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Judgment
Assessee is in appeal against order-in-original number 58- 60//GB/ 2012 dated 20/02/ 2012 in terms of which demands along with interest and
penalties were confirmed under online information and database access or retrieval service under reverse charge mechanism on the service provided
by Computer Reservation System (CRS)/Global Distribution System (GDS).
Revenue has also filed appeals against the same order-in original for dropping the demand relating to the charges (collected by the appellant from
the passengers) which relate to airport taxes and the pre-ponement/postponement of dates of journey.
Briefly stated the facts of the cases are as under:
The appellant-assessee is inter-alia providing service of transport of passengers by air embarking in India on international journey in any class other
than economy class which is a taxable service specified under Section 65(105)(zzzo) of Finance Act 1994. It was alleged that the appellant assessee
had not paid service tax on-(i) the payments made to CRS/GDS service providers under reverse charge mechanism in terms of provisions of Section
66A ibid. (ii) the airport taxes collected, (iii) charges for pre-ponement and postponement of journey dates, (iv) transport of import cargo. Vide
impugned adjudication order the adjudicating authority confirmed the demand under reverse mechanism on the payments made in respect of
CRS/GDS service providers but dropped the demand relating to amount collected for airport taxes, pre-ponement/postponement charges and transport
of import cargo.
The appellant assessee has contended that no amount was paid by it to CRS/GDS service providers and they were paid by its parent company in the
USA, and therefore no service tax is payable by the appellant under reverse mechanism. It added that the issue is covered in its favour by CESTAT
in the case of British Airways 2014 TIOL 979 CESTAT DEL. The Revenue on the other hand contended that the service was received by the
appellant assessee and the payment made by its headquarters in the USA was on its behalf and that the judgement in the case of British Airways is
not applicable to the present case
Revenue with regard to its appea l stated that airport taxes were collected as part of the gross amount received for the service rendered, and
therefore, the same are includible in the assessable value. It also stated that the preponement and postponement charges are nothing but amounts
charged for providing service in relation to transport of passengers by air and therefore service tax was clearly leviable thereon. The appellant
assessee on the other hand argued that airport taxes were merely collected on behalf of the airports and were remitted to them (i.e., the airports) and
that the preponement and postponement charges were nothing but penalties for changing the date of travel and the penalties are not includible in the
assessable value.
We have considered the contentions of both sides. We find that in the case of British Airways (supra) it has been clearly held (as a majority view)
that British Airways India (the appellant in that case) has to be treated as a separate person vis-a-vis its parent company based abroad and in view of
the admitted position that the contracts with CRS/GDS service providers were not with British Airways India but with British Airways UK, the
present appellant (i.e., British Airways India) cannot be held to be recipient of the service so as to make it liable to pay service tax on reverse charge
basis in terms of the provisions of Section 66A ibid. Although the Ld. Departmental Representative contended that the said judgement in the case of
British Airways is not applicable to the present appeal without elaborating as to how, we are unable to discern any such distinguishing facts and
circumstances which would render the ratio of the said judgement inapplicable to the present case. Consequently, this component of the impugned
demand is not sustainable in the wake of CESTAT judgment in the case of British Airways (Supra).
As regards, the airport taxes, we find that CESTAT in the following cases has clearly held that airport taxes were collected by the airlines on behalf
of the airports and were paid to them and therefore are not includible in the assessable value for the purpose of levy of service tax:
Turkish Airlines Vs. CST, Delhi [2013 (30) STR 367 (Tri-Del)]
Srilankan Airlines Ltd. Vs. CST, Chennai [2011 (21) STR 656 (T)]
Lufthansa German Airlines VS. CST, Delhi [S. No.55115/ 2014, dt. 2.12.2014]
Therefore, Revenue's appeal on this aspect (i.e., regarding service tax on airport taxes collected by the appellant assessee) is not sustainable.
As regards the preponement and postponement charges, the very nature of such charges shows that they are collected in connection of rendering
the service in relation to providing transport of passengers by air service inasmuch as these charges are recovered for changing the dates of travel.
Thus, the appellant's contention that these are mere penalties and hence not includible in the assessable value is not tenable. It is well-settled that it is
the nature of charge and not its nomenclature which has to be considered. Merely, because an airline calls such charges penalties does not alter the
nature of such charges which are clearly in relation to providing transport of passengers by air service because of service of change of journey dates
is clearly in relation to transport of passengers by air service. It, however, needs to be appreciated that the very fact that the Commissioner dropped
the demand relating to the preponement and postponement charges gives credence to the contention of the appellant that it was under bona fides
belief that the service tax on such charges was not payable. Clearly, it is an interpretational issue and therefore the extended period in these
circumstances is not invokable particularly when nothing concrete has been brought out in the show cause notice to show that there was any positive
act of wilful misstatement/ suppression on the part of the appellant-assessee. That the extended period as well as the mandatory penalty under Section
78 ibid are not invokable in such circumstances is in conformity with the Supreme Court's observations in the case of Gopal Zarda Udyog
2005TIOL13-SC-CX-LB and Chemphar Drugs Liniments 2002-TIOL266-SC-CX. Thus, the demand only for the normal period (of one year) is
sustainable on the preponemnet and postponement charges and penalty under Section 78 ibid. is not impossible. However, penalty under section 76
ibid. is clearly attracted as that is not necessarily dependent upon the existence of wilful misstatement/suppression of facts as is evident from the
wording of the said section.
In the light of the aforesaid discussion, we passed the following order:
(I) the appellant assessee's appeal number ST/718/2012 is allowed
(II) the Revenue's appeal No.ST/ 914/ 2012 is partially allowed only to the extent that the demand of service tax on the pre-ponement and
postponement charges is confirmed for the normal period of one year alor1g with interest (as per section 75 of the Finance act 1994) and penalty
under section 76 Ibid.