M/s. Taneja Aerospace and Aviation Ltd. Versus Commissioner of GST & Central Excise Chennai
Service Tax
2019 (1) TMI 1307 – CESTAT CHENNAI – [2019] 71 G S.T.R. 324 (CESTAT–Chen)
CESTAT CHENNAI – AT
Dated:- 4-1-2019
Appeal No. ST/192/2012 – Final Order No. 40008/2019
Service Tax
Ms. Sulekha Beevi C.S., Member (Judicial) And Shri Madhu Mohan Damodhar, Member (Technical)
Ms. Rinky. N, Advocate for the Appellant
Shri A. Cletus, Addl. Commissioner (AR) for the Respondent
ORDER
Per Bench
Brief facts are that based on intelligence gathered, the officers of Central Excise conducted investigation and noticed that though the appellants provided airport services, renting of immovable property service, BAS etc. they were not discharging service tax on such services. Show cause notice was issued proposing to demand service tax under the categories of Airport service, Commercial Coaching and Training, BAS and Renting of Immovable Property service. After due process of
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e from DGCA in the Private Use Category and was inter alia engaged in providing Aircraft Charter services, renting of hangar for parking aircraft, aircraft upkeep services, maintenance and repair of aircraft etc. They had obtained service tax registration under BAS as well as Management, Maintenance and Repair services etc. The demand has been quantified on the basis of figures collected from the balance sheet and profit and loss account of the appellant for the period from 2005 – 06 to 2008 – 09 and on the basis of invoice for the period from 2009 – 10, which is as under:-
S. No.
Nature of Service
Amount (Rs.)
1.
Airport Service
1,77,95,415/-
2.
Business Auxiliary Service
1,12,28,111/-
3.
Renting of immovable property service
62,46,950/-
4.
Commercial Coaching and Training Service
10,09,843/-
Total
3,62,80,319/-
Further, the tax of Rs. 45,75,599/- had been paid by the appellant before detection of the case and therefore the net demand raised was of Rs. 3,1
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retrospective effect, and that the amendment was intended to clarify the intention of the legislature. She placed reliance on the Board Circular B2/8/2004-TRU dated 10.9.2004 and Circular No.334/1/2010-TRU dated 26.2.2010 to argue that the amendment does not have retrospective application. The decision in the case of Commissioner of Service Tax, Mumbai – I Vs. Soft Touch Aviation – 2016 (43) STR 120 (Tri. Mum.) was also relied in this regard.
2.4 It is submitted by ld. counsel that the adjudicating authority has wrongly included the charges recovered by the appellant on chartering of aircrafts, renting of hangar, management, maintenance and repair of aircraft, cost of supply of spares etc. under the category of airport services. The charges for chartering of aircrafts is liable to service tax under the category of Supply of Tangible Goods Service introduced with effect from 16.5.2008. The Board vide instructions Dy. No. 20/Comm. (ST) 2009 dated 9.2.2009 has clarified this. Thus durin
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he same were supplied to CESSNA aircraft. While it was in the nature of trading activity, the cost of spares was adjusted against commission receivables. That the department having admitted that the said services is in the nature of trading activity, the demand could not be confirmed on the ground that the cost of spare is included in the value of the services because at first there was no allegation to this effect in the show cause notice and in any case the issue is settled that the value of items supplied or sold in course of providing repair and maintenance service are not includible in the taxable value. She relied upon the decision in Tanya Automobiles P. Ltd. Vs. Commissioner of Central Excise – 2016 (43) STR 155 (Tri. All.). Further, in any case, the demand having been proposed under airport services, the same cannot be confirmed under the category of BAS. She therefore argued that the demand under the category of airport services is liable to be set aside.
2.5 In regard to th
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t alleging that no evidence was produced by the appellant to support the submission that the process amounts to manufacture. When the appellant has raised central excise invoices to these Government undertakings showing the exemption of excise duty and also collection of labour charges, it is very much understood that the appellant was undertaking job work of specialized fabrication which amounts to manufacture. The demand of service tax on such charges under BAS is not maintainable.
2.6 Again, under BAS, amount received as commission from CESSNA Aircraft Co. USA, was also held to be taxable. The appellant acts as a sales representative for an aircraft company in USA and has received the commission on sale of aircrafts. Since the service is consumed outside India, the said activity would come under export of services and is not subject to levy of service tax. Further, the amount has been received in foreign convertible currency. The adjudicating authority has confirmed the demand hold
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ategory of BAS is therefore liable to be set aside.
2.7 With regard to the demand on Commercial Coaching and Training service, she submitted that the appellant has provided training in the field of aviation science and also in maintenance and repair of aircrafts. The trainees seek employment after such course and therefore these are purely vocational training courses and is exempted under Notification No. 24/2004 dated 10.9.2004. She relied upon the decision in the case of Institute of Aeronautics & Engineering Vs. Commissioner of Central Excise, Bhopal – 2018 (10) GSTL 267 (Tri. Del.).
