By TIOL News Service

NEW DELHI, OCT 20, 2017: THE appellant is engaged in sale of entry tickets at the airport as per the agreement entered into with Airport Authority of India. The present dispute is for the period 10.09.2004 to 01.03.2005.

Facts of the case:

The appellant was granted licences by the Airports Authority of India ("AAI") for sale of airport entry tickets to visitors to the IGI airport, Delhi and the Chhatrapati Shivaji International Airport, Mumbai on 13th December 2001 and 20th August 2004 respectively.

The Assessee states that it was not allowed by the AAI to collect service tax on the entry tickets during the period from September 2004 to 1st March 2005. The AAI granted the Assessee the authority to collect service tax by a letter dated 2nd March 2005 whereupon the Assessee got itself registered and started collecting service tax from 2nd March 2005 onwards.

After the Assessee obtained registration, it was issued summons on 31st May 2005 by the Department. The case of the Assessee is that in response to the above submission it submitted a reply on 14th July 2005 in which inter alia it provided the details of services rendered at various stages along with the agreements with the AAI, statements of bank accounts from 1st April 2004 to 31st March 2005 and also complete ledger account for the sale of entry tickets.

On 7th November 2005 another summons was issued by the Department and in response thereto, a reply was furnished by the Assessee on 19th November 2005 enclosing the following documents:

(i) Copy of licence agreement entered into with the AAI.

(ii) Details of all payments made to the AAI.

(iii) Details of payment made to contractors for services created and maintained at the airport.

(iv) Details of services provided to organizations other than those of AAI.

(v) Copies of income tax returns along with details of balance sheet

On 4th December 2006 and 26th March 2007, the "voluntary statements" of the Manager of the Assessee were recorded by the Department.

On 16th March the Assessee took "Centralized Registration" at Commissionerate of Service Tax, Delhi in respect of airport services and by its letter dated 18th October 2007 it supplied the month-wise sales and service tax collected/deposited from all the sites from 10th September 2004 to March 2005.

Show cause notice dated 04.03.2008 was issued invoking extended period of limitation and demanding service tax amounting to Rs. 40,37,177/- for the period 10th September 2004 to 1st March 2005 by taking the view that the appellant has rendered "Airport Service" falling under Section 65(105)(zzzzm) read with Section 65(3c) of the Finance Act, 1994.

After due process of adjudication, the original authority confirmed service tax demand alongwith an order for payment of interest and imposition of penalty under various sections of the Finance Act, 1994.

The appellant challenged this order before the Commissioner (Appeals) who upheld the same.

The appellant did not get any relief from CESTAT inamsuch as their appeal was dismissed by holding thus -

We reported this order dated 2nd March 2017 -   2017-TIOL-1117-CESTAT-DEL. 

The appellant is, therefore, before the Delhi High Court and challenges the order on the ground that the same is perverse and without application of mind as well as on the ground of limitation.

The High Court observed that the CESTAT had on 16th December 2014 passed a detailed interim order concluding thus -

"6. We have considered the submissions made by both the sides. Prima facie, we are of the view that as per the decision of the Tribunal in the case of P.C. Paulose, (supra), the activity of sale of tickets for visitors is not leviable to service tax. Therefore as there are contrary views in that case, allegation of suppression cannot be alleged against the applicants. In these circumstances, extended period of limitation is not invokable. Therefore, prima facie, the applicant has made out a good case for complete waiver of pre-deposit. Accordingly, we waive the pre-deposit and stay the recovery of impugned adjudicated liability during the pendency of the appeal."

In the light of the aforesaid, the High Court remarked -

"21. The Court finds that the CESTAT has in the impugned final order dated 2nd March 2017 committed errors, some of which may be inadvertent but not all. For instance, the impugned order mentions the date of final hearing as 14th February 2013 whereas the interim order itself was passed on 16th December 2014 . Obviously the appeal was heard only thereafter.

22. Even if the above error could be said to be inadvertent, what is perplexing is that in para 6 of the impugned order the CESTAT purports to set out para 5 of the decision of the Supreme Court in P.C. Paulose, Sparkway Enterprises v. Commissioner of Central Excise & Customs -   2011-TIOL-06-SC-ST  whereas it has in fact set out para 5 of the CESTAT's order in that case which in fact was in favour of the Assessee. This is an obvious instance of non-application of mind by the CESTAT.

23. The central issue that had to be addressed by the CESTAT was whether the Department was justified in invoking the extended period of limitation of five years in terms of Clause (d) of the proviso to Section 73 (1) of the FA. On this aspect the CESTAT appears to have failed to note certain important dates and therefore came to the erroneous conclusion that the invocation of extended period of limitation by the Department was justified.

24. It may be recalled that the period for which the SCN was issued was 10th September 2004 to 1st March 2005. In terms of Section 73 (1) of the FA which states that the period within which the Assessee had to be served the notice for failure to collect service tax was one year from 1st March 2005, i.e., 28th February 2006. Within this period a series of events took place. One was that the Appellant obtained service tax registration on 2nd March 2005 and commenced collecting and depositing service tax. The Department was obviously aware of this fact. It issued summons to the Assessee on 31st May 2005 which was replied to by the Assessee on 14th July 2005.

25. … the Department did issue summons to the Appellant on 7th November 2005 which was replied to 19th November 2005. The Assessee did furnish with the said reply the agreements, payments made to AAI , payments to contractors, copies of ITRs, details regarding sale of entry tickets etc. pursuant to the licence agreement with the AAI to the Department. This was sufficient for the Department to proceed under Section 73 (1) of the FA within the period of one year. In any event, therefore, there was no question of the Assessee suppressing any material facts regarding the sale of entry tickets and its failure to collect service tax thereon for the above period from 10th September 2004 to 1st March 2005."

As regards the submission by the counsel for the Revenue that the mere failure to pay the service tax was by itself sufficient to conclude that there was suppression of material facts by the Assessee, the High Court observed that this contention stood negatived by the apex court decision in Uniworth Textiles Limited -   2013-TIOL-13-SC-CUS  [para 12 refers].

Concluding that the Department was not justified in invoking the extended period of limitation under clause (d) of the proviso to Section 73 (1) of the FA, the substantial question of law was answered in favour of the assessee by holding that the impugned order dated 2nd March 2017 passed by the CESTAT is without application of mind. And that the CESTAT had erred in holding that the extended period of limitation in terms of the proviso to Section 73 (1) of the FA was rightly invoked by the Department.

The impugned order dated 2nd March 2017 [2017-TIOL-1117-CESTAT-DEL] of the CESTAT was set aside and the appeal was allowed.

(See 2017-TIOL-2196-HC-DEL-ST)