Custom, Excise & Service Tax Tribunal
Japan Airlines International Co. Ltd vs C.S.T., New Delhi on 8 July, 2016
CUSTOMS EXCISE & SERVICE TAX APPELLATE TRIBUNAL, West Block No.2, R.K.Puram, New Delhi COURT-III Date of hearing:10.6.2016 Date of pronouncement : 08/ 07 /2016 Service Tax Appeal No.02 of 2010 Arising out of the order-in-original No.26/JM/09 dated 1.10.2009 passed by the Commissioner (Adjudication), Service Tax, New Delhi. For approval and signature: Honble Mr. S.K. Mohanty, Judicial Member Honble Mr. R.K. Singh, Technical Member 1 Whether Press Reporter may be allowed to see the Order for publication as per Rule 26 of the CESTAT (Procedure) Rules, 1982? 2 Whether it should be released under Rule 26 of CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not? 3 Whether their Lordships wish to see the fair copy of the Order? 4 Whether Order is to be circulated to the Departmental authorities? Japan Airlines International Co. Ltd. .. Appellant Vs. C.S.T., New Delhi . Respondent
Appearance:
Present Shri J.K. Mittal, Advocate for the appellant Present Shri Amresh Jain, A.R for the Respondent/Revenue Coram: Honble Mr. S.K. Mohanty, Judicial Member Honble Mr. R.K. Singh, Technical Member Final Order No. 52422/2016 Per R.K. Singh:
1. This appeal has been filed against the Order-in-original dated 1.10.2009, in terms of which service tax demand of Rs.72,33,753/- was confirmed along with interest and penalty on the ground that appellant paid service tax under transport of passengers embarking in India for international journey by air service only on the basic air fare and did not include the charges mentioned at Sl.No.(ii) to (xx) below:
i. Total Basic Fare ii. Fuel Surcharge (YQ) iii. Insurance Surcharge (YQ) iv. Insurance & Fuel Surcharge (YQ) v. PSF (WO) vi. Passenger service facility charge (SW).
vii. Passenger service charge (QX) viii. Passenger Solidarity Charge (IZ).
ix. Custom Duty Fee (YC) x. International Transportation Tax (US).
xi. Aphis User Fee xii. Federal Inspection Fee (XY).
xiii. Security Fee xiv. Facility charge (XF) xv. Canada Air Security Charge (CA) xvi. Japan Consumption Tax (JP).
xvii. Domestic Passenger Facility Charge (HJ).
xviii. Airport Imination Fee (SQ).
xix. Singapore Departure Tax (SG) and xx. Other charges.
2. The appellant contended as under:
a) The total in column No.7 ( service tax to be paid) in chart annexed as Annexure A to the show cause notice is wrong inasmuch as against the total shown as Rs.6,20,48,923/- the correct total comes to only Rs.6,16,52,181/- as a result of which differential service tax in Col.9 of the said Annexure would be correspondingly reduced.
b) There was no liability for paying service tax on the appellant as the show cause notice was issued to M/s Japan Airlines and not to the appellant, namely M/s Japan Airlines International Co. Ltd. and no demand can be confirmed without show cause notice. The Advocate cited the judgment of the High Court of Delhi dated 8.2.2012 in Income Tax Appeal Nos.07, 2, 3, 4, 5 , 8 , 10, 11, 17 and 22 of 2006 in the case of Commissioner of Income Tax vs. M/s Jagat Novel Exhibitors Private Limited to assert that no provision of the type of Section 290 B of the Income Tax Act exists in the service tax law.
c) In the Annexure A to the show cause notice in column (5) the total value on which differential tax is to be paid is shown as the difference between column (2) (gross fare) and Col. (3) (refund gross fare) while the differential tax has been computed on the entire amount of column (2) namely, the gross fare.
d) CBEC has clarified vide Instruction F.No.B.11/1/2002-TRU dated 1.8.2002 that taxes are not subject to service tax.