2.8 In regard to the demand on Renting of Immovable Property Service, the ld. counsel for appellant submitted that appellant is contesting only the penalty imposed. The issue with regard to Renting of Immovable Property service was highly contentious during the relevant period. In Home Solutions Retail India Ltd. – 2009 (14) STR 433 (Del.), the Hon'ble Delhi High Court had initially held that the said
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ts on the part of the appellant. The counsel pointed out that the Commissioner has imposed penalty both under sections 76 and 78 which is erroneous in law.
3. The ld. AR Shri A. Cletus supported the findings in the impugned order. He submitted that the appellant is given license to run an airport. The definition of Airport Authority under section (3d) of Finance Act, 1994 provides that Airport Authority includes any person having the charge of management f an airport or a civil enclave. The appellants have charge and control of the airport and therefore their activities would fall under 'Airport Services'. The definition of 'airport services' as it stood during the relevant period includes activities such as management of airport, service provided to airlines as well as for cargo and passenger airlines, transit facilities, warehousing charges etc. The contention of the appellant that the parking charges, hangar chargers would not fall within airport service is therefore incorrect. The
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d in foreign exchange. The Commissioner has rightly confirmed the demand on such commission amount under BAS. With respect to the argument of the ld. counsel that the chartering of aircrafts would fall under Supply of Tangible Goods services and would be taxable only from 16.5.2008, he argued that chartering of aircrafts would fall under airport services. The appellant has been authorized or given license to operate the airport and therefore all activity rendered by them in the airport would fall under the category of airport services. He therefore prayed that the impugned order does not does call for any interference.
4. Heard both sides.
5.1 At the foremost, we have to say that on perusal of the show cause notice, the demand is made under four categories of services namely Airport services, Commercial Coaching and Training services, BAS and renting of immovable property services. The charges collected by appellant for various activities like charter of aircrafts, hangar charges, re
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rport authority or by any other person in any airport or civil enclave.
Provided that provisions of Section 65A shall not apply to any service when the same is rendered wholly within the airport or civil enclave”
5.3 The ld. counsel has argued that the appellant not being authorized by airport authority, the activities would not fall within the definition of airport services. On perusal of the definition of airport authority, it reads as under:-
Section 64 (3d)
“Airports Authority” means the Airports Authority of India constituted under section 3 of the Airports Authority of India Act, 1994 (55 of 1994) and also includes any person having the charge of management of an airport or a civil enclave”
5.4 Any services provided or to be provided to any person by airport authority or any person authorized by it would fall under the said category. The license issued to the appellant authorizes the appellant to operate and manage the airport. So the services of the appellant within the air
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that all the services which have been carried out within the airport would be subject to service tax under airport services. Without properly mentioning the different charges which fell under this category of airport service and also without verifying whether the same amount has spill over into other category of services, it would be unfair and improper to demand service tax alleging that every services which is provided within the airport area would fall under airport services. For these reasons, we are of the opinion that the said issue requires reconsideration by the adjudicating authority.
5.5 The demand on BAS as per the submissions made includes the commission received from CESSNA, USA for the activity carried out by the appellant in sales / marketing of aircrafts. According to appellant these activities are to export of service. The authority below has rejected this plea holding that the services has accrued in India and also that the appellant has not received the payment in
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sales promotion on behalf of foreign principal, the benefit of services accrues outside India even if the activity is performed in India. For these reasons, the first limb of the requirement for export of service is satisfied. The second requirement is that the payment should be received in foreign exchange. In the present case, the appellant has adjusted the amount received by them in their accounts after deducting the expenses. The very same issue was analyzed by the Tribunal in the case of Arafath Travels Vs. Commissioner of Service Tax, Chennai as reported in 2017 (7) GSTL 437 (Tri. Chennai). In any case, the demand prior to 18.4.2006 cannot sustain as per the decision of the Hon'ble Supreme Court in the case of Indian National Shipowners Association. From the facts and following the decisions cited, we are of the view that the activity tantamounts to export of service and therefore not liable to service tax.
5.6 The second category of demand under BAS is with regard to goods sup
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Demand of Rs. 10,09,843/- has been raised The appellant has produced documents showing the details of these courses which help the students / candidates obtain employment after the course. The courses are in the nature of aviation science, maintenance and repair of aircraft etc. The said issue stands decided in the case of Institute of Aeronautics & Engineering (supra). Following the said decision, we are of the opinion that the demand under this category cannot sustain and requires to be set aside, which we hereby do.
5.8 With respect to demand under the category of Renting of Immovable Property service, it is submitted by ld. counsel that appellant is confining the contest only on penalties imposed. The issue whether Renting of Immovable Property is subject to levy of service tax was contentious during the disputed period. There were litigations pending in various High Courts as well as in the Tribunal. Thereafter, the legislation was amended in 2010 with retrospective application
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