The Chandigarh bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) granted relief to Lufthansa German Airlines by quashing the service tax demand of approximately 6 crores imposed on the Passenger Service Fee (PSF) and airport tax on the ground of non-violation of Rule 6 of the Service Tax Rules,2006.
Lufthansa German Airlines, the appellant assessee is related to the includability of passenger service fees and airport taxes collected from passengers.
The assessee appealed against the order passed by the adjudicating authority for confirming the demand for service tax of Rs. 6,28,72,273 and the imposition of penalty against the assessee.
Ashwini Chandrasekaran, the counsel for the assessee contended that Rule 6 of the Service Tax (Determination of Value) Rules states that the statutory taxes charged by any Government on Air passengers would be excluded from the taxable value for levy of tax and therefore, the service tax was not payable.
Also submitted that the charges are not to be included in the assessable value of the services provided by the assessee.
Nikhil Kumar Singh and Narinder Singh, the counsels for the department contended that the assessee was liable to pay the service tax and the demand raised by the revenue was as per the law and liable to be sustained.
The Bench observed that the Passenger Service Fee (PFS) and Airport Tax are not includible in the assessable value of the services provided by them. Therefore, the impugned order deserves no merit and is liable to be deleted.
The two-member bench comprising S.S Garg (Judicial) and Anjani Kumar (Technical) quashed the service tax demand while allowing the appeal filed by the assessee.
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