CESTAT, BANGALORE BENCH
Kingfisher Airlines Ltd.
Commissioner of Central Excise
STAY ORDER NO. 543 OF 2012
MISC. ORDER NO. 240 OF 2012
APPLICATION NO. ST/STAY/1149/2010 & ST/COD/134 OF 2010
APPEAL NO. ST/1936 OF 2010
MARCH 26, 2012
P.G. Chacko, Judicial Member
The appeal is delayed by 84 days and the appellant has prayed for condonation of this delay. On a perusal of the averments contained in the COD application, we note that the officer of the company who was in-charge of Taxation & Finance had resigned and was relieved of his duties in June 2010, that his substitute took charge in July 2010, that the decision for filing the appeal was taken at the registered office in Mumbai upon the order-in-original received from the Regional Office at Bangalore, that such decision was taken on 8-9-2010 and that the appeal was filed on 13-9-2010. After considering the sequence of facts stated in the COD application and hearing the learned counsel for the appellant, we are satisfied that the delay of the appeal was caused by sufficient reasons. The COD application is therefore allowed.
2. The stay application filed by the appellant seeks waiver and stay in respect of Service tax of over Rs. 1.14 crores demanded for the period from April 2004 to March 2008 as also in respect of the penalties imposed on the appellant. The impugned demand of tax is under the head ‘Business Auxiliary Service’ and the same stands confirmed against the appellant in adjudication of a show-cause notice dated 24-8-2009 which invoked the extended period of limitation on the alleged ground of suppression of facts.
3. On a perusal of the records and hearing both sides, we note that the appellant was collecting Passenger Service Fee (PSF) of Rs. 200/- per passenger and Service tax thereon, totaling to Rs. 225/- per passenger, from passengers on behalf of the Airports Authority of India (AAI) during the aforesaid period. As per the agreement between the appellant and AAI, these collections were to be remitted to the latter within 15 days and, in the event of delay, a penal interest was payable to them (18%). Collection charges at the rate of 2.5% on the PSF would be paid to the appellant by AAI as a consideration for the service. The impugned demand of Service tax is on these collection charges.
4. It further appears from the records that on no occasion was the appellant able to remit their collections to the AAI within 15 days and therefore the penal interest was attracted. The collection charges payable to the appellant by AAI were set off against the penal interest leviable from the former by the latter and this adjustment took place during the period of dispute. The case of the appellant is that the collection of PSF on behalf of the AAI did not constitute ‘Business Auxiliary Service’, that in any case service tax was not chargeable as the collection charges were not received from AAI, that the factum of collection of PSF and its remittance to AAI was known to the department from July 2007 and therefore the extended period of limitation was not invokable, that the appellant company is in a state of acute financial crisis and hence not in a position to make any pre-deposit, and that the appellant has prima facie case on the strength of a decision of the Hon’ble High Court of Kerala viz. CC, CE & ST v. Federal Bank Ltd.  24 STT 416 (Ker.) referred to in an order of this Bench viz.CCE v. Corporation Bank [Appeal No. ST/115/2006, dated 29-3-2011].
5. Per contra, the learned Additional Commissioner (AR) has referred to the definition of ‘Business Auxiliary Service’ and has endeavoured to show that the appellant was working as a commission agent for AAI and hence liable to pay service tax under the above head on the collection charges. He has also contested the plea of limitation on the strength of the findings recorded in the impugned order. He has also made an attempt to distinguish the case law cited by the learned counsel.
6. After giving careful consideration to the submissions, we are not impressed with the plea of prima facie case raised on behalf of the appellant. On a perusal of the definition of ‘Business Auxiliary Service’ as it stood during the material period, we are of the prima facie view that the appellant was functioning as a commission agent for AAI by collecting PSF for AAI and remitting the collections to them. It is not in dispute that the collection charges at the rate of 2.5% on PSF were adjusted against a penal interest leviable from the appellant at the rate of 18% on the PSF collected and retained by them till its remittance to AAI. It would appear from these adjustments that collection charges were eventually received by the appellant from AAI. These charges constituted the taxable value for the impugned levy. As regards the plea of limitation, we find that an amount of service tax of approximately Rs. 70 lakhs is within the normal period and this amount is prima facierecoverable from the appellant on merits. We have also considered the plea of financial hardships contained in the stay application. In support of this plea, the learned counsel has shown us the balance sheet for the year ended March 31st, 2010, which indicates an accumulated loss of over Rs. 4,000 crores. It is further submitted that the loss has increased over the last one year. Though this claim is not supported by any documentary evidence, we are inclined to give credence to the submissions of the learned counsel in the interest of justice at this stage. We have also perused the decisions cited by the learned counsel in the context of considering the plea of prima facie case on merits. In the absence of text of the Hon’ble High Court’s judgment, we are not in a position to consider the case law. Therefore, the view we have taken is intact insofar as the claim of prima facie case on merits is concerned.
7. In the totality of the facts and circumstances we have considered, we direct the appellant to pre-deposit an amount of Rs. 25 lakhs within 6 weeks and report compliance to the Assistant Registrar on 25-6-2012. Assistant Registrar to report on 2-7-2012. Subject to due compliance, there will be waiver of pre-deposit and stay of recovery in respect of the penalties imposed on the appellant and the balance amount of service tax and interest thereon.