e) The other charges at serial No.(xx) above are various kinds of taxes/passenger fee paid in different countries as was evident from the following charts submitted during personal hearing:
Code No. Details of other Charges ___________________________________ Details of Tax Country Name Authority name BP PSC , Departure Tax and contribution to International Poverty Korea, Republic of Incheon International Airport Corporation CN Airport Fee (International) Peoples Republic of China Civil Aviation Administration of China UB Passenger Service Charge International United Kingdom Civil Aviation Authority House HK Air Passenger Departure Tax Hong Kong (SAR), China Civil Aviation Department XG Goods and Service Tax (GST) Canada Paid to Canada Government MY Passenger Service and Security Chrge Malaysia Malaysia Airport Holding Berhad SP Embarkation Fee Pakistan Airport Authority DA Passenger Service Charge (Domestic) Korea, Republic of Korea International Airport Authority QK Airline Passenger Levy Jamaica Ministry of Finance and Public Services SG Passenger Service Charge Singapore Civil Aviation Authority BE Passenger Service and Security Charge Belgium Brussels International Airport Company WY Passenger Service Charge Intl. Australia Paid to Airport Authority LK Embarkation Fee Sri Lanka Civil Aviation Authority of Sri Lanka AE Passenger Service Charge (Intl.) United Arab Emirates CEO Dubai Airports JP Consumption Tax Japan Paid to Japan International Airport RA Passenger Service Charge Intl Germany Munish Airport Authority MN Passenger Service Charge Mongolia Airports Authority TW Airport Service Charge Intl Chinese Taipei (Taiwan) Sung Shan Airport DQ Security Charge Finland Airport Authority QH Embarkation Fee Egypt Civil Aviation Authority EQ Service Charge Egypt Cairo Airport Authority FI Passenger Fee (International) Finland Civil Aviation Administration RN Passenger Service Charge Netherlands Ministerie Van Verkeer en waterstaat GB Air Passenger Duty (APD) United Kingdom HM Customs & Excise FR Airport Tax France Direction Generale delAviation Civile BW Departure Tax Botswana Department of Civil Aviation QX Passenger Service Charge Intl France Paid to Airport Paris Group XW Airport Tax Poland Poland Airport Head Office CJ Security Service Charge Netherlands Dutch Airports VV Noise Charge Netherlands Dutch Civil Aviation , Netherlands TW Airport Service Charge Intl Chinese Taipei (Taiwan) Sung Shan Airport AE Passenger Service Charge (Int;l) United Arab Emirates CEO Dubai Airports TS Passenger Service Charge Thailand Airports Authority of Thailand BR Embarkation Fee Brazil Agency of Ministry of Aeronautics AU Passenger Movement Charge Australia Australian Customs Service UN Goods and Service Tax (GST) Papua New Guinea International Revenue Commission GU Customs, Agriculture & Quarantine Inspection Service Charge Guam Continental Micronesia Inc. JC Passenger Service Charge (International) Viet Nam Civil Aviation Administration of Vietnam CA Air Travellers Security Charge Canada Canada Customs and Revenue Agency DY Tourism Arrival Tax Peru Airport Authority EY Airport Department Tax Fiji Airports Fiji Limited EZ Airport Security Charge Fiji Airports Fiji Limited LK Embarkation Fee Sri Lanka Civil Aviation Authority of Sri Lanka SS Excise Tax Republic of South Sudan Paid to Sudan Government JK Department fee Egypt Ministry of Finance Towers QH Embarkation Fee Egypt Civil Aviation Authority YE Tourism Tax Yemen, Republic of Republic of Yemen Government ZY Passenger Service Charge Austria Austria Airport Authority AT Passenger Security Charge Austria Austria Airport Authority
(f) It is evident from the letter of the Additional Commissioner of Anti-Evasion, Commissionerate of Service Tax, Delhi No.DL/ST/AE/Gr.V/Inq/68/07 dated 29/30.0.8.2007 that the Commissionerate had called a meeting of all the Airlines to disuse the issue relating to levy of service tax on Airlines and there was no willful , misstatement/suppression of facts on the appellants part as it had submitted periodical returns and had clearly informed the Revenue Department that it was paying service tax only on the basic air fare.
g) As the show cause notice has been issued in terms of the proviso to Section 73, in the absence of willful misstatement/suppression of facts, the entire demand (including that pertaining to the normal period) has to be dropped as the said show cause notice cannot be converted into a show cause notice for demand of service tax for normal period as has been held by the Calcutta High Court in the case of Infinity Infotech Parks Ltd. vs. UOI- 2014 (36) STR 37 (Cal.).
