravened various provisions of Finance Act, 1994 (as amended) with intent to evade payment of service tax. Thus, it appears the proviso to sub section (1) of 73 of the Act ibid cab be invoked and recovery of the service tax short paid/not paid can be made for five years from the relevant date. 30. The appellant filed a reply dated 16.11.2012 to the show cause notice dated 18.09.2012 and in connection with the invocation of the extended period ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to evade payment of service tax. 34. Before adverting to the decisions of the Supreme Court and the Delhi High Court, it would be useful to reproduce the proviso to section 11A of Central Excise Act, 1944, as it stood when the Supreme Court explained suppression of facts in Pushpam Pharmaceutical Co. vs. Commissioner of Central Excise, Bombay [ 1995 (78) E.L.T. 401 (SC) ] . It is as follows: 11A: Where any duty of excise has not been levied or paid or has been short-levied or short-pain or erroneously refunded, by the reason of- (a) fraud; or (b) collusion; or (c) any wilful misstatement; or (d) suppression of facts; or (e) contravention of any of the provisions of this Act of the rules made thereunder with intent to evade payment of duty by any person chargeable with the duty, the Central Excise Officer shall, within five years from the relevant dated, serve notice on such person requiring him to show cause why he should not pay the amount specified in the notice along with interest payable thereon under Section 11AA and a penalty equivalent to the duty specified in the notice. 35. In Pushpam Pharmaceuticals Company , the Supreme Court exa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ector of Central Excise, Bombay, while dealing with the meaning of the expression suppression of facts in proviso to Section 11A of the Act held that the term must be construed strictly. It does not mean any omission and the act must be deliberate and willful to evade payment of duty. The Court, further, held:- In taxation, it ( suppression of facts ) can have only one meaning that the correct information was not disclosed deliberately to escape payment of duty. Where facts are known to both the parties the omission by one to do what he might have done and not that he must have done, does not render it suppression. 27. Relying on the aforesaid observations of this Court in the case of Pushpam Pharmaceutical Co. v. Collector of Central Excise, Bombay [1995 Suppl. (3) SCC 462], we find that suppression of facts can have only one meaning that the correct information was not disclosed deliberately to evade payment of duty. When facts were known to both the parties, the omission by one to do what he might have done not that he must have done would not render it suppression. It is settled law that mere failure to declare does not amount to willful suppression. There must ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... osure of the receipt of compensation in its service tax returns. However, he did not contest the contention that there is no provision in the Act to disclose receipt of any funds in the service tax returns, which are not regarded as consideration for rendering services (whether taxable or exempt). In the circumstances, there is no basis for the allegation that MTNL had suppressed any material facts. Mere non-disclosure of a receipt, which a party believes is not chargeable to service tax, in the service tax returns, would not constitute suppression of facts within the proviso to Section 73(1) of the Act, unless it is, ex facie, clear that the receipt is on account of taxable services or it is unreasonable for any assessee to believe that the receipt does not fall in the net of service tax. In cases where there is a substantial dispute as to whether receipt of any amount is on account of taxable service as in the present case the nondisclosure of the same in the service tax return cannot, absent anything more, lead to the conclusion that the assessee is guilty of suppression of facts to evade tax. ***** 41. In the facts of this case, the impugned show cause notice does ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... required to process their service tax returns. 42. This issue was examined by a Division Bench of the Tribunal in M/s. HLS Asia Ltd. vs. The Commissioner, Service Tax [ Service Tax Appeal No. 5502 of 2013 decided on 06.03.2023 ] and it was held that the extended period of limitation cannot be invoked merely because the parties have to self assess. The observations are as follows: 13. As far as the limitation is concerned, the demand invoking extended period of limitation can be raised as per section 73 only if there is (a) fraud; or (b) collusion; or (c) wilful misstatement; or (d) suppression of facts; or (e) violation of Act, with an intent to evade payment of service tax. The SCN invoked extended period of limitation As self-assessment provisions apply to Service tax, incorrect assessment and payment of service tax by the assessee amount to deliberate misdeclaration and suppression of facts with the intent to evade.. . This proposition of the Commissioner in the SCN is alien to law. While Finance Act, 1994, provided for issuance of an SCN within the normal period in all cases and invoking extended period of limitation only if one of the five elements was present, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is issue. 44. In view of the aforesaid decisions of the Tribunal, 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. 45. The Principal Commissioner also failed to appreciate that when the benefit of the Notification dated 22.06.2010 as well as the benefit of the Notification No. 4/2011 that amended the earlier notification dated 22.06.2010 was applicable to transport of passengers by economy class, it would also be applicable to the charges collected by the appellant towards excess baggage for passengers travelling by economy class since the services covered under the latter category fall under transport of passengers by air service. 46. The result of the aforesaid discussion is that 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; 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 22.06.20 ..... 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