Passenger Service Fee and airport taxes excluded from air transport taxable value; service tax demand and remand failed.

Passenger Service Fee and airport taxes collected by an international air carrier were treated as statutory or airport-related levies, not consideration for the taxable transport of passengers by air, so they could not be added to the taxable value without causing double taxation. The demand of service tax on those disputed heads was therefore found unsustainable. The remand for recomputation of demand and interest also could not stand once the underlying demand failed on merits. The impugned orders were set aside, leaving no surviving demand for adjudication.

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Issues: (i) Whether Passenger Service Fee and airport taxes collected by an international air carrier formed part of the taxable value for transport of passengers by air service and whether the demand of service tax was sustainable. (ii) Whether the Commissioner (Appeals) was justified in remanding the matter for re-computation of the demand and interest.

Issue (i): Whether Passenger Service Fee and airport taxes collected by an international air carrier formed part of the taxable value for transport of passengers by air service and whether the demand of service tax was sustainable.

Analysis: The amounts collected under Passenger Service Fee and airport taxes were found to be statutory or airport-related levies already connected with airport services and not consideration for the taxable transport service rendered by the carrier. The record also showed that a substantial part of the demand relating to fuel surcharge and insurance surcharge had already been paid. Relying on the earlier view that inclusion of Passenger Service Fee in the hands of the carrier would amount to double taxation and that the same amount could not again be taxed as transport of passengers service, the demand was held to be unsustainable.

Conclusion: The demand of service tax on the disputed heads was held unsustainable and the finding was in favour of the assessee.

Issue (ii): Whether the Commissioner (Appeals) was justified in remanding the matter for re-computation of the demand and interest.

Analysis: Once the demand itself was found unsustainable on merits, no purpose remained in sending the matter back for reworking the tax and interest. The remand direction could not survive independently of the invalid demand.

Conclusion: The remand order was held unsustainable and the assessee succeeded on this issue as well.

Final Conclusion: The impugned orders were set aside and the appeal was allowed in full, leaving no surviving demand for adjudication.

Ratio Decidendi: Amounts collected as Passenger Service Fee and airport taxes, when already referable to airport/statutory levies and not to the taxable passenger transport service, cannot be included again in the taxable value so as to result in double taxation.

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