Partial Relief for British Airways: CESTAT Upholds Service Tax on Excess Baggage Charges for Normal Period, Drops Demand for Extended Period [Read Order]
CESTAT holds British Airways liable for service tax on excess baggage charges for the normal period, but quashes the demand and penalties for the extended period.
The Chandigarh Bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) held that British Airways is liable to pay service tax on excess baggage charges collected from passengers during the normal limitation period but not for the extended period as there was no suppression of facts.
British Airways PLC, India Branch, the appellant, is engaged in the business of transporting passengers by air. The department issued show cause notices alleging non-payment of service tax on excess baggage charges (EBC) collected from passengers during the financial years 2007-08 to 2012-13.
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The department invoked the extended period of limitation and confirmed a demand of Rs. 68.98 lakh along with interest and penalties. The Commissioner (Appeals) upheld the order. The appellant challenged the portion of the order that invoked the extended period and imposed penalties.
The appellant’s counsel argued that the EBC issue was already disclosed during a departmental audit in 2006 and that service tax was earlier paid under the “transport of goods by air” category in 2004-05. When that category was exempted in 2005, the appellant discontinued payment in good faith, believing that the exemption covered excess baggage charges as well.
The counsel submitted that there was no intent to evade tax, and all facts were disclosed to the department. The appellant relied on decisions such as Kingfisher Airlines and SpiceJet, where the extended period was held to be inapplicable in similar factual situations.
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The revenue counsel supported the findings of the lower authorities
The tribunal comprising Justice Dilip Gupta (President) and Hemambika R. Priya (Technical Member) found that British Airways had been filing returns and paying service tax regularly and had disclosed the relevant details to the department. It pointed out that the department was aware of the issue as early as 2006 and there was no evidence of suppression or deliberate misstatement.
The tribunal held that the matter was interpretational and all facts were disclosed, so the extended period could not be invoked. It also found that there was no mens rea and penalties were not warranted.
The tribunal partly allowed the appeal. It confirmed the service tax demand on excess baggage charges for the normal period but set aside the demand raised for the extended period. The penalties were also deleted.
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