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M/s. Lufthansa German Airlines Versus Commissioner of Service Tax, (Adjn) , New Delhi

2016 (4) TMI 780 - CESTAT NEW DELHI

Service tax liability - Passenger service fee being collected by the appellant on behalf of air port authority of India and being paid by them to the said authority - Held that:- by following the decision of Tribunal in the case of M/s Continental Airlines Inc vs. CST, New Delhi [2015 (7) TMI 1079 - CESTAT NEW DELHI], no service tax liability would arise in respect of passenger service fee being collected by the appellant on behalf of air port authority of India and being paid by them to the sai .....

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, DR ORDER PER MS. ARCHANA WADHWA : The appellant is engaged in providing services of transport of passenger by air embarking in India for international journey by air service and were duly registered with service tax department. With the introduction of service tax on said category of services with effect from 01.05.2006, the appellant was discharging its service tax liability. 2. The total charges collected by the appellant from their clients for providing the said services involve 4 component .....

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lue of service. It was only with the issue of Boards circular No. 85/3/2006-ST dated 17.10.06 that the issue became clear, when it was clarified that fuel surcharge is also the administrative fee and would form part of the assessable value of the service for the purpose of levy of Service tax. Learned advocate submits that immediately thereafter they deposited the differential service tax along with interest, prior to the issue of show cause notice on 28.5.08. The said show cause notice which c .....

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of other two allegations, he has no instruction to contest the same and only contest in respect of two components is relatable only to penalty and it is the third component of passenger service fee which is being contested by them. 4. After hearing the learned DR, we find that the fact of payment of service tax on basic fare as also the fact of subsequent payment of service tax along with interest on two components of fuel surcharge and administrative surcharge is not in dispute. We find that ad .....

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clarified that service tax is leviable on total value of the booking representing the consideration of single composite service. It was in these circumstances that the appellant deposited the tax subsequent to the clarification, along with interest. There was also deposit of a part of service tax in respect of the basic fare belatedly. We also note that in respect of payment of service tax on the basic fare, lot of representational communication was going on between the airlines and the Board an .....

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red by the Tribunal in the case of M/s/ Continental Airlines Inc vs. CST, New Delhi [2015-TIOL-1481-CESTAT-DEL] and by rejecting the Revenues stand that the air port tax (which are equivalent to passenger service fee) were collected as part of the gross amount received for the service rendered and as such, should be includable in the assessable value, it was held that such airport tax which are being collected by the airlines is on behalf of the airport and were paid to the air port and as such .....

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awing our attention to the submissions made by the appellants in that case, he submits that it was pleaded before the Tribunal that levies and charges which are being collected by the appellant from their clients are on actual basis and are being reimbursed by them to the air port authorities, for whom them are acting as a machinery for collection of such levy charges. It was contended before the Bench that the same cannot be added in the value of services being provided by the appellants. Howev .....

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arrived at by referring to and relying upon the provisions of Rule (5) of Valuation Rules. 6. However, we find that the Honble Delhi High Court in the case of Intercontinental Consultants & Technocrats Pvt. Ltd. vs. Union of India [2013 (29) STR 9 (Del)] has struck down it as bad in law. For better appreciation, the relevant para is reproduced as under:- 10. The contention of the petitioner that Rule 5(1) of the Rules, in as much as it provides that all expenditure or costs incurred by the .....

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e determination of the value of the taxable service for the purpose of charging service tax under Section 66 as the gross amount charged by the service provider for such service provided or to be provided by him, in a case where the consideration for the service is money. The underlined words i.e. for such service are important in the setting of Sections 66 and 67. The charge of service tax under Section 66 is on the value of taxable services. The taxable services are listed in Section 65(105) .....

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delegated legislation and authorises the Central Government to make rules by notification in the official gazette, such rules can only be made for carrying out the provisions of this Chapter i.e. Chapter V of the Act which provides for the levy, quantification and collection of the service tax. The power to make rules can never exceed or go beyond the section which provides for the charge or collection of the service tax. 11. In the aforesaid backdrop of the basic features of any legislation on .....

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e considered as the gross amount charged by the service provider for such service provided by him. The illustration 3 given below the Rule amplifies what is meant by sub-rule (1). In the illustration given, the architect who renders the service incurs expenses such as telephone charges, air travel tickets, hotel accommodation, etc. to enable him to effectively perform the services. The illustration, therefore, says that these expenses are to be included in the value of the taxable service. The i .....

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ended; at any rate, double taxation cannot be enforced by implication. A Constitution Bench of the Supreme Court in Jain Brothers v. Union of India - (1970) 77 ITR 107 observed as follows, expounding the principles relating to double taxation :- It is not disputed that there can be double taxation if the legislature has distinctly enacted it. It is only when there are general words of taxation and they have to be interpreted, they cannot be so interpreted as to tax the subject twice over to the .....

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ecovery of the tax, once the legislature has, in clear terms, indicated that the income of the firm can be taxed in accordance with the Finance Act of 1956 as also the income in the hands of the partners, the distinction between a charging and a machinery section is of no consequence. Both the sections have to be read together and construed harmoniously. It is significant that similar provisions have also been enacted in the Act of 1961. Sections 182 and 183 correspond substantially to section 2 .....

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