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Kingfisher Airlines Ltd, Jet Airways Ltd. Versus Commissioner of Service Tax

2015 (11) TMI 54 - CESTAT MUMBAI (LB)

Demand of service tax - Transportation of goods by air - whether the service tax payable on excess baggage charges paid by the passengers at the time of boarding the aircraft - Difference of opinion - Majority order - Held that:- Carrying of baggage by the appellant Airlines is incidental to the service being ‘transport of passengers by Air' and the same is classifiable under Section 65(105)(zzn). There is no separate contract in the facts of the case for transport of goods (excess baggage). Mor .....

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inary course of business. I find that the issue is one of interpretation of the taxing statute and as such being debatable, there is no element of any fraud or suppression. Accordingly, the extended period of limitation is held not invocable. - there being no deliberate defiance of the provisions of law or non-compliance with the provisions of Service Tax, none of the penalties are held to be attracted. Accordingly, I agree with the learned Member (Judicial) on this point. Thus, the penalties ar .....

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ppellants are in appeal against impugned orders wherein service tax is demanded from them under the category of transportation of goods by air alongwith interest and various penalties have also been imposed. 2. As issue involved is common, therefore all the appeals are being taken up together and are being disposed of by this common order. 3. The brief facts of the case are that the appellants are airline services and providing services namely, transport of passengers by air and transport of goo .....

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e amount collected as excess baggage charges. In these circumstances, the proceedings were initiated against both the appellants and demands of service tax have been confirmed by invoking the extended period of limitation alongwith interest and various penalties have been imposed. Aggrieved by the said orders, the appellants are before us. 4. Heard the parties. 5. The learned counsels for both the appellants have advanced arguments and are almost common. Therefore the arguments are recorded comm .....

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incipal supply. It is further clarified that a supply which comprises a single supply from an economic point of view should not be artificially split. The method of charging or invoicing does not in itself determine whether the service provided in a single service or multiple services. It is further submitted that the Commissioner of Service Tax vide his letter dated 15.04.2014 has explained that the service of transport of excess passenger baggage would be bundled with the service of transport .....

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Commissioner Customs & Excise vs British Telecommunication Plc 1999 UKHL 3. It is argued that internationally excess baggage charges are treated as incidental and part and parcel of transport of passengers by air service only. It is further submitted that merely because charges for excess baggage were collected separately from the passengers, it cannot be held that a separate service has been provided by the appellants to the passengers. In fact, there are two part tariff, one charges at th .....

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tax can be demanded thereon. To support this contention, the appellants relied upon the Circular No. 121/2/2010-ST dated 26.4.2010. Finally, it is argued that the extended period of limitation is not invocable in the facts and circumstances of the case. 7. The Central Board of Excise & Customs Circular No. 104/7/2008-ST dated 6.8.2008 is also relied upon by the appellant. 8. The appellants also relied upon the decision of the Tribunal in the case of Hira Industries ltd vs CCE, Raipur report .....

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s are included in the cost of the tickets and that is separately charged from the passengers. In these circumstances the excess baggage charges are required to be taxed under the category of transportation of goods by air. Therefore, the appeals are required to be dismissed. For the extended period, it is contended that the appellants are collecting the excess charges and are not paying service tax thereon deliberately. Therefore, in these circumstances the extended period of limitation is invoc .....

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excess than the permitted limit, then he has to pay the excess baggage charges. In these circumstances, the main service provided by the airline is transportation of passenger by air. The excess baggage charges are the integral part of the service of transportation of passenger by air. 12. Section 65A of the Finance Act,1994 also deals with the situation which is reproduced hereunder: 65A. Classification of taxable services - (1) For the purposes of this Chapter, classification of taxable servi .....

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ed in the manner specified in clause (a), shall be classified as if they consisted of a service which gives them their essential character, in so far as this criterion is applicable; 13. From the above provisions, it is clear that when taxable service comprises of more than one services then such services shall be classifiable under the taxable head which gives its essential characteristic. In this case, we have seen that the question of excess baggage charges arises when passenger is transporte .....

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impugned periods. Therefore, the appellants are not required to pay any service tax on excess baggage charges during the impugned period as the excess baggage charges is an integral part of the main service provided by the appellants, namely transportation of passenger by air. 15. We have also seen that the issue in question is debatable issue for classification of the service on the basis of various judicial pronouncements. In these circumstances, the extended period of limitation is not invoc .....

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ervice Tax is payable by Airline Operators on excess baggage charges paid by passengers at the time of boarding the Air Craft under the category of transport of goods by aircraft service under Section 65(105) (zzn) Or Whether the service provided for carrying excess baggage is air transport of passenger service under Section 659105(zzzo) and service Tax will not be payable separately, the excess baggage being an integral part of the main service nemaly, transportation of passenger by Air. 19. It .....

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efore no occasion arises for clubbing this service with the service of transportation of passengers. It is only the free baggage allowed with the passenger ticket that can be called as incidental to the transportation of passengers because no separate charges are levied for free baggage. It is incidental because the free baggage is apparently included in the cost of the ticket. But when the transportation of excess baggage is being charged separately and is being paid for distinctly and separate .....

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cases, the passenger will be asked to file a Bill of Entry as in the case of Commercial Cargo. Thus the baggage becomes Commercial Cargo and its transportation will be leviable to Service Tax. A hotel may provide two services and charge for them separately. For example, it may provide room rent service and restaurant service. In such cases, service tax is leviable on the two services. But when free breakfast is part of room rent, only then it may be said that the breakfast service is incidental .....

