AIR CANADA Vs CST-TIOL http://www.taxindiaonline.com/RC2/printCase.php?QoPmnXyZ=MT...

2017-TIOL-986-CESTAT-DEL

IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL

PRINCIPAL BENCH, NEW DELHI

Service Tax Appeal No.1335/2011

Arising out of Order-in-Appeal no.172/ST/DLH/2011 Dated: 5.8.2011

Passed by the Commissioner (Appeals),Central Excise, Delhi-I

Date of Hearing: 31.1. 2017

Date of Decision: 1.3.2017

M/s AIR CANADA

Vs

COMMISSIONER OF SERVICE TAX

NEW DELHI

Appellants Rep by: Shri Sanjay Jain, CA & Shri Anil Makhija, Adv.
Respondents Rep by: Shri Ranjan Khanna, DR & Ms Neha Garg, DR

CORAM: S K Mohanty, Member (J)

Shri B Ravichandran, Member (T)

ST - Valuation - Claim for exclusion of amounts on the basis of acting as pure agent can
be made only if all conditions for such concept are fulfilled - present inclusion is not on
the basis of provisions of Rule 5(1) of Service Tax (Determination of Value) Rules, 2006
- appeal is not sustainable due to failure to establish the facts - Appeal dismissed:
CESTAT [para 5, 6]

Appeal dismissed

Case laws cited:

Continental Airlines Inc - 2015-TIOL-1481-CESTAT-DEL...Para 5distinguished

FINAL ORDER NO. 52137/2017

Per: B Ravichandran:

The appeal is against order dated 5.11.2000 of Commissioner (Appeals), Delhi-I. The appellants
are engaged in air transport of passengers and are registered with the Department for payment of
service tax under the category of "transport of passengers embarking in India for international
journey in a class other than economy class by Air Service". The dispute in the present case relates
to correct valuation of such taxable service during the period May, 2006 to September, 2007. The
issue relates to service tax liability of the appellant with reference to airport taxes, passenger
service fee (PSF) and fuel and insurance surcharge collected by the appellant from the passengers,
in addition to base fare. The Revenue contended that for service tax purpose, the value should be
the gross amount collected by the appellant from the passengers. The appellant contested the
inclusion of airport services and PSF in the value for taxation. The Original Authority on
adjudication of the case confirmed service tax liability of Rs.20,20,07,250/- and imposed equal
amount of penalty under Section 78 of the Finance Act, 1994. He also imposed Rs.5,000/- as
penalty under Section 76 of the Act. On appeal, vide the impugned order, ld. Commissioner

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(Appeals) upheld the order except for modification of re-calculation of the tax liability treating the
gross amount as inclusive of service tax. He set aside the penalties imposed on them, invoking
provisions of Section 80.

2. Ld. Counsel appearing on behalf of the appellant submitted that they are not contesting the tax
liability on fuel and insurance surcharge collected from the passengers. He submitted that the
appellants have paid Rs.13,64,299/- towards tax liability on this account along with the interest of
Rs.2,56,282/- on 31.08.2008 i.e. even before issurance of show cause notice. However, the
appellants are contesting the includibility of "passenger service fee" and "airport taxes" in the
taxable value for the purpose of calculating service tax. He submitted that these charges /taxes
are collected by the Airlines on behalf of the concerned Airport Authorities and remitted to such
Authorities, in full. They are acting only as agents for such collection and no service is provided by
them to the passengers towards such taxes/charges. He relied on the decided cases of other
Airlines to submit that the Tribunal held PSF and Airport taxes are not liable to be added in the
taxable value.

3. Ld. AR contested the appellant's plea on PSF and Airport Taxes. It is submitted that different
Airlines are following different practices. The facts of each case are to be examined before
calculating the correct valuation of taxable service. It is submitted that the claim of the appellant
that they are collecting PSF on behalf of the Airport Authority of India has to be supported with
documentary evidence like agreement, general circular, etc. Further, it should be demonstrated by
the appellant that they did collect only exact amount payable to Airport Authority of India from
passengers. In the absence of such supporting evidence, no general conclusion to exclude such
charges can be made. In fact, it is emphasized by the ld. AR that the appellants have not produced
any documentary evidence, relevant to the period in dispute, that under what mandate they are
collecting the PSF and how accounting is made in their books as well as in the books of Airport
Authority of India.

