The Chennai bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) held that the service tax cannot be levied on the institute conducting coaching and training for the issue of a pilot certificate which was recognized by law.
Orient Flight School, the appellant assessee was registered as a Society under the Societies Registration Act, 1816 and is engaged in flight training to students and imparted training to the students in the nature of take-off, landing, flying, handling aircraft and ground training and also prepared the students for various skill tests in the Air and Ground examinations conducted by the Directorate General of Civil Aviation (DGCA) to issue Private Pilot License (PPL), Commercial Pilot License (CPL) etc.
The assessee appealed against the order passed by the Commissioner (Appeals) for confirming the demand for service tax along with interest and for imposing penalties.
N Vishwanathan, the counsel for the assessee contended that the Student Pilot License (SPL) does not qualify a person to fly aircraft as a full-fledged pilot and only after the test conducted by DGCA and the type rating of the specified aircraft was entered in the Commercial Pilot License (CPL), the trained person can handle the aircraft as a pilot.
Also submitted that the assessee only conducted training and issued SPL which was not taxable under the service tax demand which was raised by the department.
Rudra Pratap Singh, the counsel for the department contended that the activities of imparting Pilot Training course were taxable as the assessee issues only a Student Pilot License (SPL) which was a prerequisite to enter the aircraft as a trainee.
The Bench observed that the DGCA was a Government body exercising its power under the provisions of Aircraft Act, 1934 and the Rules made thereunder and the activity of the assessee of imparting such course would fall under clause (l) of Section 66D of Finance Act, 1944, and the assessee being an institute conducting coaching and training for the issue of the pilot certificate which was recognized by law was therefore excluded from the ambit of levy of service tax.
The two-member bench comprising Sulekha Beevi (Judicial) and Vasa Seshagiri Rao (Technical) held that the assessee being an institution was not liable to pay service tax for training the students for the issuance of pilot certificate.
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