AI Drafter 
TaxTMI 
TaxTMI 
2023 (7) TMI 949
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....05)(zzn) of the Finance Act, apart from other services. 3. In the process of rendering the service, the appellant also collects excess baggage charges when the weight of the baggage of the passenger is in excess of the permissible weight. The dispute that arises in the present appeal is with respect to the levy of service tax on such excess baggage charges collected by the appellant from the passengers. 4. The impugned order dated 26.07.2016 adjudicates two show cause notices dated 18.09.2012 and 06.05.2014. The show cause notice dated 18.09.2012 mentions that the appellant had collected excess baggage charges during the period 2007-08 to 2011-12 on which service tax amounting to Rs. 1,64,25,588/- was leviable but it was not paid. The service that was alleged to have been rendered by the appellant was mentioned as transport of passengers embarking in India for International journey by air service, made taxable under section 65(105)(zzzo) of the Finance Act. The show cause notice dated 06.05.2014 mentions that for the period 2012-13, the appellant would be required to pay service tax amounting to Rs. 23,12,067/- for the reasons stated in the earlier show cause notice dated 18.....
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.... 2,61,420 6. The month wise figures for excess baggage charges collected for the period April 2012 to March 2013 was also mentioned by the appellant and is as follows: Period EBT ST applicable @ 4.944% Total ST paid Short deposited April 2012 25,38,665 1,25,215 - (1,25,512) May 2012 22,71,437 1,12,300 - (1,12,300) Jun 2012 18,70,595 92,482 - (92,482) July 2012 6,78,265 33,533 33,534 1 August 2012 35,78,456 1,76,919 1,76,910 (9) September 2012 31,12,561 1,53,885 1,53,878 (7) October 2012 16,16,692 79,929 79,932 3 November 2012 16,83,964 83,255 83,256 1 December 2012 25,50,449 1,26,094 1,26,090 (4) January 2013 29,90,914 1,47,871 1,47,873 2 February 2013 20,64,130 1,02,044 1,02,051 7 March 2013 17,66,661 87,340 87,346 6 Total 2,67,22,789 13,21,164 9,90,870 (3,30,294) 7. The adjudicating authority noticed that what had to be determined was whether the service provided by the appellant would fall under 'transport of passenger by air service' or 'transport of g....
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....the noticee therefore cannot be attributed to the charges collected towards transport of passengers by economy class, as these charges are collected only at the time of check-up by the passengers and are never ever part of the gross amount charged by the airlines for travel of such passenger by economy class. ***** Accordingly, I observe that the noticee is not entitled to the benefit of abatement under the said notification and conclude that they are liable to pay service tax on the excess baggage charges collected from all class of the passengers at the rate prescribed under Section 66 of the Finance Act, 1994 for the period prior to 01.07.2012 and at the rate prescribed under Section 66B of the Act w.e.f. 01.07.2012." (emphasis supplied) 9. The Principal Commissioner also rejected the contention of the appellant that excess baggage charges collected from business class passengers were only leviable to service tax. The Principal Commissioner, therefore, held that the bifurcation chart of the appellant showing excess baggage charges attributable to the total number of economy and business class passengers would have no relevance. 10. The contention of the appellant that i....
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....rvations are as follows: "8.7 I am of the view that it is possible to invoke extended period in the case of Service Tax even in situation where there is no intent to evade payment of tax. Even if it is presumed that the noticee has not contravened any provisions with intent to evade payment of Service Tax, yet the noticee has filed to comply with the obligations cast upon it by the Legislature. There is no requirement that there should be suppression with intention to evade. Mere suppression is adequate for the purpose of the recovery of tax for the extended period as well as for imposing penalty. In any case, the noticee, in this case, has willfully contravened the provisions of the Service Tax Rules, 1994. ***** 8.9 All these facts narrated above go to show that the noticee suppressed the facts, by non-compliance of the obligations cast upon them by the statutory provisions. The suppression of the facts clearly gives the conclusion that the party had intention to evade the tax. It was imperative to mention here that suppression with intent to evade payment of tax need not require to be proved with mathematical precision in the regime of self-assessment,....
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.... could not have included the value of the excess baggage charges collected by the appellant for economy class passengers. Learned counsel also submitted that the benefit of the Notification dated 22.06.2010 was available to the appellant and the Principal Commissioner committed an error in denying the benefit of this Notification. For the period April 2011 to March 2012 learned counsel for the appellant submitted that appellant was also entitled to the benefit of Notification No. 4/2011, which amended the earlier Notification No. 26/2010 dated 22.06.2010. To support the aforesaid submissions learned counsel for the appellant relied upon the decision for the Tribunal in Jet Airways India Ltd., Kingfisher Training and Aviation Services Ltd. vs. CCE [2015 (40) STR 1159 (Tri.Mum.)] as also the decision of the Tribunal in M/s. Thai Airways International Public Company Ltd. vs. Commissioner of Service Tax New Delhi [2018-TIOL-1472-CESTAT]. Learned counsel also pointed out that the Civil Appeal filed by the department to assail the decision of the Tribunal in Jet Airways was dismissed by the Supreme Court holding that there was no merit in the appeal. The decision is reported in 2016-TIOL....
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.... of the main service provided by the appellants, namely transportation of passenger by air. 15. We have also seen that the issue in question is debatable issue for classification of the service on the basis of various judicial pronouncements. In these circumstances, the extended period of limitation is not invocable. Therefore, the appeals succeed on merits as well as on limitation." (emphasis supplied) 22. The learned Member (Technical), however, held that the services rendered by the appellant would fall under transport of goods by air and the extended period of limitation was correctly invoked. The relevant findings are as follows: "19. It is seen that the service of goods transportation is defined under Section 65(105)(zzn) as "any service provided or to be provided to any person by aircraft Operator in relation to transport of goods by aircraft." When the excess baggage charges are paid by passengers separately, they are being provided a service of transportation of goods by Air. This is what the statute clearly and unambiguously provides. This activity of carriage of excess baggage is distinct and separately identifiable and therefore no occasion arise....
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....aggage and the liability of Service Tax on such excess baggage was a debatable issue. In the case of Jetlite India v. CCE - 2011 (21) S.T.R. 80 (Tri.-Delhi), it was held that excess baggage charges are leviable to Service Tax. The issue is very clear and the failure to pay Service Tax cannot be condoned." (emphasis supplied) 23. The learned Members, therefore, recorded the difference of opinion and it is as follows: Difference of Opinion "As there is a difference of opinion between the Members, therefore, following point is placed before the Hon'ble President for reference to the Third Member:- 1. Whether Member (Judicial) is correct in holding that the excess baggage charges collected by the appellant is an integral part of the main service namely transportation of passenger by air therefore, the demand is to be set aside? OR Whether Member (Technical) is correct in holding that the excess baggage charges are required to be taxable under the category of transportation of goods by air craft? 2. Whether in the facts and circumstances of the case the Member (Judicial) is correct in holding that extended period of limitation is not invok....
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....er (Judicial) on this point. Thus, the penalties are fit to be set aside. 4. To sum up, I agree with the learned Member (Judicial) on all the three questions o points of difference referred to me." (emphasis supplied) 25. Ultimately, the Division Bench, in view of the views expressed by the learned Third Member, passed the following order: "In view of pronouncement of order by Ld. Third Member, the majority view is as under: (1) The excess baggage charges collected by the appellants are an integral part of the main service namely transportation of passengers by air. Therefore, the demand of service tax is set aside. (2) Extended period of limitation is not invokable. (3) Penalties cannot be imposed on the appellants. In view of the majority opinion appeals are allowed." 26. The Division Bench of the Tribunal in Thai Airways followed the decision rendered by the Tribunal in Jet Airways and observed as follows:- "6. With regard to collection of Excess Baggage Charges by the appellant from the customers, we find that the said amount was collected from the passengers for carrying extra luggage above the normal leve....
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.... Airlines collect excess baggage charges had come to light only because the department had issued a notice. It is submitted that Service Tax audits were conducted on various Airlines, and such charges were duly examined by the Service Tax Audit Team, and the question of willfully suppressing the facts is denied. It is submitted that the proviso to sub section (1) of 73 of the Act cannot be invoked, and the benefit of extended period of five years cannot be allowed. It is further denied that the Service Tax aggregating to Rs. 1,64,25,588/- is recoverable." 31. The impugned order, as noticed above, after noticing that mere failure or omission on the part of the appellant to disclose some information to the department will not amount to suppression of facts attracting the extended period of limitation observed that under the self assessment procedure the party is required process on its own the tax due on the services provided, but as the appellant had failed to discharge this burden the appellant had willfully and deliberately suppressed facts so as to avoid liability towards payment of service tax. The extended period of limitation according to the Principal Commissioner was, the....
