TMI Blog2018 (4) TMI 1045X X X X Extracts X X X X X X X X Extracts X X X X ..... I 974 - CESTAT MUMBAI (LB)], in that case the appellant therein claimed the classification of their service as Transportation of Passengers by Air Service. But, the Tribunal after very detailed discussion of the facts and various case law on the subject as well as CBEC Circular No. 20/2009 dt. 09.02.2009 came to the conclusion that the services will be rightly classifiable under the category of “Supply to Tangible Goods Service”. Classification of the service rendered under the category of “Supply to Tangible Goods Service” upheld. Technical Inspection Certificate Service - reverse charge mechanism - Since the service received was from service providers situated abroad, the department has confirmed service tax demand against the appellant under Section 66A of the Finance Act - Held that: - the above payments were made by the appellant towards receipt of services from abroad - The service tax on such services is required to be paid by the recipient under the reverse charge basis in terms of Section 66A of the Act read with Rule 2(1)(d) of the Service Tax Rules, 1994 - demand upheld. Appeal dismissed - decided against appellant. - S. T. Appeal No. 3963 of 2012 - Final Order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se notice dated 11.01.2010 was issued to the appellant for recovery of allegedly non-paid service tax amounting to ₹ 2,06,42,902/- alongwith interest and also for imposition of penalty on them under section 76, 77 78 of the Finance Act, 1994. 5. The show cause notice was adjudicated by the Commissioner vide Order in Original dt. 29.06.2012 read with corrigendum dt. 07.09.2012 by which the Commissioner holding that the appellant s activity was Supply to Tangible Goods Service taxable u/s 65(105)(zzzzj) of the Finance Act, 1994, confirmed the total service tax demand of ₹ 1,83,75,373/- alongwith interest and also imposed penalty of equal amount on the appellant u/s 78 of the Finance Act, the penalty of ₹ 10,000/- was imposed u/s 77 of Finance Act, 1994. The service tax demand for remaining amount was dropped. The above confirmed demand of service tax also included Service tax under Technical Inspection Service. Being aggrieved, the present appeal has been filed. 6. Heard both sides and perused appeal record. 7. Sh. P. K. Sahu, ld. Advocate appearing for the appellant, pleaded that appellant were providing the services of transportation of passenger by air ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on-scheduled air transportation. 9. After hearing both sides and on perusal of record, we find that the substantial part of the demand has been raised under the category of supply of tangible goods service taxable under Section 65(105)(zzzzj) of the Finance Act, 1994. The core issue of the dispute is whether the service provided by the appellant is Transportation of Passengers by Air within India or Supply to Tangible Goods Service . The appellant has agreed that the former service became taxable only w.e.f. 01.07.2010 and hence for the disputed period no service tax will be payable under that category. The Adjudicating Authority has classified the service under the Supply to Tangible Goods Service and levied the service tax for the disputed period. 10. As per the terms of the agreements, the appellant were providing helicopter to the State Government for transportation of their personnel as and when required and for this purpose they were required to keep helicopter in readiness at particular places, maintain the same and also provide qualified and experience crew for their operation and maintenance. The expenses on fuel, maintenance, parking etc. are to be borne by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hold helicopter licence to operate the helicopter, compliance with all laws, rules, regulations, orders, standards and schedules as specified by the Directorate General of Civil Aviation was to be complied with by the appellant, who is the service provider. The appellant was also obligated to provide to the charterer, the helicopters daily in airworthy condition regularly on all 365 days of the year. For the services rendered the appellants were eligible for remuneration on a fixed monthly charge basis for thirty six months plus flying hourly charges. The helicopters were to be operated upon by the crew provided by the appellant and such crew have complete control over the actual flying operations. The agreement with Trans Ocean Offshore Deepwater Drilling Inc. was also for providing charter service to the company by the appellant. The said agreement also envisaged operation of the aircraft for the transportation of the passengers and passenger baggage as per the instructions and requirements of the client, the crew was to be provided by the appellant and all approvals, licences, permits was the responsibility of the appellant. For the services rendered consideration was paid to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... owners Association v. UOI. The question before the Hon‟ble High Court was whether the transaction involved in charter hiring of vessels for offshore explorations, is liable to tax under mining services or under supply of tangible goods for use service. Hon‟ble High Court in the said case held as follows:- 37. Entry (zzzzj) is entirely a new entry. Whereas entry (zzzy) covers services provided to any person in relation to mining of mineral, oil or gas, services covered by entry (zzzzj) can be identified by the presence of two characteristics namely (a) supply of tangible