The Customs, Excise & Service Tax Appellate Tribunal has directed JetLite (formerly Sahara Airlines Ltd) to pay Rs 100 crore (Rs 1 billion) as a pre-deposit on a service tax dispute, pending final settlement.Of the amount, Rs 64 crore (Rs 640 million) is towards service tax arrears and the rest is penalty for non-payment. The amount in dispute, of alleged service tax arrears, is Rs 128 crore (Rs 1.28 billion). It is a tax demand based on the operations of the earlier Air Sahara, before its takeover by Jet.
“We (tribunal) direct the appellant (JetLite) to make pre-deposit of Rs 100 crore within eight weeks of the receipt of this order and make compliance within one month of the deposit. Subject to such compliance, realisation of balance demand shall be stayed till disposal of appeal,” said the judgment.
The government’s contention was that Sahara Airlines Ltd (now JetLite) was promoting the real estate and housing business and area operations of Sahara India Commercial Corporation Ltd (formerly known as Sahara India Housing Ltd).
The passengers of the airline were targeted as potential customers to promote the business of the housing projects. It was advertised through various ways, including printing in air tickets, and the airline was paid for this advertisement. The tax demand was raised on this basis.
Jet Airways confirmed the development. “We are yet to receive a copy of the communication. Once we receive the same, we will examine the matter and take appropriate action. However, there has been no tax evasion – and (it is) open to interpretation,” said an email reply from the airline.
JetLite is a wholly owned, no-frills subsidiary of Jet Airways. Jet bought Air Sahara in April 2007 for Rs 1,450 crore (Rs 14.5 billion) and later rebranded it to JetLite. Of this purchase price, Jet had paid Rs 900 crore (Rs 9 billion) in installments by April 20, 2008.
Jet and Sahara then got into a legal tussle, after Jet cleared an income tax demand of Rs 37 crore (Rs 370 million) and deducted this while paying one of its installments. Jet said the amount was due from Sahara before the deal, so it was not responsible for the liability.
This was the trigger of the dispute, leading Sahara to claim the originally agreed price of Rs 2,000 crore (Rs 20 billion) from Jet for the deal. The dispute is yet to be settled.
JetLite now operates a fleet of 25 leased aircraft, which includes 18 Boeing 737 series and seven Canadian Regional Jets 200 Series. The airline flies to 28 domestic destinations and two international destinations (Kathmandu and Colombo), operating over 110 flights a day.