TaxTMI 
TaxTMI 
2024 (11) TMI 1541
X X X X Extracts X X X X
X X X X Extracts X X X X
....nd irregularly availed credit under rule 14 of CENVAT Credit Rules, 2004, along with appropriate interest under section 75 of Finance Act, 1994, besides penalties being imposed on the company as well as official of the company even as demand of Rs. 15,88,250, as proposed in the show cause notice, was dropped though that had more to do with being consistent about the nature of the service within which the impugned activity actually fell. 2. The appellant-assessee, a holder of 'non-scheduled operator permit' issued by the Directorate General of Civil Aviation (DGCA), offers its fleet of 'fixed wing' and 'rotary' aircraft on charter under agreement between themselves and customers with tax liability on consideration from 2009-10 to November 2013 discharged as provider of 'transport of passenger by air' service which, between beginning and June 2010, did not extend to domestic travel and tax liability on that component paid thereafter no tax was paid on consideration received for domestic flights with abatement of sixty per cent (60%) availed in terms of notification specific to that service; thereafter, from 1st December 2013, the same activity was classified, though irrelevant to ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... well as of others. The records state that, in that dispute, the Tribunal held the impugned activity to be 'supply of tangible goods service' owing to which the appellant-assessee was persuaded to fall in line by service tax authorities and thus, opted for the Voluntary Compliance Encouragement Scheme (VCES), 2013 for the tax dues of upto 31st December 2012 while commencing payment of tax on the entire consideration for the period thereafter. It is also on record that the appellant-assessee had raised supplementary invoices on their customers and many disregarded that for absence of contractual relevance. 5. The demands were, thus, of Rs. 15,35,49,520 towards rendering of taxable service supra, Rs. 18,74,121 towards procurement of 'support service of business and commerce' and 'banking and financial service' from outside India, Rs. 7,37,271owing to inappropriate availment of credit and Rs. 15,88,250 towards credit availed under CENVAT Credit Rules, 2004 of tax paid but not extinguished to the extent attributable to non-taxed component respectively of which the last was dropped for having been sought in connection with exclusion of domestic journeys for a while from consideration....
X X X X Extracts X X X X
X X X X Extracts X X X X
....y from base and tax liability discharged from July 2010 to March 2012. He intimated that abatement, permitted in notification no. 6/2012-ST dated 17th March 2012 and notification no. 26/2012-ST dated 20th June 2012, had been availed thereafter until November 2013 and that, upon prompting by service tax authorities, the differential tax was paid which, for the period upto December 2012, was discharged as dues under the scheme referred supra for escapement from interest and penalty and for the full differential from January 2013 to November 2013. Learned Counsel submitted that, for the period prior to July 2012, the definition of revised taxable service was not applicable to them as they had not supplied aircraft to their customers but merely facilitated use of aircraft and, instead, provided only use of the aircraft with effective control yet retained with them. He drew distinction between 'time charter' and supply of aircraft to demonstrate that, while possession or title remained with the appellant at all times, the use was also circumscribed to deciding on destination and composition of the travel group. 9. Taking us to the specifics of the proposed 'taxable service', it was c....
X X X X Extracts X X X X
X X X X Extracts X X X X
...., hence, the differential tax liability. 11. From the manner in which aspects find repetition in the impugned order, it appears that the adjudicating authority was primarily concerned with arrangements that left the 'right to physical possession and effective control' in the hands of the appellant while bringing to bear the cost of the aircraft, as well as the technical expertise acquired by the appellant, to validate the inevitability of such retention. We do find that the pattern of the order has much to do with manner in which the Tribunal, in Global Vectra Helicorp Ltd v. Commissioner of Service Tax, Mumbai-II [2016 (42) STR 118 (Tri-Mumbai), came to the conclusion that the activity was, in effect, 'supply of tangible goods service' which was rendered taxable earlier and, subsequently, devoid of benefit of abatement that the rival category was. That was reason enough for service tax authorities to press the provisions of law and judicial determination in proposing recovery of differential tax. Furthermore, the subsequent resort to 'supply of tangible goods service' by appellant-assessee for discharge of tax liability was harped upon as acquiescence with the revised categoriz....