goods including machinery, equipment and appliances for use, (b) there is no transfer of right of possession and effective control of such machinery, equipment and appliances. According to the members of the 1st petitioner, they supply offshore support vessels to carry out jobs like anchor handling, towing of vessels, supply to rig or platform, diving support, fire fighting etc. Their marine construction barges support offshore construction, provide accommodation, crane support and stoppage area on main deck or equipment. Their harbour tugs are deployed for piloting big vessels in and out of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t petitioner to mining activities and hold that they fall in entry (zzzy). Entry (zzzzj) is not a specie of what is covered by entry (zzzy). Nature of the services rendered by the members of the 1st petitioner, legislative history of the two entries, various circulars to which, we have made reference and the relevant judgments which we have noted hereinabove lead us to hold that the entry contained in Section 65(105)(zzzy) of the Finance Act, 1994 does not apply to services provided by the members of the 1st petitioner .. The ratio of the above decision applies equally well to the facts of the present case. The above decision of the Hon‟ble High Court was affirmed by the Hon‟ble Apex Court also. In that view, supply of helicopters on charter hire basis would merit classification under supply of tangible goods for use service and we hold accordingly. 6.5 The appellant‟s contention that they have undertaken the services of transport of passengers by air and not supply of tangible goods for use is not borne out from the terms and conditions of the agreement entered into with the clients. It is the appellant‟s contention that they have the licence ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f providing the services pursuant to the agreement and the contractor shall not utilize the helicopter for any other purpose without the prior consent of the company. Accordingly, the helicopter could not be used by the assessee (contractor) for any other purpose without the prior consent of Heligo (company). It is evident that the agreement created an exclusive right in Heligo for use of the helicopter during its tenure. That Heligo exercised this right for the benefit of third party companies is, in turn, evident from the written submissions dated 23-3-2011 filed by the appellants‟ advocates, which read thus : even Heligo Charters Pvt. Ltd., in turn, charter the aircraft . The aircraft is chartered by many offshore and oil companies to ferry their personnel .. the aircraft has been used by independent third party offshore oil extraction/drilling companies . The flights undertaken by aircraft are commercial, revenue flights paid for by third party offshore companies. Obviously the end-users of the helicopter are the so-called third party companies which cannot be called members of the public . Popular dictionaries of English provide the following meani ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by complying with condition No. 104. This argument is fraught with analytical error. Any such dissection of the definition of scheduled air transport service as attempted by the counsel is not warranted to obtain the meaning of non-scheduled air transport service . This is because requirement (b) mentioned by him is not determinative of whether the air transport service is scheduled or non-scheduled . To our mind, the only difference between the two types of air transport service lies in the simple fact that one is scheduled while the other is non-scheduled , which would mean that scheduled air transport services involve flight services operated on the basis of a schedule of time whereas non-scheduled air transport services are without any time schedule for the flights. [This view is fortified by clause (9.2) of Passenger CAR , which deals with non-scheduled operators and their operations and says: In such operations, the operators shall not publish their time schedules as the operations are of non-scheduled nature.] Other features are common for both scheduled and non-scheduled services. It would follow that, like scheduled air transport service (passenger), non-sche ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ges are collected from the passengers. Therefore, the service provided cannot be considered as transport of passengers, but has to be considered as charter of aircraft. There is no doubt that the right of possession and effective control while in use by the charterer is not parted with. Thus the charter hire of helicopters to ONGC and other clients for flight operations as per their requirements cannot be said to be non-scheduled (passenger) services. Therefore, we reject the contention of the appellant in this regard. Consequently, we hold that the services rendered by the appellant in the instant case cannot be treated as air transport services for the transport of passengers. 6.6 The C.B.E. C. had also occasion to examine the issue and vide Circular No. 20/COMMR.(S.T.)/2009, dated 9-2-2009 the Board clarified, inter alia, as follows : It has been brought to the notice of the Board that many non-scheduled operator engaged in the business of giving the right to use the aircraft to its customers (Chartering of Aircrafts) are not paying service tax. The issue has been examined in the Board. With effect from 16-5-2008, service provided to any person by any other ..... X X X X Extracts X X X X X X X X Extracts X X X X
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