Service Tax on Passenger Service Fee (PSF) Payable by Airport Authority, Not Airlines: CESTAT [Read Order]
CESTAT held that Passenger Service Fee (PSF) is a statutory levy, and service tax on PSF is payable by the Airport Authority, not by airlines.
The Chandigarh Bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) ruled that Passenger Service Fee (PSF) collected by airlines from passengers is a statutory levy, and service tax on such PSF is payable by the Airport Authority, not by the airlines.
Austrian Airlines, the appellant, is a registered service provider under the service tax law and was paying service tax on air travel services. The department, after examining the appellant’s records, alleged that the airline had not included certain charges, such as Passenger Service Fee (PSF) and airport taxes, in the assessable value while calculating service tax.
The department claimed that these amounts were part of the total consideration received for air travel and must be included in the taxable value. Based on this, a show cause notice was issued demanding service tax of Rs. 19,52,197 for the period from October 2010 to September 2011.
The adjudicating authority confirmed a demand of Rs. 17,69,898 with an equal penalty. The Commissioner (Appeals) upheld the order, leading the appellant to approach the tribunal.
The appellant’s counsel argued that PSF and airport taxes are statutory levies collected on behalf of the Airport Authority under Section 22 of the Airports Authority of India Act, 1994.
They submitted that the airline merely collects these amounts from passengers and remits them to the respective authorities, and that the airline does not render any service in respect of these charges.
The counsel explained that service tax on PSF is already paid by the Airport Authority under the category of “Airport Services,” and including PSF again in the value of air travel services would result in double taxation.
The revenue’s counsel argued the findings of the lower authorities and argued that PSF and airport taxes were collected along with the ticket fare and formed part of the consideration for air travel, making them liable to be included in the assessable value for service tax.
The two-member bench comprising S.S. Garg (Judicial Member) and P. Anjani Kumar (Technical Member) observed that the issue had already been settled in favour of the appellant by the Principal Bench of the tribunal.
The Principal Bench explained that PSF is a statutory levy imposed under Section 22 of the Airports Authority of India Act, 1994, for services and amenities provided to passengers at airports. The tribunal pointed out that the Airport Authority charges PSF for facilities such as landing, parking, and passenger amenities, and that airlines merely act as collecting agents.
The tribunal further observed that documents produced by the appellant, including invoices and certificates from the Airport Authority, confirmed that service tax on PSF had been paid by the Airport Authority to the government.
The tribunal explained that including PSF in the airline’s taxable value would result in double taxation because it was already taxed as part of “Airport Services.” It also pointed out that PSF and airport taxes are not consideration for services rendered by the airline and thus cannot be included in the value of air travel services. The appeal filed by Austrian Airlines was allowed.
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