Relief to Air France: CESTAT Quashes Service Tax Demand on Collection of Excess Baggage Charges on ground of Limitation [Read Order]

The New Delhi bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) directed the Principal Commissioner to exclude the demand of service tax concerning the extended period of limitation for collection of excess baggage charges which falls under the category of transport of passengers by air service. 

Air France, the appellant assessee was a foreign airline operating in India as a branch office approved by the Reserve Bank of India and services under the category of “transport of passengers by air” made taxable under section 65(105)(zzzo) of the Finance Act,1994. 

The assessee appealed against the order passed by the Principal Commissioner of Service Tax for confirming interest and penalty for non-payment of service tax. 

Anil Makhija and Sunil Anand, the counsels for the assessee contended that since the amount towards excess baggage charges was not paid by the passenger at the time of booking of the ticket and such amount was paid when the baggage was found to be more than the permissible weight and this service would have to be classified as transport of goods by air and not as transport of passengers by air. 

Harshvardhan, the counsel for the department contended that the bifurcation chart of the assessee showing excess baggage charges attributable to the total number of economy and business class passengers would have no relevance. 

The Bench observed that the services rendered by the assessee would fall under the transport of passengers by air and the extended period of limitation could not have been invoked. 

Also held that collection of the amount by the appellant towards excess baggage charges would be leviable to service tax under the category of transport of passengers by air and not under the transportation of cargo by air. 

The two-member bench comprising Dilip Gupta (President) and Anjani Kumar (Technical) directed the Principal Commissioner to re-determine the service tax by excluding the demand concerning the extended period of limitation and partly allowed the appeal filed by the assessee. 

To Read the full text of the Order CLICK HERE

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