Chimes Aviation P Ltd. Vs Commissioner, Service Tax (CESTAT Delhi)
The appellant is in the business of imparting training and coaching to individuals in the field of flying aircrafts for obtaining commercial licenses and private licenses from the Director General of Civil Aviation. The appellant, after receiving the requisite permission, also started operating the aircraft on a need basis or charter service and obtained registration as a service provider of the taxable services “transportation of passengers by air” and “commercial training and coaching”.
The issue involved in these appeals is as to whether the services provided by the appellant would be taxable under the head “transportation of passengers by air” 5 which became taxable w.e.f. 01.07.2010 or would be taxable under “supply of tangible goods”6 w.e.f 16.05.2008.
In order to appreciate the contentions that have been advanced by the learned counsel for the appellant and the learned authorised representatives appearing for the Department, it would be necessary to examine the taxable services provided under the head ‘TPA’ as contended by the appellant and ‘STG’ as contended by the Department.
It is is evident from the Grounds of Appeal, the appellant has stated that with effect from 01.07.2010, the Appellant started paying the Service Tax by classifying the same under transport of passengers by Air Services (TPA) and not under supply of Tangible Goods Services (STGU) as is observed by the department. It, thus becomes apparent that initially, in order to seek refund of the amount already paid for the previous period (2009-10 and 2010-11 i.e. from 01.04.2009 to 30.06.2010), they classified their services under a wrong head (transport of passenger by air service/TPA) and stuck with the same later on. When the department’s view was made clear to the Appellant, the insistence on their part to deliberately classify their services under a different head shows their intention of escaping their liability for the previous period which amount to noncompliance with statutory obligations. The Appellants have relied upon various case laws but in the instant case the facts of the case are different and there is nothing on record to suggest that the circumstances/conditions as prevailed in the cited judgment are also existing vis-à-vis the present case. In the cases relied upon the Appellants, there is a certain element of technical or venial breach of a provision of law on the part of the concerned party which in turn has served as a pointer of bona-fide default on the part of that party, but in the instant case, the intentional misclassification of the services rendered cannot be termed as a technical or venial breach of any provision on their part. As discussed above, the Appellants have also failed in proving their bona-fide in as much as the fact that they knew the exact classification of the services rendered by them and still failed to discharge their tax liability under the proper classification. It is not a case where there was any confusion with regard to the correct classification of service, rather they have deliberately defied the correct payment of Service Tax. In view of foregoing, when the offence of deliberately mis-classifying their services on the part of the Appellants is proved beyond doubt, the said act deserves to be penalized and accordingly, the observation with regard to imposition of penalty under Section 77(1)(a) and Section 77(2) of the Finance Act, 1994 made in the impugned order is vindicated.”
In the instant case, the appellant had not taken registration under STG taxable service and the appellant had also contravened the provisions of Chapter V of the Finance Act and the Rules made there under. Detail findings on this issue have been recorded by the Commissioner (Appeals) in the impugned order and the same have been recorded in paragraph 15(v) of the order. As there is no error in the findings recorded by the Commissioner (Appeals), the imposition of penalties under section 77(1)(a) and section 77(2) of the Finance Act cannot be faulted.
FULL TEXT OF THE CESTAT DELHI ORDER
Service Tax Appeal No. 53107 and Service Tax Appeal No. 53108 of 2016 have been filed by M/s Chimes Aviation P. Ltd.1 to assail the order dated 07.10.2016 passed by the Commissioner (Appeals)-I Service Tax New Delhi2 that has modified the order dated 07.06.2016 passed by the Additional Commissioner of Service Tax Delhi-II3, adjudicating the two show cause notices dated 21.10.2013 and 15.04.2015. The period involved in the first show cause notice dated 21.10.2013 is from 2008 to 2009, while the period involved in the second show cause notice dated 15.04.2015 is from 2013 to 2014.
2. In regard to the first show cause notice, the Additional Commissioner confirmed the demand of service tax amounting to Rs. 23,84,477/- under section 73 of the Finance Act, 19944 and appropriated an amount of Rs. 23,48,061 already deposited by the appellant. Interest under section 75 of the Finance Act and penalties under sections 77(1)(a) and 77(2), and section 78(1) of the Finance Act were also imposed.