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ent as set out in the circulars and instructions of Central Board of Excise & Customs (CBEC) to evaluate conformity with 'effective control' and drew support, besides, from the judgement of the Hon'ble High Court of Bombay in Indian National Shipowners' Association v. Union of India [2009 (14) STR 289 (Bom)] but, in order to reject the claim of appellant for being devoid of any conformity with 'transport of passenger by air' service, reliance was had to the decision of the Tribunal in King Rotors & Air Charter P Ltd v. Commissioner of Customs (ACC & Import), Mumbai [2011 (269) ELT 343 (Tri-Mumbai)]. In the course of discussions, three orders, viz., United Helicharters Ltd v. Commissioner [2010 (262) ELT 293 (Tribunal)], Karnavati Aviation Pvt Ltd v. Commissioner [2013 (30) STR 89 (Tribunal)] and Adani Gas Ltd v. Commissioner [2012 (28) STR 170 (Tribunal)], came to be considered as overwhelming the one order, in Mesco Airlines Ltd v. Commissioner of Service Tax, New Delhi [2013 (31) STR 364 (Tri-Del)], cited by appellant therein with all of these as irrelevant for resolution of the dispute which was decided on the foundation of the decision in re King Rotors & Air Charter P Ltd of t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....eduled aircraft operations. The definition of charter operations is contained in that part of the CAR which pertains to Minimum Requirement for grant of permit to operate non-scheduled Air Transport Services. Hence, charter operations do not cease to be aircraft operations by reason of the fact that the entire aircraft is chartered by the client from the aircraft operator. Charter operations are essentially aircraft operations, and cannot be categorized as supply of aircraft by the aircraft operator to the charterer. In light of the abovementioned stipulations of the CAR it is evident that in case of charter operation, no ticket is required to be sold to the individual passenger. Further, the charter may be for single journey or for multiple journeys over a period of time. Regardless of this the services remains one of charter operation. 24. In view of above, it is seen that the services rendered by the appellants fall within the category of non-scheduled air transport services. Further, the appellant is in the business of providing service to its customers embarking in India for domestic journey. Hence, the conditions for coverage under the "transport of passengers by air....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rs of the 1st petitioner was not covered by any entry prior to insertion of entry (zzzzj). In the light of judgment of the Assam High Court in Magus Corporation's case (supra) it must be held that the said services were not specified under any entry and hence were not liable to service tax till entry (zzzzj) was introduced covering them.' without subjecting the category claimed in the present dispute to comparison even while holding that '42. Thus activities which had direct relation to mining were covered by entry (zzzy) transport of goods by air and road was covered by separate entries. There was no separate entry for transport by sea. The fact that charter hire of vessels is brought to tax under entry (zzzzj) indicates that the said entry is to cover transport by sea..' which precludes air charter from the said entry. Be that as it may, we, too, would be derelict in adopting that peripheral observation as settling the law. Indeed, it is the absolute absence of judicial determination of liability of 'air charters' as 'supply of tangible goods service' that now compels examination of the scope of definition of proposed 'taxable service' for the period prior to 1st J....
X X X X Extracts X X X X
X X X X Extracts X X X X
....le event' in a 'destination based consumption tax' as the levy has been described by the Hon'ble Supreme Court in All India Federation of Tax Practitioners and others v. Union of India [AIR 2007 SC 2990]. In the present dispute, the contractual engagement between corporate entity, having interest in the passenger to be transported, and the licenced operator - essentially for guaranteeing availability of means of travel and for discharge of terms of consideration - has been erroneously accorded interpretational significance over a relationship legislated upon well before, and acknowledged definitionally in, the tax came into being. The manner of description and method of payment of consideration does not make for any 'taxable service' but only serves as measure for levy and tangible evidence of intangible service having been rendered. The decision to travel and the destination of the travel are not determined by the artificial person. The impugned order is, thus, incorrect in having negated the rendering of 'transport of persons by air' service solely for the reason that the contract was entered into and consideration paid by an artificial person. 18. Turning to the assigned 'tax....
X X X X Extracts X X X X
X X X X Extracts X X X X
....retation is the submission of Learned Counsel, albeit with a different approach, that 'aircraft', inter alia, are not intended to covered by the 'taxable service' impugned in the appeal. Consequently, with the availability of another 'taxable service', the deficit, as far as 'ships and vessels' are concerned, taken note of by the Hon'ble High Court of Bombay in re Indian National Shipowners' Association does not occur here to warrant fitment within a broader entry. Even more suggestive is the enumeration, though by no means exhaustive, in the second of the communications of the Central Board of Excise & Customs (CBEC) that includes special types of vessels but clearly omitted vessels intended for carriage of goods and persons; such vessels could well counted among 'machinery, equipment and appliances' that are intended to be taxed by section 65(105)(zzzzj) of Finance Act, 1994. 20. We also take note that, while 'goods' are defined in section 65 and section 65B of Finance Act, 1994, there is no definition of 'tangible goods' and, further that 'supply' - an expression rarely used in enumeration of 'taxable service' - is also similarly devoid of explanatory guidance. It appears to ....