2025 (6) TMI 1734 - AT - Service Tax

Demand u/s 73A - Amount collected by the assesse in the nature of service tax or not - collection of 13% airport authority levy by the appellant from their clients - demand raised under Best Judgment method under section 73 of the Finance Act 1994 - Levy of service tax when appellant has been discharging VAT on the AAI levy collected with respect to the transaction related to sale of food beverages - Levy of penalty. Inclusion of component of service tax or not - collection of 13% airport authority levy by the appellant from their clients - applicability of section 73A of FA 1994 - HELD THAT - Section 73A (w.e.f. 18.04.2006) provides that any person who has collected any amount in excess of Service Tax assessed or determined and paid on any taxable service from recipient of Service Tax in any manner as representing Service Tax shall forthwith pay the amount so collected to the credit of the Central Government.The provisions of this section come to play only when any excess amount has been collected as service tax from the service recipient. If such amount of service tax is collected which is in excess of service tax assessed or determined or paid on any taxable service such amount is required to be deposited forthwith to the credit of the Central Government. In this context it is noted that the word Collection precedes payment . Thus if no amount of service tax is collected then section 73A is not applicable. The Tribunal in Alstom Projects India Ltd. v. CC CE ST Coimbatore 2013 (6) TMI 202 - CESTAT CHENNAI held that so far as section 73A is concerned it applies only when a person collects any sum in name of service tax which could not have been done by a person claiming all through that he is not liable to pay Service Tax. A perusal of the sample invoice raised by the appellant on Singapore Airlines (invoice no. 001753 dated 30.09.2013) on sale of food and beverages reveals that the appellant has charged VAT at various applicable rates and AAI levy at 13% from the client. There are no collection of any amount representing as service tax in the said invoice. Section 73A is categorical that the amount should have been collected as Service tax and not deposited. In the instant case no such evidence has been brought forward by the Revenue to establish that the said amount representing service tax was collected by the appellant from the sale of Food and beverages - The charging section 73A categorically applies only when a person collects any sum in name of service tax which is not the case in this appeal. In the instant case it has been demonstrated by the learned Counsel that no amount was collected by the appellant representing service tax in their sale invoices raised in respect of food and beverages. What has been collected is VAT and AAI levy. It is also on record that the appellant had duly deposited service tax collected on invoices raised in respect of provision of services. The department has not disputed this fact. The impugned order has held that Apparently no Service Tax has been collected by the Appellant separately on the AAI levy from their clients either in the invoice pertaining to supply of food or provision of services - A perusal of the invoices reveal that VAT AAI levy and service tax and AAI levy was collected on the invoices issued to their customers. However it is not required to accept that service tax was not indicated separately in the invoices issued for provision of services. Demand raised under Best Judgment method under section 73 of the Finance Act 1994 - HELD THAT - It has been held in the impugned order that the instant show cause notice has incorrectly been issued under section 73 - If the instant SCN is to be considered to have been issued under Section 73A then the said demand cannot be upheld. Levy of service tax when appellant has been discharging VAT on the AAI levy collected with respect to the transaction related to sale of food beverages - HELD THAT - The said demand has been raised on the transactions where VAT was paid by the appellant on sale of food and beverage. Consequently on this ground as well the demand cannot be sustained. Levy of penalty - HELD THAT - Once demand cannot be sustained the penalties are also not sustainable. Conclusion - i) Section 73A is categorical that the amount should have been collected as Service tax and not deposited. In the instant case no such evidence has been brought forward by the Revenue to establish that the said amount representing service tax was collected by the appellant from the sale of Food and beverages. ii) Payments of service tax as also the VAT are mutually exclusive. Therefore they should be held to be applicable having regard to the respective parameters of service tax and the sales tax as envisaged in a composite contract as contradistinguished from an indivisible contract. iii) The appellant had not collected any amount representing service tax in their sale invoices raised in respect of food and beverages. iv) Once demand cannot be sustained the penalties are also not sustainable. The impugned order set aside - appeal allowed.

Summary

The core legal questions considered by the Tribunal in this appeal are as follows:

1. Whether the demand of service tax under Section 73A of the Finance Act, 1994, for amounts allegedly collected by the appellant as service tax on the Airport Authority of India (AAI) levy, is sustainable, particularly when the appellant contends that no amount representing service tax was collected from customers on sale of food and beverages.