(h) The observation in para 37.1 of the impugned order that the appellant failed to get the service tax registration amended for incorporating the services of transport of passengers embarking in India for international journey by air service within 30 days from 1.5.2006 is incorrect as is evident from amended Registration Certificate copy placed at page 60 of the appeal paper book in terms of which this amendment was carried out on 26.5.2006.
(i) Gujarat High Court in the case of Raval Trading Company vs. C.S.T. 2016 (42) STR 210 (Gu.)has held that penalty under Section 76 and 78 are mutually exclusive.
(j). Fee and taxes are not includible in the assessable value in term of the judgment of the Delhi High Court in Intercontinental Consultants & Technocrats Pvt. Ltd. vs. UOI 2013 (29) STR 9 (Del.).
3. Ld. A.R. for Revenue (per contra) pleaded as under:
a) The appellant did not point out any mistake in the calculation or in the said Annexure A at the time of adjudication by the primary adjudicating authority.
b) The appellant was required to declare the total (gross) receipt and not merely receipt on account of basic fare in the ST-3 return which it did not do and so allegation of suppression is sustainable.
c) As held by CESTAT in the judgment reported in 1983 (14) ELT 1807, as the show cause notice mentioned the period, quantity of goods and rate of duty the show cause is valid.
d) As per judgment of CESTAT in the case of British Airways Plc vs. C.S.T., New Delhi 2013 (29) STR 177 (Tri-Del.) the service tax is payable on the entire amount of receipt for sale of tickets.
e) CA certificate regarding nature of miscellaneous expenses cannot be taken cognizance of by CESTAT as it was not produced before the primary adjudicating authority and no application was moved for producing additional evidence.
f) There is not evidence that various components mentioned at serial Nos.(ii) to (xx), were taxes/fees.
g) Suppression on the part of appellant is evident in this case also because the Custom Department repeatedly asked the appellant to submit the figures as mentioned in para 4.2 of the adjudication order but the appellant did not timely do so. Even when some figures were eventually supplied, it did not supply figures relating to tickets issued prior to 1.5.2006 for the journey performed after 1.5.2006 and the amount collected against cancellation charges during the period 1.5.06 to 31.3.08 although it promised that they would be supplied in due course.
4. We have considered the contentions of both sides. It is true that Annexure A to the show cause notice in column No.5 does state value on which tax is to be paid and contains figures equal to gross fare (Col.2) minus refund (Col.3) but in column (7) the service tax to be paid has been computed on the gross figures shown in column (2). However it is pertinent to mention that Annexure A is essentially a compilation of various figures and the basis for charging service tax has been given in the show cause notice in which it is clearly stated as to why calculation for differential service tax demanded has been made on the basis of gross fare receipts (given in Col.2 of the said annexure). As stated in the impugned order, the appellant did not give any evidence regarding amount of money refunded against cancellation of tickets. In quasi-judicial proceedings, deduction can not be allowed in the absence of documentary evidence. Further, jurisprudentially speaking service tax has to be paid with reference to the money received against sale of tickets and subsequent refund on account of cancellation may entitle the appellant for refund subject to meeting various stipulations relating thereto including the principles of unjust enrichment. In these circumstances, computation of service tax on the basis of gross receipt does not suffer form any legal infirmity. However it is a fact that there is a totaling mistake in column (7) and even if the mistake was not pointed out at the time of primary adjudication a factual mistake cannot be brushed aside and has to be taken into account. It is seen that actual total of column (7) comes to 6,16,52,181/- as against Rs.6.20,48,923/- shown in the Annexure and this would equivalently and directly impact the differential amount of S.T. shown in column 9 of the Annexure.