4. We have heard both the sides and perused the appeal records. We note that inclusion of fuel
and insurance surcharges in the assessable value is not being contested by the appellant. The only
point of contest is the includibility or otherwise of PSF and other airport taxes in the value. Before
proceeding further with the case, we have to record that specific question seeking clarifications
were put to the ld. Counsel for the appellant when the case was heard on 31.01.2017. He has been
advised to support the claims made by the appellants with documentary and corroborative
evidence. However, no such submission has been made despite of giving extended period of time.
As such, we are proceeding with the case based on the records available in the file. The PSF and
other taxes were claimed to have been collected by the appellant as per the directions of the
Airport Authorities. Despite of specific query made by the Bench, the appellants could not produce
any documentary evidence to show that during the relevant period, they were mandated by the
Airport Authority to collect such charges from the passengers and to remit on actual basis to
Airport Authority. The appellants submitted certain bills raised by Delhi International Airport Pvt.
Ltd. (DIAL). These are invoices for passenger service fee issued by the DIAL to the appellant. We
have perused one such invoice along with its connected documents. The invoice states number of
flights, charges, service tax, cess and total amount. We note that the amount collected from the
passengers by the appellant, apparently, includes service tax. It is not clear as to how, when
acting as an agent, for Airport Authority, with reference to collection of PSF, the appellant can
collect the service tax also from the passengers. There can be no concept of pure agent for
collecting tax on behalf of the client. Any amount collected as service tax from any person, cannot
be passed on to any other person other than Government. We have asked clarification particularly
on this issue from the ld. Counsel. No clarification was submitted. Further, we have perused one of
the air tickets with detailed break-up as submitted by the appellant. It is claimed that abbreviation
WO refers to PSF. An amount of Rs.150/- has been collected towards PSF from the passengers. We
note that the ld. AR submitted that PSF collectable from the passenger is only Rs.130/-. It is also
seen that the Airport Authority of India, who are managing many international airports in India
have issued note on tariff structure. It is clearly mentioned therein that the passenger service fee
is excluding service tax. The service tax at the applicable rates will be paid by the Aircraft Operator
in addition to above charges.

5. Ld. Counsel for the appellant submitted a part of Passenger Air Tariff, General Rules, 2010. It is
submitted that this is the mandate for the members of IATA. The said compilation indicates
country-wise taxes and fee to be paid by the Airlines. While we note that any amount collected
from the passenger specifically identified for the particular service, to be rendered by other than

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the appellants, are not to be included in the gross value, it is necessary to establish with
documentary evidence the background of such fee or taxes, legal term of contractual obligation to
collect and pay the amount on actual basis. These documentary evidences are not forthcoming in
the present appeal. Further, we also note that reliance placed by the appellant on the decided
cases can be of help in the present case only when the facts are established. We also note that any
claim for exclusion on the basis of acting as pure agent can be made only if all conditions for such
concept are fulfilled. Similarly, it is seen that the present inclusion is not on the basis of provisions
of Rule 5(1) of Service Tax (Determination of Value) Rules, 2006. The said rule mentions about
expenditure or cost incurred by the service provider in the course of providing taxable service. In
the present case, we are not dealing with any expenditure or cost incurred by the appellant in
providing any service. Their claim is that these amounts (PSF and Airport taxes) are collected on
behalf of the Airport Authority. In the absence of supporting evidence and also the crucial fact that
the same is transmitted on actual basis without any mark up/tax element involved, has not been
established in the present case. Here, we also note that the Tribunal in Continental Airlines Inc -
2015-TIOL-1481-CESTAT-DEL and a few other cases held that PSF and airport taxes are not
includible in the taxable value of airlines. It was recorded that these charges were collected by the
airlines on behalf of airports and were paid to them and, therefore, are not includible in the
assessable value for the purpose of levy of service tax. Unless, these facts are established the ratio
cannot be universally adopted for all airlines. As, already noted, categorical evidences are not
forthcoming in the present appeal, in spite of specific query by the Bench.

6. Accordingly, we find that the appeal cannot be sustained due to failure to establish the facts.

Accordingly, the same is dismissed.

(Order pronounced on 1.3.2017)

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