2016 (9) TMI 1106 - AT - Service Tax

Exclusion of PSF Charges and Airport Taxes from Taxable Services Valuation in Service Tax Assessment

The Tribunal held that PSF charges and Airport Taxes should not be included in the value of taxable services for service tax assessment. The charges ... Includibility of PSF charges in value of taxable service - Includibility of Airport Taxes in value of taxable service - Charges collected on behalf of airport not part of assessable value - Service tax on gross consideration from international passengersIncludibility of PSF charges in value of taxable service - Charges collected on behalf of airport not part of assessable value - PSF (Passenger Service Fee) charges collected by the appellant are not includible in the value of taxable service 'Transport of passengers embarking in India for international journey by air services' and therefore not subject to service tax under that category. - HELD THAT: - The Tribunal examined whether PSF charges form part of the gross amount for providing the taxable air passenger transport service. Relying on its earlier decisions in Lufthansa German Airlines and M/s. Continental Airlines Inc. , the Tribunal observed that such charges are collected by the airlines on behalf of the airport authority and are paid over to the airport. As charges collected on behalf of the airport, they do not constitute consideration for any service provided by the airline to the passenger and therefore cannot be included in the assessable value of the taxable service. In view of these co ordinate Bench rulings, the impugned finding that PSF was taxable was set aside and the appeal allowed insofar as PSF is concerned.PSF charges are not includible in the taxable value and are not liable to service tax under the said category; impugned order set aside on this point.Includibility of Airport Taxes in value of taxable service - Charges collected on behalf of airport not part of assessable value - Airport Taxes collected by the appellant are not includible in the value of the taxable service and are not liable to service tax under the category 'Transport of passengers embarking in India for international journey by air services'. - HELD THAT: - The Tribunal considered whether airport taxes imposed on international passengers and collected by the airline form part of the consideration for the airline's taxable service. Following the same reasoning and precedent relied upon - Lufthansa German Airlines and M/s. Continental Airlines Inc. - the Tribunal held that such taxes are collected on behalf of the airport/government and are remitted to that authority; they do not represent payment for any service rendered by the airline. Consequently, airport taxes cannot be included in the assessable value of the airline's taxable service. The impugned order holding otherwise was set aside and the appeal allowed in respect of airport taxes.Airport Taxes are not includible in the taxable value and are not liable to service tax; impugned order set aside on this point.Final Conclusion: The appeal is allowed. The Commissioner (Appeals)'s finding that PSF charges and Airport Taxes are includible in the value of taxable international passenger transport services is set aside, following co ordinate Bench decisions that charges collected on behalf of the airport/authority and remitted to it are not part of the assesable value for service tax. Issues involved: Inclusion of PSF charges and Airport Taxes in the value of taxable services for service tax assessment.Analysis:1. PSF charges: The appellant argued that PSF charges should not be considered as part of the gross amount received for providing taxable services related to the 'Transport of Passengers embarking in India for International Journey by air services.' The appellant contended that PSF charges are not taxable under this service category. The Tribunal referred to previous decisions in cases like Lufthansa German Airlines vs. CST (Adjn.), New Delhi and M/s. Continental Airlines Inc. vs. CST, New Delhi, where it was held that charges collected by airlines on behalf of the airport and paid to the airport should not be included in the assessable value. The Tribunal agreed with this reasoning and allowed the appeal in favor of the appellant, setting aside the impugned order.2. Airport Taxes: The appellant also argued that Airport Taxes should not be included in the value of taxable services as they are in the nature of a tax deposited with the Government and not a service provided to passengers. The Tribunal, relying on previous decisions, reiterated that charges collected by airlines on behalf of the airport and paid to the airport should not be part of the assessable value for service tax assessment. The Tribunal found that the issue was squarely covered by previous decisions and, therefore, set aside the impugned order, allowing the appeal in favor of the appellant.In conclusion, the Tribunal held that both PSF charges and Airport Taxes should not be included in the value of taxable services for service tax assessment, based on the reasoning that these charges are collected by airlines on behalf of the airport and paid to the airport, and do not represent consideration for services provided to passengers. The Tribunal's decision was in line with previous decisions on similar issues, providing clarity on the treatment of such charges in service tax assessments.