Airlines Win Tax Case: PSF & EBT Charges Not Taxable

The Tribunal ruled in favor of the airlines operator in a case concerning the liability of service tax on Passenger Service Fee (PSF) and Excess Baggage Ticket (EBT). It held that PSF collected for the airport authority did not attract service tax as the operator acted as an intermediary. Additionally, EBT charges, collected for excess baggage, were deemed integral to the main service and should not be separately taxed. The Tribunal also found that the demand for service tax on tickets sold before 1.5.2006 but used thereafter was time-barred, leading to the impugned order being set aside in favor of the appellant.

---

---

Issues:

1. Liability of service tax on Passenger Service Fee (PSF) and Excess Baggage Ticket (EBT) collected by the airlines.
2. Applicability of service tax on tickets sold before 1.5.2006 but used by passengers after that date.

Analysis:

Issue 1: Liability of service tax on PSF and EBT:
The case involved the appellant, an airlines operator, who collected total fare from passengers but deposited service tax only on the base fare and fuel surcharge. The service tax department initiated proceedings seeking confirmation of service tax demand for non-included PSF and EBT. The appellant argued that PSF collected on behalf of the airport authority and EBT charges were not taxable services. The Tribunal held that PSF collected for the airport authority did not attract service tax as the appellant acted as an intermediary. The Tribunal also ruled that EBT charges, collected for excess baggage, were integral to the main service of transporting passengers by air and should not be separately taxed under any other category.

Issue 2: Applicability of service tax on tickets sold before 1.5.2006:
Regarding tickets sold before 1.5.2006 but used by passengers after that date, the appellant contended that the show cause proceedings were time-barred. The Tribunal referred to previous decisions and held that the appellant was liable to pay tax on the tickets used after 1.5.2006. However, the demand confirmed beyond the normal period was barred by limitation, and the extended period of limitation could not be invoked. Therefore, the demand for service tax on tickets used after 1.5.2006 was not sustainable due to the limitation of time.

In conclusion, the Tribunal set aside the impugned order, ruling in favor of the appellant, based on the non-taxability of PSF, EBT charges integral to the main service, and the time-barred nature of the demand for service tax on tickets sold before 1.5.2006 but used thereafter.

---