5. The components on which demand of service tax has been confirmed are enumerated at serial Nos. (ii) to (xx) above. The appellant has given plausible explanation that the charges mentioned at Sl.No.(v) to (xx) in para 1 comprised only such amounts which were collected to be paid to various authorities in India and abroad. Ld. A.R. for Revenue has raised a point that there is nothing on record to show that these were compulsorily levies and collected only to be remitted to Airport authorities and Agencies in India or abroad, but we are not inclined to delve into in this aspect in great detail in the light of the fact that this issue is no longer res integra and these charges have been held by CESTAT to be non-includible in the assessable value for the purpose of service tax in the following cases:
(i) Continential Airlines Inc. vs. C.S.T., Delhi 2015 TIOL 1481 CESTAT DEL.
(ii) Turkish Airlines vs. C.S.T., Delhi 2013 (30) STR 367 (Tri-Del.),
(iii) Sri Lankan Airlines
(iv) Luftansa German Airlines vs. C.S.T., Delhi 2016 TIOL 1086 CESTAT DEL.
Indeed, CESTAT judgement in the case of British Airways PLC Vs. CST, New Delhi (supra) cited by Revenue was taken note of and distinguished by CESTAT judgement in the case of Lufthansa German Airlines Vs. CST, New Delhi (supra) by observing inter alia that the judgement in the case of British Airways PLC Vs. CST, New Delhi (supra) had taken support of Rule 5(1) of Service Tax (Determination of Value) Rules, 2006, which has been declared ultra vires by Delhi High Court in the case of Intercontinental Consultants & Technocrats Pvt. Ltd. Vs. Union of India [2012-TIOL-966-HC-DEL-ST].
6. However, fuel surcharge (YQ), insurance surcharge (YQ) and insurance & fuel surcharge (YR) are not the amounts collected to be reimbursed to any agencies. Section 67 of Finance Act, 1994 provides that assessable value for charging service tax is the gross amount charged by the service provider for such service. Therefore, these charges clearly constitute part of the gross receipt for rendition of service. Incidentally, it may be pertinent to mention that the Airlines collectively took up this issue with CBEC which vide letter No.341/52/2006-TRU dated 18.9.2007 addressed to Chairman , Board of Airlines Representative in India categorically clarified that fuel surcharge, insurance surcharge and insurance & fuel surcharge ( YQ) & (YR)are includible in the assessable value. The said CBEC letter is reproduced below for ready reference:
To Shri P.K.Gupta Chairman, Board of Airline Representatives in India C/o AirIndia, Air India Building 13th Floor, Nariman Point Mumbai-400 021 Subject:- Service tax on transport of passengers embarking in India for international journey by air service Regarding.
Please refer to your letter dated September 04, 2007, regarding inclusion of YQ and YR component in taxable value of service provided by aircraft operator to passenger embarking India for international journey [section 65(105)(zzzo) of the finance Act, 1994].
2. As per section 67 of the finance Act, 1994, value of a taxable service shall be the gross amount charged by the service provider for the service provided and includes any amount received towards the taxable service before, during or after provision of such service. Provisions relating to determination of the value of taxable services contained in Service Tax (Determination of Value) Rules, 2006 to clear and unambiguous. As explained by you, YQ and YR charges are integral part of the consideration received for the services provided. Method of vivisecting may not be of any relevance as long as the amount is in the nature of the consideration paid for the service provided. The legal status has been explained in person during the meeting with the representatives of Board of Airline Representatives in India.
3. In view of into above, you are advised to take immediate necessary action to pay the appropriate service tax on above mentioned service provided. For any further clarification on this issue, you may like to contact the jurisdictional service Tax officers.
Yours faithfully (K Balamurugan) OSD (TRU) Tel: 23092634 We may hasten to add that we are not basing our finding/conclusion on the basis of CBEC clarification but on the basis of the provisions of Section 67 ibid and have referred to CBEC circular only because it pertains to the same issue. Indeed, such surcharge is inter alia held to be includible in the assessable value in CESTAT judgment in the case of Lufthansa German Airlines vs. C.S.T. 2016 TIOL 1086 CESTAT DEL.
