Air France Vs Commissioner of Service Tax (CESTAT Delhi)
CESTAT Delhi held that the collection of excess baggage charges would be leviable to service tax under the category of transport of passengers by air and not under transportation of cargo by air.
Facts- The appellant is a foreign airline operating in India as a branch office approved by the Reserve Bank of India. The appellant provides services under the category of “transport of passengers by air” made taxable u/s. 65(105)(zzzo) of the Finance Act,1994 w.e.f. 01.05.2006 and services of “transport of goods by aircraft” made taxable u/s. 65(105)(zzn) of the Finance Act, apart from other services.
In the process of rendering the service, the appellant also collects excess baggage charges when the weight of the baggage of the passenger is in excess of the permissible weight. The dispute that arises in the present appeal is with respect to the levy of service tax on such excess baggage charges collected by the appellant from the passengers.
Conclusion- Held that the collection of amount by the appellant towards excess baggage charges would be leviable to service tax under the category of transport of passengers by air and not under transportation of cargo by air.
Held that since the issue of classification of the service on the basis of various judicial pronouncement was debatable, the extended period of limitation could not have been invoked.
FULL TEXT OF THE CESTAT DELHI ORDER
This appeal has been filed by Air France1 to assail the order dated 26.07.2016 passed by the Principal Commissioner of Service Tax, Delhi2, by which the demand of service tax has been confirmed with interest and penalty.
2. The appellant is a foreign airline operating in India as a branch office approved by the Reserve Bank of India. The appellant provides services under the category of „transport of passengers by air‟ made taxable under section 65(105)(zzzo) of the Finance Act, 19943 w.e.f. 01.05.2006 and services of „transport of goods by aircraft‟ made taxable under section 65(105)(zzn) of the Finance Act, apart from other services.
3. In the process of rendering the service, the appellant also collects excess baggage charges when the weight of the baggage of the passenger is in excess of the permissible weight. The dispute that arises in the present appeal is with respect to the levy of service tax on such excess baggage charges collected by the appellant from the passengers.
4. The impugned order dated 26.07.2016 adjudicates two show cause notices dated 18.09.2012 and 06.05.2014. The show cause notice dated 18.09.2012 mentions that the appellant had collected excess baggage charges during the period 2007-08 to 2011-12 on which service tax amounting to Rs. 1,64,25,588/- was leviable but it was not paid. The service that was alleged to have been rendered by the appellant was mentioned as transport of passengers embarking in India for International journey by air service, made taxable under section 65(105)(zzzo) of the Finance Act. The show cause notice dated 06.05.2014 mentions that for the period 2012-13, the appellant would be required to pay service tax amounting to Rs. 23,12,067/-for the reasons stated in the earlier show cause notice dated 18.09.2012.
5. The appellant filed a reply to both the show cause notices. In response to the show cause notice dated 18.09.2012 the appellant pointed out that since the amount towards excess baggage charges is not paid by the passenger at the time of booking of the ticket and such amount is paid when the baggage is found to be in excess of the permissible weight, this service would have to be classified as transport of goods by air and not as transport of passengers by air. The appellant also pointed out that till 30.06.2010 only classes other than economy class were leviable to service tax and thereafter service tax was leviable on a fixed value on economy class. It was also pointed out that the appellant had not maintained records showing bifurcation of class for excess baggage charges and only an estimate could be worked out taking into consideration the fact that not all the business class travellers pay excess baggage charges. According to the appellant, the month wise figures for excess baggage charges collected for the period April 2007 to March 2012 is as under:
