ST - Airport service - Advances received for services to be provided after 01/05/2006 from which date service became taxable - as no exemption was provided, tax liability arises, however, demand is blatantly hit by limitation: CESTAT
By TIOL News Service
MUMBAI, AUG 13, 2015: THE appellants are providing services of transportation of passengers embarking in India for international journey by air services. The tax liability on services rendered to their customers on first class and business class were effective from 01/05/2006.
The appellant had received a letter dated 10/11/2006 from the Assistant Commissioner of Service Tax and which is as extracted below -
Sub: Levy of Service Tax on International Journey by Aircraft.. reg
Gentlemen,
You are aware that service tax is leviable with effect from 01 st May 2006 on services provided by an aircraft operator to passengers embarking in India for international journey by any class, other than economy class, under Section 65 (105) (zzz0)read with section 66 of the Finance Act, 1994. Board of Airline Representatives in India (BAR) have sought clarifications on the levy of service tax on the above mentioned service.
In this regard, the Central board of Excise & Customs (Ministry of Finance) vide Circular No. 85/3/2006-ST dated 17/10/2006 has interalia clarified that service tax is leviable on the total value of the ticket. The copy of said Circular is available on Website: www.servicetax.gov.in
In view of the above you are requested to submit the following information so that early action can be taken. Further you are also requested to inform the amount of service tax paid during September 06, by return of tax, if any.
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Month wise (May 06 to Sept 06)
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Value of Ticket
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Gross amount charged from the passenger
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Value on which service tax paid
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Difference between gross amount & value on which ST paid
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Amount of service tax paid
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Reasons for non-compliance of service tax with reference to Col. No. 5
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(1)
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(2)
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(3)
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(4)
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(5)
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(6)
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(7)
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It seems that the appellant replied to this letter on 14/03/2007.
Almost three years later, ademand notice came to be issued on 10/03/2010 for recovery of Service Tax not paid. The appellant contested the SCN claiming that the amount of advance received was for the services to be rendered after 01/05/2006, but they were not aware that the service tax liability would arise. On limitation, the plea of bonafide belief was taken.
The CST, Mumbai with lightning speed, vide order dated 17/06/2010,confirmed the demand of Rs.74,48,904/- along with interest and penalties.
Before the CESTAT, the appellant submitted that prior to 01/05/2006 any amount collected by the appellants were for the services which were not under tax net; that they could not be held liable to pay such service tax for the amount collected in advance. The appellant relied upon Notification No. 36/2010-ST dated 28/06/2010 and the clarification issued by the Board [DOF No. 334/03/2010-TRU dt. 01.07.2010] consequent to issuance of suchnotification and which is extracted below-
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While legally tax is payable on such amounts received, it has been decided to specifically exempt service tax on that partial or full amount which is received by the service provider/ person liable to pay the tax (and not by an agent, who in turn transfers such amount to such person after this date) before 01.07.2010, pertain to a service which has become taxable on account of the provisions of the Finance Act, 2010 and is provided on or after 01.07.2010. Any amount received after 01.07.2010 by the service provider/ person liable to pay the tax would be subjected to tax.
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It is further submitted that this circular should be applied for the case in hand also in view of the judgement of apex Court in the case of Suchitra Components Ltd. - 2007-TIOL-09-SC-CX. On limitation, it is submitted that the Assistant Commissioner of Service Tax, vide letter No. ST/Mum/Gr.I/ATS/7913 dated 10/11/2006 sought the details from the appellant as to their service tax liability on the amounts charged from the passengers for the period 01/05/2006 to 30/09/2006 and that the appellant replied to the said letter on 14/03/2007 itself and it was only on 10/03/2010 that the SCN was issued and, therefore, the demand is time barred. Reliance is also placed on the decision in Uniworth Textiles Ltd. - 2013-TIOL-13-SC-CUS.
The AR reiterated the findings of the adjudicating authority and also submited that the appellant being in the organised sector, was aware of the taxability of the services rendered by them and should have discharged the tax liability on their own. In the matter of limitation, it is submitted that the appellant did not inform the department about the amounts received in advance from the passengers for the services and having not declared such an amount, there was an element of mis-statement and hence, invocation of extended period was correct.
The Bench observed -
On Merits:
+ The reliance placed on the Board's Circular No. 334/3/2010-TRU dated 01/07/2010 will not carry the appellant's case any further as the circular is not for the relevant period in hand; as also we see from the Circular that the said circular was issued specifically in respect of notification No. 36/2010-ST, while the issue in hand it pertains to the situations wherein new services were brought into tax net from 01/05/2006. On merits, we find that the appellant has a very weak caseas the service tax liability on the amounts received in advance has to be discharged is the settled law.
Limitation:
+ The appellant has a very strong case as the show-cause notice is dated 10/03/2010, demanding service tax liability for the amounts collected prior to 01/05/2006.
+ In response to the said letter (dated 10/11/2006) the appellant informed details by their letter dated 14/03/2007 and it is not in dispute. It can be noticed from the letter received by the appellant from the office of the Assistant Commissioner, service tax specific details were called for and such details were given. In our view the appellant had volunteered the information as soon it was sought by the departmental authorities. In our view the details which were not sought could not have been supplied by the appellant…
+ We do not understand the reasoning given by the adjudicating authority for coming to a conclusion that the service tax liability arises on the appellant for the period prior to 01/05/2006 as it is no doubt that services were utilised by passengers post 01/05/2006 and the amounts were collected prior 01/05/2006.
+ Receipts of the payments prior to the date of journey recorded in accounts, as is the industry practice. If the authorities were claiming that the appellant has suppressed the details, they could have asked for the correct details from the appellants, which they did not do so. Further, we find that the post communication dated 06/08/2006, which is referred by the adjudicating authority, it was also in the knowledge of the department that a clarification has been issued, despite such clarification, there seems to be no follow up by the department like seeking for the details or demand of tax from the appellants. In the absence of any positive action of suppressing the details from the department, we find that tax liability which is being worked out by invoking the extended period is not correct …[Uniworth Textiles Ltd. relied upon]
Holding that the demand raised on the appellant is blatantly hit by limitation, the same was set aside and along with it, the interest and penalties.
The appeal was allowed with consequential relief.
In passing: Incidentally, the Bench, while deciding the stay application, had directed the appellant to make pre-deposit of the entire amount of the service tax demanded. It was then observed - On verification of the records, we find that the details submitted by the applicants on 14.05.2007, does not cover the amount of tickets sold prior to 01.05.2006 for the journey carried out on or after 01.05.2006. We find that this is a suppression of fact on the part of the applicants prima facie therefore, the extended period of limitation has rightly been invoked. See 2012-TIOL-658-CESTAT-MUM.
(See 2015-TIOL-1684-CESTAT-MUM)