7. Ld. Advocate for the appellant strenuously argued that there was no willful misstatement/suppression of facts, the issue had been taken up by the Airlines collectively with the CBEC and it had also clearly informed the Revenue Department that it paid service tax on the basic fare only. Normally, in these circumstances, the allegation of suppression of facts/misstatement may not have been sustainable . However, in the present case, we find that when the Custom Department came to know that service tax was being paid only on basic fare, it wrote to the appellant repeatedly asking for the details regarding the gross amount collected. Paras 2, 3, 4, 4.1. & 4.2 of the impugned order are reproduced below as they clearly bring out the factual position as to how the appellant dilly dallied in providing the details in spite of being repeated asked and even eventually did not supply full information:
2. Intelligence was gathered that the assessee was not paying service tax on the gross value of the services provided under the category of service Transport of passengers embarking in India for international journey by Air Service as per the provisions of Sec. 67 of the Finance Act, 1994 (the Act, in short) read with the Service Tax (Determination of Value) Rules, 2006. Accordingly, inquiries were made from the assessee in this regard vide letters dated 17.8.2006, 23.10.06, 9.4.2007 and 207.08 and they were asked to submit the details of break-up of the total value of tickets issued during the period 1.5.2006 to 31.3.2007 against such services provided along with the details of service tax paid. The details were sought separately for the tickets sold/issued and used during the period 1.5.06 to 31.3.2007 and tickets sold/issued prior to 1.5.06 but used during the period 1.5.06 to 31.3.07.
3. However, no details were provided by the assessee. The assessee vide letter dated 30.8.07 was informed that a meeting on the issue would be held in Service Tax Commissionerate, Delhi on 10,9,07 and a proforma was also supplied to them to send the information. They were again requested to supply the requisite information vide letter datd 13.9.2007. Vide letter dated 9.10.07, the assessee informed that they were in process of preparing the data and would be submitting the same very soon.
4. However, neither reply from the assessee nor any data/details /information was received from the assessee. The assessee vide letter 17.1.08, was again requested to supply the details up to 30.9.07. They were further requested to expedite the details vide letters dated 20.2.08 , 5.3.08 and 1.4.08.
4.1 On 1.4.08, Shri Ritesh Gupta, Assistant Manager , Administration & Finance, submitted a compact disc (CD) informing that the details were contained in the required format in that CD. He was, however, requested to supply a self certified copy of data and that too in the prescribed proforma supplied to them. Following this, a letter dated 2.4.08 was received along with which the assessee submitted a coy of ST -3 return for the half year ended 30.9.06. The assessee was again requested on 15.4.08 to supply the certified copy of the details in the prescribed along with other details.
4.2 Finally, vide their letter dated 9.6.08, the assessee supplied the details for the year period May, 06 to September, 07 in the prescribed proforma. However, no details in respect of the tickets sold prior to 1.5.06 but used on or after 1.5.06 were supplied by the assessee and some discrepancies in the details submitted by the assessee were observed. Accordingly, the assessee was requested on 13.6.06 to supply the details nor supplied by them and to depute a well conversant officer to sort out the discrepancies. In reply to this, the assessee vide their letter dated 3.7.08, submitted an abstract of the tickets sold during 1.5.06 to 30.9.07 and copies of challans for the month of June 2006 and January 2007. It was further submitted that details for tickets issued priort to 1.5.06 but used on or after and amount collected against cancellation charges during 1.5.06 to 31.3.08 would be submitted in due course of time. However, no such details had been supplied by the assessee.
