ST - Claim for exclusion of amounts on basis of acting as pure agent can be made only if all conditions for such concept are fulfilled: CESTAT
By TIOL News Service
NEW DELHI, MAR 26, 2017: THE appellants are engaged in air transport of passengers. 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 appellant contested the inclusion of airport services and PSF in the value for taxation.
The Original Authority confirmed the service tax liability and imposed equal amount of penalty.
The Commissioner (Appeals) upheld the order except for treating the gross amount as inclusive of service tax and ordering re-computation of tax liability. The penalties imposed on the appellant were set aside invoking the provisions of Section 80 of FA, 1994.
Aggrieved, the appellant is before the CESTAT and submits that they are not contesting the tax liability on fuel and insurance surcharge collected from the passengers and that they have paid Rs.13,64,299/- towards tax liability on this count along with the interest of Rs.2,56,282/- before issuance 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 on the ground that these charges/taxes are collected by the Airlines on behalf of the Airport Authorities concerned and remitted to such Authorities, in full. Inasmuch as they are acting only as agents for such collection and no service is provided by them to the passengers in lieu of such taxes/charges.
The AR submitted that different Airlines are following different practices and, therefore, facts of each case are to be examined before applying the ratio of decisions delivered in case cited in support [Continental Airlines Inc - 2015-TIOL-1481-CESTAT-DEL. It is emphasized 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. and in the absence of such supporting evidence, no general conclusion to exclude such charges can be made.
The CESTAT noted that the appellant was advised during the last hearing 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.
It was further observed -
+ While we note that any amount collected from the passenger specifically identified for the particular service, to be rendered by other than 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.
+ 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.
Concluding that the ratio in the cases cited by the appellant cannot be universally adopted for all airlines unless categorical evidences are presented, the appeal was held unsustainable due to failure to establish the facts.
The appeal was dismissed.
(See 2017-TIOL-986-CESTAT-DEL)
