By TIOL News Service

NEW DELHI, SEPT 05, 2017: THE appellants are engaged in operating Airlines and are providing taxable service under the category of "Transport of Passengers embarking in India for international journey by Air".

The Revenue entertained a view that the value for taxable service has not been properly calculated by the appellant. Inasmuch as it was alleged that the appellant have not included certain considerations, though part of air ticket charges, claiming that the said portion relates to passenger service fee (PSF) and airport taxes collected under an obligation with Airport Authority in India and other authorities, who are controlling the air travel in other countries.

A service tax liability of Rs.47,74,267/- was confirmed and penalties were imposed. The order was upheld by the Commissioner(A).

In appeal before the CESTAT, the appellant submitted that the issue has already been considered in the appellant's own case and other cases like Lufthansa German Airlines- 2016-TIOL-1086-CESTAT-DEL, Continental Airlines INC -  2015-TIOL-1481-CESTAT-DEL and wherein it is held that PSF and airport taxes cannot form part of taxable value.

Furthermore, the consideration towards these fees and charges are not towards rendering of any service by the appellant;that the said amount has been remitted to M/s Delhi International Airport Limited on a regular basis in terms of the invoice raised and the DIAL paid service tax on PSF charges to the department. [Jaipuria Infrastructure Developers Pvt. Ltd. -  2014-TIOL-609-CESTAT-DEL  relied upon to submit that the tax collected by one person can be deposited through another person .]

The AR submitted that any exclusion from the gross amount should be in terms of the Section 67 of FA, 1994 or Valuation Rules;that appellants could not point out under which authority an exclusion can be made for a part of consideration from the gross value; that the appellants have not only collected the PSF but also the service tax payable on such PSF;that there is no authority to collect service tax from the service recipient on behalf of a third party; that if the appellants are not liable to pay service tax on such value as they have claimed to have not rendered any service towards such charges, then they cannot collect service tax attributable to such value; that Revenue, on examination of the documents and facts, is now bringing the full background of the case for determination although similar issue was decided by Tribunal in appellant's own case.

The Bench inter alia observed –

++ These charges are with reference to facilities provided by the Airport Authority to the operators of Airlines in connection with their operation or to the passenger, which in any case, is also relatable to their travel. In other words, the persons availing the facilities in airports are the passengers, who are in the process of either inward or outward air travel. The appellants are issuing tickets for such air travel, which in any case, cannot be performed unless the passengers enter and passes through the airports.

++ We are in agreement with the appellant that addition of PSF in the taxable value at the hands of the appellant may result in double taxation . Admittedly, the PSF is forming part of airport service in terms of Section 65(105)(zzm). The very same PSF cannot be subjected to service tax under transport of passenger service.

++ Regarding the submission of the Revenue that the appellant is collecting service tax along with PSF and such arrangement is not within the scope of Finance Act, 1994, we note that these aspects have not been alleged or adverted in the show cause notice or by the Original Authority while recording findings against the appellant. As contested by the appellant, the reasons, which are not forming part of the proceedings before the lower authorities, cannot be taken up afresh for factual verification, at this stage .

Holding that the impugned order is not sustainable, the same was set aside and the appeals were allowed.

(See 2017-TIOL-3215-CESTAT-DEL)