As a relief to M/s. Virgin Atlantic Airways Ltd, the Delhi Bench of the Customs, Excise & Service Tax Appellate Tribunal ( CESTAT ) quashed Interest on Passenger Service Fees and Airport Taxes. It was argued that the appellant has complied with the condition of Rule 6 of Service Tax ( Determination of Value ) Rules, 2006 and the same is not includible in the assessable value of service provided by the appellant, as the impugned period is, post 27.02.2010.
The petitioner challenged the order-in-original passed by the Commissioner of Service Tax, New Delhi whereby the proposals made in three show cause notices issued to the appellant were decided and demands of service tax totalling Rs. 6,24,75,401/- were confirmed along with interest and penalties were imposed.
Shri Nagesh Kumar, counsel appeared for the appellant assisted by Shri Amrish Dhawan and Shri Harsh Vardhan, authorized representative for the department.
The appellant operates as an airline and is registered with the service tax department for providing “Transport of passengers embarking in India for International journey by Air Service” and “Transport of Goods by Air Service”. Receiving intelligence that the appellant was not paying service tax on the gross value of the services provided under the category of “Transport of passengers embarking in India for International journey by Air Service”, officers called for information from the appellant.
It was alleged in the SCNs that the appellant was paying service tax on the Basic Fare, Fuel Surcharge and Insurance Surcharge but was not paying service tax on the PSF, Admin fee and Airport Taxes collected from the passengers and the same was proposed to be recovered.
The appellant submitted its replies to the SCNs on 23.10.2012 and 11.8.2014 contending that no service tax is leviable on the PSF, Admin fee and Airport Taxes. However, the demands were confirmed as proposed in the SCNs.
The appellant is relying on Rule 6 of the Service Tax ( Determination of Value ) Rules, 2006, which has been amended with effect from 22-2-2010, the Tribunal finds that Airport Tax has been collected by the appellant as per section 22 of Airport Authority of India Act, 1994 which empowers the authority to charge fees for the amenities given to the passengers and visitors at any Airport.
The PSF has been charged in terms of Aircraft Rules, 1937, wherein Rule 88 of the said Rules, authorises the licensee to collect fees to be called as Passenger Service Fees from the embarking passengers at such rates as the Central Government may specify and is also liable to pay for security component to any Security Agency designated by the Central Government for providing the security service.
The appellant has complied with the condition of Rule 6 of Service Tax ( Determination of Value ) Rules, 2006 and the same is not includible in the assessable value of service provided by the appellant, as the impugned period is, post 27.02.2010 and the said issue has been examined by this Tribunal in the appellant’s case wherein this Tribunal has made it clear that these charges are not to be included in the assessable value of the services provided by the appellant relying on the decision in the case of Continental Airlines versus CST, New Delhi. Moreover, as per the exemption Notification No. 12/2010, dated 12-2-2010, 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 is not payable by the appellant.
A two-member bench comprising Shri Justice Dilip Gupta, President and Shri P V Subba Rao, Member ( Technical ) held that Passenger Service Fee ( PSF ) and Airport Tax are not includible in the assessable value of the services provided by them.
The Tribunal set aside the impugned order insofar as the demand of service tax on PSF and Airport Taxes is concerned and remanded the matter to the Commissioner for verification of whether the appellant had collected any admin charges during the relevant period and if so, the taxability.
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