2. Whether the extended period of limitation could be invoked for recovery of service tax demands under Section 73A for periods prior to the insertion of Section 73A in the statute (i.e., before 18.04.2006).

3. Whether the demand under Section 73A can be sustained when the appellant had paid VAT on the sale of goods (food and beverages) and service tax on provision of services, and whether VAT and service tax are mutually exclusive taxes.

4. Whether the impugned order is a speaking order and whether natural justice was observed, including specification of the exact sub-section of Section 73A under which demand was raised.

5. Whether the demand under the Best Judgment assessment under Section 73 for the period 2012-13 is sustainable, given the SCN was issued under Section 73 but treated as under Section 73A.

6. Whether the appellant collected any amount "in any manner as representing service tax" as required under Section 73A to attract the provisions of forfeiture and recovery.

7. Whether the appellant's contention that the AAI levy was an independent charge and the service tax on the same was paid to DIAL, is substantiated and whether the appellant retained any service tax amount collected from customers.

8. Whether the Department's reliance on audit objections without further investigation suffices to confirm the demand.

9. Whether the provisions of arrest under the Finance Act, 1994, as amended, are applicable in the facts of the case.

Issue-wise Detailed Analysis:

1. Applicability of Section 73A for the Demand of Service Tax on AAI Levy

The legal framework under Section 73A mandates that any person liable to pay service tax who has collected any amount in excess of the service tax determined or assessed, or any amount collected which was not required to be collected, "in any manner as representing service tax," must pay such amount to the Central Government forthwith. The Tribunal noted that Section 73A came into effect from 18.04.2006 and is a forfeiture provision applicable only where an amount representing service tax has been collected and retained.

Precedents cited include the Tribunal's decisions in Alstom Projects India Ltd. and Neel Sidhi Enterprises, which emphasize that Section 73A applies only when a person collects an amount as service tax and retains it. The Supreme Court's ruling in R.S. Joshi v. Ajit Mills Limited was also relied upon to clarify that "collected" means collected and kept as one's own, not merely held in suspense or to be refunded if found not payable.

The appellant's invoices for sale of food and beverages showed collection of VAT and AAI levy but did not indicate any separate collection of service tax. The Department's contention that service tax was collected on AAI levy in invoices for provision of services but not on sale of goods was challenged by the appellant, who pointed out the absence of any clear indication of service tax collected on AAI levy in the invoices related to food and beverages.

The Tribunal examined the invoices and found that no amount representing service tax was collected on sale of food and beverages, and the service tax collected on provision of services was duly paid to the Government. The Department's presumption that service tax was collected on AAI levy across all transactions was rejected as lacking evidentiary basis.

The Tribunal also referred to the Principal Bench's decision in MakeMyTrip, which held that Section 73A is not attracted unless an amount is collected "in any manner as representing service tax" and retained. In that case, amounts collected as taxes and fees on behalf of hotels were remitted to the hotels, and no amount was retained by the appellant, thus Section 73A was held inapplicable.

Accordingly, the Tribunal concluded that the demand under Section 73A could not be sustained for five of the six show cause notices, as no amount representing service tax was collected on sale of food and beverages.

2. Invoking Extended Period of Limitation and Demand for Period Prior to 18.04.2006

The appellant contended that Section 73A was inserted only with effect from 18.04.2006 and therefore could not be invoked for the period 2004-05 to 2005-06. The appellant argued that for this period, the provisions of Section 11D of the Central Excise Act (pari materia to Section 73A) read with Section 83 of the Finance Act, 1994, should have been invoked, which was not done.

The Tribunal relied on the Delhi High Court decision in Hindalco Industries Ltd., which held that Section 11D cannot be invoked for recovery of amounts collected prior to its introduction. Since the Department failed to invoke Section 11D for the period prior to 18.04.2006, the demand for that period was held unsustainable.

3. Mutual Exclusivity of VAT and Service Tax

The appellant submitted that VAT was paid on the sale of food and beverages, and service tax was paid on provision of services. The appellant relied on the Supreme Court's decision in Imagic Creative Pvt Ltd., which held that VAT and service tax are mutually exclusive and cannot be levied on the same transaction. The Tribunal agreed that since VAT was paid on the sale of goods, no service tax demand could be sustained on the same transaction.

