Tribunal sets aside demand for passenger service fee & airport taxes, penalty under Section 78 due to lack of evidence.

The Tribunal partially allowed the appeal, setting aside the demand related to passenger service fee and airport taxes, as well as the penalty under Section 78. The decision was based on the lack of evidence supporting wilful misstatement or suppression of facts by the appellant.

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Issues:
Appeal against service tax demand on transportation of passengers by air service, including fuel and insurance surcharge, passenger service fee, and airport taxes.

Analysis:
1. The appellant contested the service tax demand on fuel surcharge but not on passenger service fee and airport taxes. CESTAT judgments, including Lufthansa German Airlines and Continental Airlines Inc. cases, held that no service tax is payable on passenger service fee and airport taxes as they are not part of the assessable value.

2. The Departmental Representative argued that charges like fuel and insurance surcharge constitute part of the assessable value and are taxable. However, the appellant clarified that the issue of fuel surcharge was addressed with CBEC, and service tax was remitted after clarification.

3. The Tribunal noted that the appellant admitted and paid the service tax demand on fuel surcharge. CESTAT judgments distinguished the case of British Airways PLC, citing the rule declared ultra vires by the Delhi High Court. The Tribunal found no wilful misstatement or suppression of facts by the appellant.

4. Regarding the penalty under Section 78, a letter from CEBC clarified the inclusion of YQ and YR charges in the taxable value of services provided by airlines. The Tribunal observed that the appellant's actions were not deliberate or suppressive, citing various legal precedents that emphasize the need for positive evidence of wilful misstatement for imposing penalties.

5. Considering the analysis, the Tribunal partially allowed the appeal by setting aside the demand related to passenger service fee and airport taxes, as well as the penalty under Section 78. The decision was based on the lack of evidence supporting wilful misstatement or suppression of facts by the appellant.

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