Aircraft chartering services on hourly basis are taxable goods services, but demand set aside due to time-barred notice

CESTAT NEW DELHI held that aircraft chartering services charged on hourly basis constitute supply of tangible goods services, taxable since 16.05.2008, not transportation of passengers by air service. However, the tribunal allowed the appeal finding the show cause notice dated 18.06.2013 was time-barred as extended limitation period was wrongly invoked. The appellant had bonafide belief their services were non-taxable transportation services before 01.07.2010 and regularly discharged tax liability thereafter. Department failed to prove malafide intent for tax evasion. Entire demand was set aside due to limitation, and penalty was not imposed.

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Issues involved: Determination of tax liability under service tax for services provided by appellant, invocation of extended period of limitation, classification of services as "transportation of passengers by air service" or "supply of tangible goods services."

Tax Liability Determination:
The appellant provided Aircraft/Helicopter on charter hire along with their crew, leading to a dispute on the taxability of services. The Department alleged non-registration and proposed recovery of service tax, interest, and penalties. The appellant contended that their services fall under "transportation of passengers by air service" taxable from 01.07.2010, and not under "supply of tangible goods services" taxable from 16.05.2008. They argued for setting aside the order based on bonafide belief and cited relevant case laws.

Extended Period of Limitation:
The Department invoked the extended period of limitation for raising the demand. The appellant argued against the invocation, stating no suppression of facts and their bonafide belief regarding the classification of services. They relied on various legal precedents to support their stance.

Classification of Services:
The Tribunal deliberated on whether the services provided by the appellant should be classified under "transportation of passengers by air service" or "supply of tangible goods services." Considering past decisions and the appellant's compliance post-2010, it was concluded that the services are classifiable as "Supply of Tangible Goods Services" taxable since 16.05.2008. The Tribunal held the Show Cause Notice as time-barred and set aside the order, allowing both appeals with consequential benefits to the appellants.

Judges' Separate Opinion:
No separate judgment was delivered by the judges in this case.

This summary provides a detailed breakdown of the issues involved in the legal judgment, including the tax liability determination, the invocation of the extended period of limitation, and the classification of services, along with the final decision and relevant arguments presented by both parties.

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