3. In regard to the second show cause notice, the Additional Commissioner confirmed the demand of service tax amounting to Rs. 5,35,032/- under section 73 of the Finance Act and appropriated an amount of Rs. 5,35,032/- deposited by the appellant. The Additional Commissioner also ordered for levy of interest under section 75 of the Finance Act and penalties under sections 77 (1)(a) and 77(2), and 76 of the Finance Act.
4. The Commissioner (Appeals) dropped the levy of interest in regard to both the show cause notices, but confirmed the imposition of penalty under sections 77(1)(a) and section 77(2) of the Finance Act.
5. The appellant is in the business of imparting training and coaching to individuals in the field of flying aircrafts for obtaining commercial licenses and private licenses from the Director General of Civil Aviation. The appellant, after receiving the requisite permission, also started operating the aircraft on a need basis or charter service and obtained registration as a service provider of the taxable services “transportation of passengers by air” and “commercial training and coaching”.
6. The issue involved in these appeals is as to whether the services provided by the appellant would be taxable under the head “transportation of passengers by air” 5 which became taxable w.e.f. 01.07.2010 or would be taxable under “supply of tangible goods”6 w.e.f 16.05.2008.
7. In order to appreciate the contentions that have been advanced by the learned counsel for the appellant and the learned authorised representatives appearing for the Department, it would be necessary to examine the taxable services provided under the head ‘TPA’ as contended by the appellant and ‘STG’ as contended by the Department.
8. Prior to 01.07.2010, ‘TPA’ was a taxable service defined in section 65(105)(zzzo) of the Finance Act in relation to transport of a passenger embarking in India for international journey. It is reproduced below:
“Section 65(105)(zzzo) “taxable service” means any service provided or to be provided to any passenger, by an aircraft operator, in relation to scheduled or non-scheduled air transport of such passenger embarking in India for international journey, in any class other than economy class.
Explanation 1: For the purposes of this sub-clause, economy class in an aircraft meant for scheduled air transport of passengers means,-
(i) Where there is more than one class of travel, the class attracting the lowest standard fare; or
(ii) Where there is only one class of travel, that class.
Explanation 2: For the purposes of this sub-clause, in an aircraft meant for non-scheduled air transport of passengers, no class of travel shall be treated as economy class;”
9. An amendment was made w.e.f. 01.07.2010 in the aforesaid section by including domestic journey in addition the international journey and the amended section is as follows:
“Section 65(105)(zzzo): to any passenger, by an aircraft operator, in relation to scheduled or non-scheduled air transport of such passenger embarking in India for domestic journey or international journey;”
10. The definition of „passenger‟ in section 65(77c) was also amended on 01.07.2010.
11. Prior to 01.07.2010, the definition of „passenger‟, as contained in section 65(77c), is as follows:
“(77c) “passenger” means any person boarding, at any customs airport, an aircraft for performing an international journey, but does not include-
(i) a person who has arrived at such customs airport from a place outside India and is in transit through India, provided that he does not pass through immigration and does not leave customs area and continues his journey to a place outside India; and
(ii) a person employed or engaged by the aircraft operator in any capacity on board the aircraft;”
12. After 01.07.2010, the definition of „passenger‟ is as follows:
“(77c) “passenger” means any person boarding an aircraft in India for performing domestic journey or international journey.”
13. STG, which become a taxable service w.e.f. 16.05.2008, is defined in section 65 (105)(zzzzj) to mean:
“Section 65(105)(zzzzj): “taxable service” means any service provided or to be provided to any person, by any other person, in relation to supply of tangible goods including machinery, equipment and appliances for use, without transferring right of possession and effective control of such machinery, equipment and appliances.”
14. It would, therefore, be seen that „TPA‟ service in the case of international travel, both for scheduled and non scheduled transport operator was taxable w.e.f. 16.05.2008 but it was subjected to levy of service tax for domestic travel also w.e.f. 01.07.2010.
15. The order passed by the Commissioner (Appeals) notices the following facts:
(i) “In order to ascertain the veracity of the contents of the appellant, I have carefully gone through the impugned order and find that in para E7.4 at page 56, the original authority has observed as under:
“I note that the notice claimed to have paid service tax of Rs. 28,83,093 for the period 2009-10 to 2013-14 under Air Transport of Passenger Services (year wise service tax amount can be tabulated as per table below):