From the foregoing, it is evident that appellant deliberately dilly dallied in providing the required information in spite of being asked repeatedly as a consequence of which the Revenue could eventually issue the show cause notice based upon whatever information was belatedly provided by the appellant although it did not provide the entire information which was sought. The provision relating to willful misstatement/suppression of fact have been explained by the Honble Supreme Court in several judgments. For example, in the case of Uniworth Textiles Ltd. Vs. CCE, Raipur [2013 (288) ELT 161 (SC)], it was held that mere non-payment of duties is not equivalent to collusion or wilful mis-statement or suppression of facts, otherwise there would be no situation for which ordinary limitation period would apply. Inadvertent non-payment is to be met within the normal limitation period and the burden is on Revenue to prove allegation of wilful mis-statement. The onus is not on the assessee to prove its bona fides. In the case of CCE Vs. Chemphar Drugs Liniments [2002-TIOL-266-SC-CX], the Supreme Court held that something positive other than mere inaction or failure on the part of the assessee or conscious or deliberate withholding of information when assessee knew otherwise, is required before it is saddled with the liability the extended period. In the case of Continental Foundation Jt. Venture Vs. CCE, Chandigarh-I [2007 (216) ELT 177 (SC)], Supreme Court went to the extent of ruling the mere omission to give correct information is not suppression of facts unless it was deliberate and that an incorrect statement cannot always be equated with wilful mis-statement. In the light of the jurisprudence analyzed above, when the appellant did not supply the information it was required to supply and which the Department was within its right to ask for and asked for repeatedly, it clearly amounts to suppression of facts. Consequently the extended period is rightly invocable in this case. As the extended period has been held to be invocable the judgment in the case of Infinity Infotech Parks Ltd. vs. UOI (supra) cited by ld. Advocate does not come to the appellants rescue.
8. The appellant has strenuously contended that the show cause notice was issued to M/s Japan Airlines while the appellant is M/s Japan International Co. Ltd. and therefore, show cause notice was not issued to the appellant and hence no service tax can be demanded on the basis of show cause notice (leading to the impugned order) because there is no provision in the service tax law similar to Section 290 B of the Income Tax Act. In this regard, we would like to observe that the purpose of show cause notice is to provide opportunity to the appellant to defend itself as required by the principles of natural justice. If the appellant had not responded to the show cause notice and the impugned order was issued ex parte, it could have possibly persuasively argued that no show cause notice was issued to it and the Delhi High Court judgment dated 8.2.2012 in the case of Jagat Novel Exhibitors Private Limited (supra) may have come to its rescue. However, in the present case we find that show cause notice was issue to Japan Airlines, Chadralok Building, 36 , Janpath, New Delhi 110001 and the appellant not only received the show cause notice but also responded thereto in full measure. It received all the communications in the name and address as above responded to those communications. It submitted its defence reply also and appeared for personal hearing before the primary adjudicating authority and did not raise any such objection. Thus the purpose of show cause notice (resulting in impugned order) has been fully and eminently served in this case and the impugned order has been issued in full and complete compliance of the principles of natural justice. In these circumstances, this contention is too flimsy to be of any consequence whatsoever.
9. Regarding simultaneous imposition of penalties under Section 76 and Section 78, we find that Gujarat High Court in the case of Raval Trading Co. (supra) has discussed the issue in great details and after taking note of the judgments : in the case of Bajaj Travels 2012 (25) STR 417 (Delhi High Court), First Flight Courier 2011 (22) STR 622 ( P & H) and Motor World 2012 (27) STR 225 (Karnataka) has held that penalty under Section 76 should not be imposed if penalty under Section 78 is imposed. The said judgment is required to be followed as a requirement of judicial discipline.
10. In the light of the foregoing analysis, we allow the appeal by way of remand to the primary adjudicating authority for de novo adjudication with the following directions/findings:
i) The demand pertaining to the charges mentioned at serial Nos.(v) to (xx) in para 1 is not sustainable.
ii) extended period is invocable
iii) Totalling mistake in Column 7 in Annexure A to the show cause notice should be taken note of while computing the demand of differential service tax.
(iv) Penalty under Section 76 should not be imposed when penalty under Section 78 is imposed.
(v) The appellant shall be given an opportunity of being heard before de novo adjudication.
(Pronounced in the open Court on 08/072016) (S.K. Mohanty) Judicial Member (R.K. Singh) Technical Member scd/ 1