4. Nature of the Impugned Order and Natural Justice

The appellant argued that the impugned order was a non-speaking order, merely replicating allegations in the show cause notices without independent analysis, and did not specify the sub-section of Section 73A under which demand was raised. The Tribunal noted that the SCNs and order failed to specify the exact sub-section of Section 73A invoked, which was a violation of natural justice principles. The appellant's reliance on precedents such as Amrit Foods and Naresh Kumar Gupta was noted, which emphasize the requirement of clarity in allegations and reasons in adjudicatory orders.

However, the Tribunal did not dwell extensively on this point in its final conclusions, focusing instead on the substantive issues.

5. Demand under Best Judgment Assessment under Section 73

The show cause notice dated 22.05.2014 was issued under Section 73 but treated as under Section 73A in the impugned order. The Tribunal held that if the SCN was to be considered under Section 73A, the demand could not be sustained for reasons discussed above. The Tribunal did not find merit in sustaining the demand under Section 73 in the circumstances.

6. Whether Amounts Were Collected "In Any Manner as Representing Service Tax"

The Tribunal emphasized that Section 73A requires the amount to be collected as service tax, which must be clear and unambiguous from invoices, bills, contracts, etc. The appellant's invoices clearly showed VAT and AAI levy but no amount representing service tax on sale of food and beverages. The Department's reliance on presumption that service tax was collected on AAI levy in all invoices was rejected as insufficient.

The Tribunal also referred to the Board's Circular No. 201/11/2016-ST, which provides guidelines for arrest in service tax cases, emphasizing that for an arrest or demand under Section 73A, there must be clear evidence of collection of service tax as such, exceeding Rs. 2 crore, and failure to pay the amount collected. The absence of such clear evidence weighed against the Department's case.

7. Appellant's Payment of Service Tax on AAI Levy to DIAL and Whether Any Amount Was Retained

The Department contended that the appellant collected service tax on the AAI levy from customers but failed to pay it to the Government, retaining the amount. The appellant countered that it had paid service tax on AAI levy to DIAL and had not retained any amount. The appellant also pointed out the absence of any invoice from DIAL evidencing the service tax paid.

The Tribunal found that the appellant had paid service tax on provision of services and that the Department did not dispute this fact. The Department's failure to produce invoices from DIAL or establish retention of service tax by the appellant undermined its case. The Tribunal held that no prima facie case was made out that the appellant had retained any amount collected as service tax.

8. Reliance on Audit Objections Without Further Investigation

The appellant submitted that the show cause notices were based solely on audit objections without further investigation or independent verification. The Tribunal noted that the impugned order replicated audit allegations without detailed analysis or evidence. This weakened the Department's case, as mere audit objections without corroborative evidence are insufficient for confirming demands.

9. Applicability of Arrest Provisions

The Tribunal referred to the Board's Circular on arrest guidelines, which restrict arrest powers to cases where an amount exceeding Rs. 2 crore has been collected as service tax and not paid to the Government within six months. The absence of clear evidence of collection and retention of service tax by the appellant meant that arrest provisions were not applicable.

Significant Holdings:

"Section 73A is categorical that the amount should have been collected as Service tax and not deposited. In the instant case, no such evidence has been brought forward by the Revenue to establish that the said amount representing service tax was collected by the appellant from the sale of Food and beverages."

"The word 'collected' can only refer to cases where a person collects an amount from another with an intention to retain the said amount. If the dealer merely gathered the sum by way of tax and kept it in suspense account because of dispute about taxability or was ready to return if eventually it was not taxable, it is not collected."

"Payments of service tax as also the VAT are mutually exclusive. Therefore, they should be held to be applicable having regard to the respective parameters of service tax and the sales tax as envisaged in a composite contract as contradistinguished from an indivisible contract."

"The impugned order has held that 'Apparently, no Service Tax has been collected by the Appellant separately on the AAI levy from their clients either in the invoice pertaining to supply of food or provision of services'. If that is the basis of the argument of the Revenue, then it has to be held that the appellant did not pass on the burden of service tax to his client, and has paid service tax out of his pocket. That is an absurd conclusion to reach as service tax, amongst others, is an indirect Tax, wherein the burden of the tax is borne by the customer/client."

"The appellant had not collected any amount representing service tax in their sale invoices raised in respect of food and beverages. What has been collected is VAT and AAI levy. It is also on record that the appellant had duly deposited service tax collected on invoices raised in respect of provision of services."

"The demand under Section 73A cannot be sustained in respect of five of the Show Cause Notices issued to the appellant."

"Once demand cannot be sustained, the penalties are also not sustainable."

Consequently, the Tribunal set aside the impugned order and allowed the appeal.