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....f six months by invoking the proviso to section 11A of the Excise Act. The proviso to section 11A of the Excise Act carved out an exception to the provisions that permitted the Department to reopen proceedings if the levy was short within six months of the relevant date and permitted the Authority to exercise this power within five years from the relevant date under the circumstances mentioned in the proviso, one of which was suppression of facts. It is in this context that the Supreme Court observed that since "suppression of facts' has been used in the company of strong words such as fraud, collusion, or wilful default, suppression of facts must be deliberate and with an intent to escape payment of duty. The observations are as follows; "4. Section 11A empowers the Department to re-open proceedings if the levy has been short-levied or not levied within six months from the relevant date. But the proviso carves out an exception and permits the authority to exercise this power within five years from the relevant date in the circumstances mentioned in the proviso, one of it being suppression of facts. The meaning of the word both in law and even otherwise is well known. In n....
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....findings made herein above that there was no deliberate intention on the part of the appellant not to disclose the correct information or to evade payment of duty, it was not open to the Central Excise Officer to proceed to recover duties in the manner indicated in proviso to Section 11A of the Act." (emphasis supplied) 37. These two decisions in Pushpam Pharmaceuticals and Anand Nishikawa Company Ltd. were followed by the Supreme Court in the subsequent decision in Uniworth Textile Limited vs. Commissioner of Central Excise, Raipur [2013 (288) E.L.T. 161 (SC)] and the observation are: "18. We are in complete agreement with the principal enunciated in the above decisions, in light of the proviso to section 11A of the Central Excise Act, 1944." 38. It will also be useful to refer to a recent decision of the Delhi High Court in Mahanagar Telephone Nigam Ltd. vs. Union of India and ors. [W.P. (C) 7542/2018 decided on 06.04.2023] and the relevant observations are reproduce below: "32. As noted above, the impugned show cause notice discloses that the respondents had faulted MTNL for not approaching the service tax authorities for clarification. The respo....
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....o evade the service tax, which it was aware would be leviable, suppressed the fact of receipt of consideration for rendering any taxable service. On the contrary, the statements of the officials of MTNL, relied upon by the respondents, clearly indicate that they were under the belief that the receipt of compensation/financial support from the Government of India was not taxable. Absent any intention to evade tax, which may be evident from any material on record or from the conduct of an assessee, the extended period of limitation under the proviso to Section 73(1) of the Act is not applicable. The facts of the present case indicate that MTNL had made the receipt of compensation public by reflecting it in its final accounts as income. As stated above, merely because MTNL had not declared the receipt of compensation as payment for taxable service does not establish that it had willfully suppressed any material fact. MTNL's contention that the receipt is not taxable under the Act is a substantial one. No intent to evade tax can be inferred by non-disclosure of the receipt in the service tax return. 42. We agree with the contention that the impugned show cause notice was issue....
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....nd incorrectly assesses and pays service tax, it will amount to deliberate mis-declaration and suppression of facts with the intent to evade'. 14. The existing provisions do not support the observation made by the Commissioner. All assessees under the Service tax operate under self assessment provisions and the appellant is no exception. Section 69 of the Finance Act, 1994 requires a provider of taxable service to register, section 70 requires it to self-assess tax and file returns with the Superintendent of Central Excise and if the assessee either fails to file the returns or having made a return, fails to assess the tax in accordance with the provisions of this Chapter or rules made thereunder, Section 72 requires the Central Excise officer to make 'Best judgment assessment' and for this purpose, require documents, records, etc. to be produced. 15. Thus, the scheme in Finance Act, 1994 is that if the assessee does not self-assess tax correctly, the remedy against it is the 'Best Judgment Assessment' under section 72. This provision is similar to the provision for re-assessment under Section 17 (4) of the Customs Act, 1962. The Commissioner imagined that wrong s....