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excess of 10% of the gross value of the ticket or ₹ 100/- per journey whichever is less, for passenger transporting in any class within India. Respectfully, I disagree with my Ld. brother who has viewed that because the appellants are paying Service Tax which is fixed per passenger, therefore the appellants are not required to pay tax on excess baggage. As I discussed above, the situation does not warrant to consider the excess baggage service as an integral part of the passenger services .....

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ken into its components. The facts of present case are distinguishable because there are two separate components. Board Circular states that while taking a view, both the form and aspects are to be taken into account. The guiding principle is to identify the essential features of the transaction and in the present situation there are two essentially different transactions, one for passenger and the other for excess baggage. The reliance on the CBEC DOF No. 334/1/2008-TRU dated 29.02.2008 appears .....

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t . The reliance on this Circular is misplaced because here we are dealing with distinctly separate elements. And this is not a case where supply of services is being artificially split from an economic point of view. In fact the separate transaction and separate invoicing for passenger and baggage does not suggest a single supply of service. 19.2 The reliance of the cases of Hira Industries (supra) and Ramakrishna Reddy (supra) is not appropriate as they do not bear the same facts. In the first .....

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s cited by the appellants, the activities of loading and transportation were taken under a composite contract and paid for accordingly. However in the present case there is no composite transaction and transportation of passengers and baggage are paid for, separately. 19.3 The appellants have relied upon Section 65A of the Finance Act, 1994, to contend that, under Section 65(2)(a), the sub-clause which provides the most specific description shall be preferred. And under sub-clause (b) composite .....

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case the sub-clause (zzn) occurs before the sub-clause (zzzo) which refers to passenger transportation. Thus by following the principles of classification laid down in Section 65A too, the preferred classification will be under category will be under category of transportation of goods'. 19.4 In the written submission, the learned Counsel for the second appellant also tried to argue that baggage cannot be treated as goods, by relying on the definition of goods given under Section 2(7) of Sa .....

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re cannot be treated as goods. A plain reading of the above definition shows that the first para of the definition reads a, goods means every kind of movable property other than actionable claims and money. This part obviously indicates that baggage gets covered under the terms goods . The learned Counsel has also referred to the VAT Laws of other countries. Here we are dealing with a situation for a period prior to the introduction of the Negative List concept which was introduced in 2012. The .....

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ance is placed on Bharat Roll Industry (Pvt.) Ltd. vs. CCE, Haldia - 2008 (229) ELT 0107 (Tri-Cal). The appellants have not been able to show any judgment of the Courts to support a view that the issue of classification of excess baggage and the liability of Service Tax on such excess baggage was a debatable issue. In the case of Jetlite India vs. CCE - 2011 (21) STR 80 (Tri-Delhi), it was held that excess baggage charges are leviable to Service Tax. The issue is very clear and the failure to pa .....

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994. They also did not file appropriate half yearly Service Tax returns under Section 70 read with Rule 7 ibid. These are mandatory requirements and the appellants are not new to Service Tax law. They are big organizations who have ignored the requirement of the law specially keeping in view the fact that they were charging the passengers for the excess baggage. Therefore, they are liable to penalty under Section 77 of the Finance Act, 1994. 21.2 The appellants are paying service tax on passenge .....

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na Podwal reported in 2006 (1) STR 185 (Ker .) has held that the incidents of imposition of penalty under Sections 76 and 78 of the Act are distinct and separate under two provisions and even if offences are committed in the course of the same transaction or arise out of the same act, penalty is imposable for ingredients of both offences. However, the Hon'ble Karnataka High Court in the case of CST, Bangalore vs. Motor World - 2012 (27) STR 215 (Kar) - took a view contrary to that taken by t .....

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that the excess baggage charges collected by the appellant is an integral part of the main service namely transportation of passenger by air therefore, the demand is to be set aside. OR Whether Member (Technical) is correct in holding that the excess baggage charges are required to be taxable under the category of transportation of goods by air craft. 2. Whether in the facts and circumstances of the case the Member (Judicial) is correct in holding that extended period of limitation is not invok .....

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ronounced in Court on 2/12/14) M/4762-4765/15/STB In Continuation with Order No. M/2026/14/CSTB/C-I Dtd: 18/9/14 / 2/12/14 Third Member's Decision Appeal No. ST/865-866/12, ST/86071 & 86819/14 M/s. Kingfisher Airlines Ltd. , M/s Jet Airways Ltd. Versus Commissioner of Service Tax, Mumbai -I Date of hearing : 23.04.2015 Date of decision: 16.09.2015 Per Anil Choudhary I have heard the parties at length and also gone through the orders recorded by my brothers learned Member (Judicial) and l .....

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which gives to the service its essential character or which provides the most descriptive description shall be a criteria for classification. 2. On the other hand, the learned Member (Technical) has held that as the charges are collected separately - for the service of transport of passengers by Air' and for the levy of charges of excess baggage'. Thus, the levy of Service Tax for excess baggage' is not incidental and the same is separate and distinct. It is further held that two se .....

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Air' and the same is classifiable under Section 65(105)(zzn). There is no separate contract in the facts of the case for transport of goods (excess baggage). More particularly, in the case of agreement of transport of passengers by Air, there is no element of transport of unaccompanied goods. Thus, agreeing with the learned Member (Judicial), I hold that the excess baggage charges collected by the appellant Airlines is integral part of the service provided for transport of passengers by Air .....

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